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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[ X ]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 1999
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____________ to _____________
Commission File No. 0-23553
PHOTOGEN TECHNOLOGIES, INC.
(Name of Small Business Issuer in its Charter)
NEVADA
(State or other jurisdiction of
incorporation or organization)
36-4010347
(I.R.S. Employer
Identification No.)
7327 OAK RIDGE HIGHWAY, SUITE B
KNOXVILLE, TN 37931
(Address of principal executive offices) (Zip Code)
(865) 769-4011
(Issuer's telephone number, including area code)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 / /
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. /X/
Issuer's revenues for its most recent fiscal year: $179,795
The approximate aggregate market value of voting stock held by non-affiliates
computed as of March 7, 2000, based upon the last sale price of the Common
Stock reported on the Nasdaq SmallCap Market was approximately $89,698,631.
For purposes of this calculation only, the registrant has assumed that its
directors and executive officers, and any person who has filed a Schedule
13D, are affiliates.
The number of shares outstanding of each of the registrant's classes of
common stock, as of March 7, 2000: 37,383,386
Documents Incorporated By Reference: Portions of the registrant's definitive
proxy statement for its 2000 annual meeting of stockholders are incorporated
by reference into Part III.
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PART I.
Photogen Technologies, Inc. and its wholly-owned subsidiary Photogen,
Inc. are collectively referred to as "Photogen," the "Company," "we," or "us."
Portions of the discussion in this Form 10-KSB contain forward-looking
statements and are subject to the Risk Factors described below in Item 1.
ITEM 1. DESCRIPTION OF BUSINESS.
INTRODUCTION
Photogen Technologies, Inc. is an emerging development-stage
biotechnology company focused on developing minimally invasive products for the
treatment and diagnosis of disease. These products would be based on several
related families of core technologies, which include multi-photon excitation,
certain photoactive agents or diagnostic agents, and other related technologies.
We have discovered new methods and apparatus for using energy from
lasers, X-rays or other sources to selectively activate photoactive agents
within tissue sufficient to produce a range of beneficial therapeutic and
diagnostic outcomes. These discoveries include methods, materials and devices
that are used to produce light or other energy and photoactive agents for the
purpose of destroying diseased cells, removing tissue or identifying and
diagnosing disease. Our core technologies are proprietary, and are either
protected by issued U.S. and foreign patents or are subject to patent
applications pending in the U.S. and other foreign jurisdictions.
An important example of using energy to activate photoactive agents is
photodynamic therapy ("PDT"). Photodynamic therapy is the treatment of diseased
tissue by combining a photoactive agent with the appropriate activating energy.
Photo-diagnosis involves a similar process, in which the outcome is a diagnostic
signal or image of tissue. Photoactive or diagnostic agents are drugs, or
compounds naturally present in tissue, that react with energy to create a
desired therapeutic reaction or diagnostic signal.
Our technological capabilities should allow us to pursue a development
strategy different from other companies in our field. We expect our technologies
to allow:
- Use of a number of different photoactive agents, even
those that may not be suitable for use by our
competition.
- Use of a wider variety of energy sources, such as
X-ray, green light and near infrared light, rather
than being limited to red or blue light.
- Use of multiple drug delivery methods including IV
injection, direct tumoral injection, oral
administration or topical application.
Our approach is not limited to the use of one light source or one line
of drugs; instead, we are actively exploring many families of photoactive drugs
and a variety of light sources, including X-rays, visible green light and
ultrafast pulsed and near infrared lasers. We believe that this broad-based
approach should yield non-invasive or minimally invasive treatments and
diagnostics for a wide variety of conditions deep within the body, as well as on
or near the surface. This strategy led us to work toward
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therapeutic solutions designed to accommodate the specific characteristics of
the disease, the needs of patients, and physicians' preferred methods of
application.
Our platform of proposed products allows us to select among multiple
drug and energy combinations in order to optimize treatment efficacy and safety.
We believe that tailoring the technology to fit the problem and the market
should result in safer, more effective and more widely accepted therapeutic and
diagnostic products. Our proposed products have the potential to replace
numerous surgical and similar invasive treatments and diagnostics, reduce side
effects (including those resulting from chemotherapy), improve treatment
efficacy, and lower the overall cost of care in markets such as oncology,
dermatology and ophthalmology.
To date, we have concentrated our development activity on three
product applications: psoriasis, lymphography and prostate cancer. We
selected these applications because of our belief that each represents
promising opportunities, competitive treatments are less effective, and each
application may lead to follow-on applications. We expect this approach to
allow us to leverage our technology and resources more effectively and offer
shorter time frames to bring these and other potential products into the
marketplace. For example, our work in psoriasis may lead to techniques for
treatments for conditions requiring very shallow light penetration.
Similarly, our prostate cancer research could lead to treatments for breast,
lung, head and neck cancer.
We have no therapeutic or diagnostic products or operating revenues at
this time. However, our business model for producing and selling our proposed
products accounts for the start-up nature of our company, the high capital needs
of new drug development and the existing resources available for both
manufacturing and product distribution. Our goal is to leverage our cash,
technology and human resources in a manner that accelerates product development
and sales revenues, and minimizes equity dilution.
We plan to sell our proposed products through a variety of means
determined by the specific market characteristics. We anticipate using a variety
of relationships that range from outright licenses to distribution and supply
relationships. The specific method chosen will be consistent with our desire to
leverage our internal capabilities and the goal of generating early product
revenues.
We have fifteen employees, fourteen of whom are full-time and one who
is part-time. A majority of our employees hold Ph.D.'s and other advanced
degrees. Our scientific research team is located at our corporate headquarters
in Knoxville, Tennessee (nine employees), with the clinical development team
working in Westborough, Massachusetts (six employees). Our core team of
scientists includes specialists in molecular biology, non-linear laser physics,
interventional radiology, spectroscopy, bioengineering and photochemistry. We
recently hired additional personnel with expertise in clinical development,
clinical trial design, regulatory approval processes and the use of imaging
technologies in clinical trials.
Photogen Technologies, Inc. is a Nevada corporation that is the
successor by merger to Bemax Corporation, a California corporation incorporated
in 1984 to develop and market dot matrix computer printer products. Bemax
Corporation ceased operations in 1988. In 1994, Theodore Tannebaum, Robert J.
Weinstein, M.D. and another investor acquired control of Bemax Corporation; and,
in March 1995, Bemax merged into its wholly-owned Nevada subsidiary named M T
Financial Group, Inc. (organized in 1994) ("M T Financial"). M T Financial was
the surviving corporation and Bemax Corporation thereby
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changed its state of incorporation from California to Nevada. From 1988 through
May 1997, we and our predecessors had no business operations and our activities
were limited to evaluating possible acquisition candidates. In May 1997, M T
Financial acquired Photogen, Inc. through a merger. As a result, Photogen, Inc.
became a wholly-owned subsidiary of M T Financial, M T Financial changed its
name to Photogen Technologies, Inc. and Mr. Tannebaum, Dr. Weinstein and certain
other persons invested additional funds in the Company.
CORE TECHNOLOGIES
Over the last two years, as a result of our research into new
technologies, and acquisitions or licensing from other third parties, we have
developed a platform of core technologies which we believe will support multiple
products and applications. Our technology portfolio now includes the following:
MULTI-PHOTON EXCITATION
We have developed a method of activating photosensitive drugs and other
compounds using an ultrafast, pulsed laser based on our proprietary simultaneous
two-photon and multi-photon excitation technologies. (We refer to simultaneous
two-photon and multi-photon excitation collectively as "multi-photon
excitation" to distinguish them from traditional single-photon activation.) Our
simultaneous multi-photon excitation technologies are covered by three issued
U.S. patents (two for therapy and another for diagnostics) and are subject to
additional pending patent applications in the U.S. and other foreign
jurisdictions. This technology provides us with the following capabilities:
- Spatial control of an activation area to more
selectively deliver a therapeutic effect:
Multi-photon activation limits the field of
activation to the focus of the laser beam. This focus
can be made exceedingly small, providing fine control
over where the photodynamic effect is produced.
- Use of many photoactive agents: Our multi-photon
technology uses a broader range of energy levels,
which we may use to activate photoactive agents that
otherwise could not be used, including those of our
competitors and even those that are not compatible
with our competitors' activation systems.
- Deeper penetration: Multi-photon activation uses
longer wavelength light that delivers activating
energy more deeply within tissue.
- Delivery of large amounts of energy while minimizing
damaging photothermal effects.
PHOTOCHEMISTRY
We have identified a promising compound we call PH-10 that offers a
wide variety of uses. We discovered that PH-10 selectively accumulates in
diseased tissue (such as tumors), remains in diseased tissue for many days, and
when activated with low-dosage X-ray, or with green light or ultrafast, pulsed,
near infrared light, reacts to effectively destroy those diseased cells. Our
preclinical animal tests to date lead us to believe that PH-10, when combined
with particular light or radiation sources, has the potential to treat cancer
and certain dermatological conditions virtually anywhere in the body. For
example, when
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PH-10 is used with X-rays it enhances the killing effect of the X-rays, allowing
the destruction of cancerous tissue deep within the body (using markedly lower
levels of X-ray energy than required in conventional therapy). Treatment at
these reduced energy levels means that the photochemical effect (in this case,
cell destruction) will tend to be limited to the diseased tissue with less
damage to the healthy tissue. This feature alone holds the potential to
significantly improve current methods and apparatus for radiation therapy. We
have patent applications pending for the use of PH-10 in combination with
visible light and with X-ray energy to treat and diagnose diseased tissue (the
diagnostic properties of PH-10 are discussed below).
PH-10, when used with green light, results in a potential treatment
that is very depth limited. Green light is strongly absorbed by skin and can
only achieve a treatment depth of 3-5 millimeters. Although this might seem like
a shortcoming, this feature is especially important and useful for surface
applications where serious damage can result from deeper treatment. We hope to
exploit this capability in the treatment of psoriasis and other surface
conditions such as actinic keratosis.
Another exciting property of PH-10 is its relatively long history of
safe use and the FDA's approval of this compound for a prior injectable
application. Commercial use, the absence of any adverse side effects
presently known to us, and the documented safety of the compound means that
we may be able to shorten the initial phases of drug safety testing and move
more quickly to the later stages of conducting human clinical trials. We
believe this will give us the ability to bring new products with multiple
applications based on PH-10 to market faster and at a lower cost than would
ordinarily be possible.
NON-INVASIVE DIAGNOSTICS
LYMPHOGRAPHY. Lymphography is a procedure used to determine if a
patient's cancer has spread to the lymph nodes. The presence or absence of
cancer in the sentinel lymph node -- the first lymph node to receive lymphatic
drainage from a tumor -- is an important indication of whether the disease has
spread from the original tumor, the seriousness of the disease, and the
prognosis for successful treatment. Under current treatment protocols, a
malignant node or a node that is suspected of containing cancerous cells must be
surgically removed.
In 1999, we entered into an exclusive license for a special group of
proprietary contrast materials, including one that has completed Phase I
clinical trials and is ready to begin Phase II/III human clinical trials. These
materials are covered by patent applications filed in the U.S. and elsewhere. We
also acquired patented methods for performing minimally invasive lymphography
using X-ray, computed tomography ("CT") or magnetic resonance
imaging ("MRI").
The purpose of these technology acquisitions is to develop products
that precisely locate sentinel nodes following injection of a small amount of
our proprietary contrast materials in the vicinity of the tumor. Due to the
particular properties of these materials, they travel through the lymph system
to the lymph nodes most likely to be affected if the cancer has spread. In most
cases, we expect that the image may provide enough information to determine the
position of nodes and the presence of cancer. A further benefit of these
minimally invasive procedures is that they can be used multiple times and
therefore provide a means to monitor the results of cancer treatment and detect
recurrence.
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MULTI-PHOTON EXCITATION. One of our issued patents on simultaneous
two-photon excitation and a patent application on multi-photon excitation
describes the use of that technology for detecting diseased tissue. A laser
system, coupled with flourescent diagnostic agents targeted to concentrate in
diseased tissue, and signal processing technology described in one of our
patents, has the potential to cause diseased tissue to emit light that can be
converted into images. This could supplement current X-ray, mammography and MRI
techniques to detect suspicious masses.
TARGET THERAPEUTIC AND DIAGNOSTIC APPLICATIONS -- OUR CLINICAL PIPELINE
We are currently working to develop products incorporating our
technologies in three application areas:
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CURRENT TECHNOLOGY/POTENTIAL CLINICAL STATUS POTENTIAL FOLLOW-ON
INDICATION PRODUCT APPLICATION
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Psoriasis PH-10 as a cream or Clinical pilot study Actinic keratosis,
spray with green light planned to start second squamous and basal cell
quarter 2000 carcinoma, wound healing
and Barretts esophagus
Light source device Equivalent device
approved for other
medical applications
Lymphography Nanoparticulate Phase I complete; Other diagnostic and
imaging agent Phase II planned to start imaging applications
fourth quarter 2000 or
early 2001
Prostate cancer PH-10 with X-ray Preclinical expected to Breast, lung, head and neck
be completed third cancer
quarter 2000 and animal
study planned to start
fourth quarter 2000
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All of the dates listed above for completion of preclinical work, and
for commencement of pilot studies and Phase II human clinical trials, are goals
and projections based upon current objectives and information currently
available to us. Our ability to meet these goals is subject to numerous
contingencies, including the availability of testing facilities, availability of
required materials or equipment, regulatory approvals, insurance, adequate
capital and other factors described in "Risk Factors," below. The various stages
of preclinical testing, pilot studies and human clinical trials are discussed
below at "Government Regulations."
DERMATOLOGY - PSORIASIS
Dermatology is a market where we believe our planned products will
offer much improved treatments over those currently available. We believe that
we can create dermatology products that will meet the needs of this often
overlooked market. With human pilot studies for psoriasis scheduled to
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begin in 2000, we believe that we will be able to effectively treat this disease
of the skin without serious side effects. Additionally, we plan to use our
proprietary resources to develop applications in other areas of dermatology,
such as actinic keratosis, hair removal and wound healing.
Our initial focus in dermatology is on psoriasis. Psoriasis is a common
chronic disorder of the skin characterized by dry scaling patches, for which
current treatments are few and those that are available have potentially serious
side effects. Of the more than seven million people in the United States alone
who suffer from psoriasis (there are estimated to be between 160,000 and 250,000
new psoriasis cases each year in the United States), more than 65% are treated
with topical steroids that can have unpleasant side effects. None of the other
treatments for moderate cases of psoriasis have proven completely effective and
there is no cure for the disease at this time. The 25-30% of patients who suffer
from more severe cases are candidates for PUVA (Psoralen with ultraviolet A
light) and more intensive drug therapies. While PUVA treatment is one of the
more effective treatments, patients undergoing such therapy experience a
significantly increased risk of skin cancer.
In the treatment we are currently evaluating, PH-10 is applied as a
topical cream to the psoriatic plaque and illuminated with green light. We
believe this treatment process will be superior to other PDT procedures because
our combination of the drug and light source are expected to result in selective
destruction of psoriasis cells with minimal damage to healthy tissue. Other
potential advantages may include that the treatment could be completed in a
small number of patient visits, and with reduced pain and post-treatment
sensitivity to light.
We have approved a grant to study the effectiveness of activating PH-10
with green light (delivered by a laser) to treat psoriasis. This study is
expected to take place in Denmark on approximately 14 human subjects, beginning
in mid-2000. Given the safety profile of the drug and the history of safe use in
other indications, we anticipate a relatively short pathway from the pilot study
to human clinical trials and eventual FDA approval.
DIAGNOSTICS - LYMPHOGRAPHY
The ability to diagnose certain diseases, including cancer, is an area
we believe our technologies could offer improvement. It is generally accepted
that breast cancer and melanoma are spread by way of the lymph system.
Furthermore, effective and successful treatment of these cancers is aided by an
early assessment of the presence or absence of disease in the lymph nodes. In
addition, cancers of the lung, breast, prostate and many other cancers spread
via the local lymph system. Products and procedures have been developed that
enable surgeons to locate the sentinel node(s) (the first node to receive
lymphatic drainage from a tumor), facilitate the excisional biopsy, and perform
a pathological exam on the excised node. This procedure is costly due to the
time it takes to locate the node and have the pathologist analyze a sample. If
the node contains cancer, then surgical removal of all the regional lymph nodes
may be performed. In some of these diseases, nodal diagnosis is not possible
because their location is difficult to access.
Patients who are thought to have cancer are currently subjected to
injections of blue dye and radioactive particles that track the materials to the
general area of the sentinel node. In the case of breast cancer, conservative
doctors may biopsy and remove 15-30 underarm lymph nodes. Additional treatment
will be required if cancer is discovered. Unfortunately, approximately 80% of
the patients diagnosed with breast cancer or melanoma who undergo these painful
procedures are found to have no
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sign of disease in their nodes. Indeed, doctors are now questioning the safety
of removing the lymph nodes.
For patients who have been diagnosed with or treated for many types of
cancer, reevaluation of their lymph nodes to determine whether their cancer has
returned would guide therapy for those who need it and provide welcome
reassurance for those who do not. Based on estimates of the number of patients
diagnosed with or recovering from breast or prostate cancer alone, the amount of
procedures conducted annually is potentially in the millions. The lymphography
market is in dire need of a non-invasive, improved procedure that can diagnose
and stage cancer without infringing upon patients' quality of life. Our
procedure and imaging agent could make it possible to diagnose and determine the
extent of the cancer and assess these nodes.
Preparing to meet this market need, we are in the process of developing
an advanced lymphography technology through a joint venture with affiliates of
Elan Corporation, plc. Sentigen Ltd., the joint venture entity, is working to
develop and commercialize nanoparticulate diagnostic imaging agents for the
detection and treatment of cancer in patients' lymph nodes. Our goal with this
joint venture is to develop a minimally invasive diagnostic imaging procedure
based on CT that would precisely locate the sentinel nodes and provide a means
to determine if cancer was present in those nodes. We anticipate that
nanoparticulate imaging agents will be well suited to enter the lymph system and
flow to the sentinel nodes. A sensitive imaging device, such as a CT device,
scans the nodes to determine the structure of the node and whether cancer is
present. The difference in contrast created by the presence or absence of the
imaging agent serves as the basis to judge presence or absence of disease. We
expect nanoparticulate imaging agents to remain in the node to allow for an
effective imaging procedure with a good safety profile and acceptable clearance
times.
Data from the American Cancer Society indicates that there are
approximately 660,000 or more new cases of breast, prostate, lung, melanoma,
uterine and head and neck cancer diagnosed annually. Those new cases could be
eligible for a diagnostic test of the type we are working on, based on
applicability to a variety of cancers. The data further indicates that there are
currently in excess of approximately three million patients who already have had
cancer and may be eligible for such a diagnostic test. Because our proposed
procedure will be minimally invasive and with what we believe will be minor side
effects, it could be used as a monitoring diagnostic to help assess treatment
success and to monitor the progression of the disease. This promises to be a
less painful and complicated procedure that could be administered in an
outpatient setting, which thereby may facilitate wider use. In most cases, we
believe the images may provide enough information to determine the advancement
of cancer and potentially may be used to monitor the results of post-cancer
treatment and to detect recurrence.
We are presently contemplating that Phase II trials to test the imaging
agents will begin in the fourth quarter of 2000 or early 2001 and will be
conducted in two, 60-patient studies intended to confirm the degree and number
of side effects. If the testing in the 120 patients validates Phase II results,
we expect to convert the trials to a pivotal Phase III study. We then anticipate
recruiting approximately 400 patients for the Phase III study.
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ONCOLOGY
The development of cancer treatments is another area where we believe
our potential products could offer improvement over currently available
treatments. More than 8.4 million Americans live with cancer and more than one
million new cases of cancer are expected to be diagnosed in 2000. Today's cancer
therapies for deep tissue cancers, such as lung, prostate and breast cancers,
are harsh because they involve chemotherapy, intense radiation, and/or radical
surgeries. These treatments, while strong enough to destroy diseased tissue, may
fail to discriminate between healthy and diseased tissue and can traumatize the
body, leaving the patient weak and suffering from side effects for months and
even years after being treated. Surgical disfigurement, illness, hair loss,
weakness, nausea, burns and follow-on tumors are just a few of the side effects
of conventional cancer therapy.
We believe our planned products could potentially improve treatment of
a wide variety of cancers using non-invasive or minimally invasive techniques
that may spare the patient additional trauma brought on by side effects. The
challenge in cancer therapy still remains treating the disease without damaging
healthy tissue. Conventional treatments generally do not offer this level of
selectivity. Even many of the new biotechnology products may fall short of the
hoped for selectivity and produce serious side effects.
It is currently estimated that 70% of newly diagnosed cancers are focal
(they present as a solid tumor still confined to its tissue of origin). We have
demonstrated in mice and rabbits that our photoactive drug, when combined with
low dose radiation in a focal tumor, results in the destruction of tumor cells.
We have shown that the drug PH-10 has a selective affinity for many types of
tumor tissue and that high levels of the drug are selectively retained within
the tumor for days. When tumors in mice were injected with PH-10 and given a low
dose of radiation, we observed a 90% reduction in tumor cells after two days.
Histological analysis showed that when the low-dose treatment was delivered to
cells containing the drug PH-10 there was no significant damage to healthy cells
surrounding the tumor. These results hold the promise of a new, minimally
invasive, radiation-based cancer therapy applicable to many focal tumors without
limitation due to the tumor's location in the body. This potential treatment
could be delivered in an outpatient setting, avoiding the side effects of
traditional therapies and offering the chance to control or possibly eliminate
cancerous tumors.
Through a research agreement with Tufts University School of Veterinary
Medicine, we are working to develop new cancer treatments using low dose X-rays
to activate PH-10. At Tufts, the team can treat animals with naturally occurring
cancer, which we hope will accelerate product development to benefit both humans
and animals. With more than 179,000 new cases diagnosed each year, we are
initially concentrating on treatments for prostate cancer. We hope our research
findings will lead to development of treatments for cancers of the lung, breast,
head and neck.
RESEARCH PIPELINE
One of the benefits of our flexible approach and core technologies is
the possibility that research in one application could lead to treatments in
other applications. The following table shows possible follow-on applications
from our current projects and other research projects underway or under
consideration.
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MARKET AREA FOLLOW-ON TECHNOLOGY/POTENTIAL STATUS
APPLICATION PRODUCT
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DERMATOLOGY Actinic keratosis PH-10 and green light Ready to begin human
pilot study
Squamous and basal PH-10 and green light Ready to begin human
cell carcinoma pilot study
Wound healing PH-10 and green light Ready to begin human
pilot study
Hair removal Ultrafast, pulsed laser Ready to begin human
pilot study
Cutaneous melanoma Ultrafast, pulsed laser Preclinical studies
complete
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ONCOLOGY Barretts esophagus PH-10 and green light Ready to begin human
pilot study
Ocular melanoma Ultrafast, pulsed laser Preclinical studies
ongoing
Breast, lung, head and PH-10 with X-ray Ready to begin
neck cancer preclinical studies
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DIAGNOSTICS Lymphography Other diagnostic and Research under
imaging applications consideration
Two-photon Signal processing Ready to license to
microscopy technologies third parties
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ACTINIC KERATOSIS. Actinic keratosis (also called solar keratosis or
senile keratosis) is the most common pre-cancerous skin lesion among
fair-skinned people. In the U.S., it has been estimated that nearly half of the
approximately five million cases of skin cancer initiated as actinic keratosis.
Early stages of this disease have proven responsive to PDT. We are researching
possible use of PH-10 with green light activation for treatment of these early
stages, and for potential treatment of more advanced stages of the disease. We
plan to consider human pilot studies of this therapy depending on the results of
our other dermatological studies.
SQUAMOUS AND BASAL CELL CARCINOMA. More than one million new cases of
squamous and basal cancer -- common surface cancers that appear on the skin,
lips, inside the mouth, throat or esophagus -- are expected to be diagnosed in
2000 and its occurrence is increasing in the fair-skinned population of
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the United States, Europe and Australia. Treating basal cell and squamous cell
cancers and other surface cancers poses its own set of problems, with ugly
scarring and recurrence of the cancer if some of the cancerous cells fail to be
removed. We are currently researching use of PH-10 combined with green light
activation for potential treatment of squamous and basal cell cancer. We plan to
consider human pilot studies of this therapy depending on the results of our
other dermatological studies.
WOUND HEALING. We are researching a technique that would promote the
healing of persistent skin lesions, such as those found in diabetes patients.
This PDT technique would use PH-10 in a cream that becomes activated using green
light. We plan to consider human pilot studies of our technology as a treatment
for wound healing pending the results of our other dermatological studies.
HAIR REMOVAL. We are investigating the application of long wavelength,
ultrafast, pulsed laser light to remove blond and red hair, using a melanin
precursor present in the hair follicle as the photoactive agent to destroy the
hair follicle. Our approach, if successful, may yield an improvement over
current hair removal technologies by removing light colored hair and by removing
hair without generating heat or requiring cooling for the skin. This approach is
ready for a pilot study in humans. It has been estimated that there will be
approximately 1.5 million hair removal procedures in 2000, growing to three
million procedures in 2003. If we can demonstrate through our pilot studies and
later clinical trials that our procedure is effective, painless and works on all
skin types and hair colors, we would anticipate capturing a portion of that
market.
OCULAR MELANOMA. We are conducting research on ocular melanoma with the
Massachusetts Eye and Ear Infirmary (a teaching affiliate of Harvard Medical
School) for an alternative photodynamic therapy treatment that may offer
advantages over current painful radiotherapy or surgical treatment options.
While ocular melanoma is rare (approximately 2,000 U.S. cases annually) the most
exciting aspect of the study is that it may pave the way for treatment of
primary melanomas of the skin and for metastatic melanoma in the lungs and
liver. Treatment of ocular melanoma using multi-photon excitation in a rabbit
model has resulted in eliminating tumors in over 80% of the animals with one
treatment session. We are currently conducting light dosimetry and other
refinement studies. We believe that this application is nearly ready for human
pilot studies.
CUTANEOUS MELANOMA. In our laboratory, we performed research assessing
the use of ultrafast, pulsed light to directly activate melanin and its
precursors to kill cutaneous melanoma tumors. We announced preliminary results
of that research in September 1998. Tumors produced in mice were treated by
scanning the affected area with light from an ultrafast, pulsed laser. Tumors
ranging in size from 6 to 10 millimeters in diameter and up to 5 millimeters
thick, when treated with ultrafast, pulsed laser light using multiphoton
excitation, produced an immediately marked "blanching" effect, resulting from
the interaction between melanin and the light. After treatment, tumor volume was
reduced by 100% with little or no scarring. Further research on this indication
is being deferred pending the completion and results of our ocular melanoma
preclinical research described above.
BARRETTS ESOPHAGUS. Barretts esophagus is a pre-cancerous condition in
which the lining of the esophagus changes tissue type as a result of
long-standing acid reflux. It has been estimated that there is a 10% chance that
the Barretts tissue will advance to esophageal cancer if not properly treated.
We are researching whether PH-10, when topically applied to esophageal tissue
and treated with the proper light source, could selectively target and treat
diseased tissue. The research may lead to reduction in treatment costs and
improved safety over today's methods of treating Barretts esophagus. Problems
that have been
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noted with conventional PDT have included deep-tissue damage creating
post-treatment strictures and perforation of the esophageal wall. In our
laboratory, we demonstrated that murine esophageal tissue could be selectively
targeted and treated with a topical application of PH-10 and green light. We
began preclinical trials in canines in July 1999 through our research agreement
with the University of Tennessee School of Veterinary Medicine. We have
completed 30 treatments, the results of which were consistent with our belief
that our selective targeting approach would lead to improved safety.
BREAST, LUNG, HEAD AND NECK CANCER. Through our research agreement
with Tufts University School of Veterinary Medicine, we plan to begin
preclinical work on animals to determine whether our work on developing
treatment for prostate cancer can be extended to treatment for cancers of the
breast, lung, head and neck. We believe the properties of PH-10 activated
with X-rays may have potential in these follow-on applications.
TWO-PHOTON MICROSCOPY. We have evaluated a portion of this technology
by incorporating our designs into a conventional two-photon microscope located
at Vanderbilt University. Our technology for signal processing can potentially
improve the diagnostic signal over background noise, which should improve image
clarity and diagnostic sensitivity. This technology is now ready to license to
third parties for use in microscopy or clinical diagnostic applications.
BIOTECHNOLOGY. In the course of our many research projects, we have
developed intellectual property that falls within the area of traditional
biotechnology. These technologies involve methods to improve the development and
production of vaccines, and the discovery of unknown viruses. To further pursue
these discoveries, we may create a joint venture subsidiary that would focus on
this area, although we are not actively pursuing this type of joint venture for
our biotechnology developments at this time.
VETERINARY APPLICATIONS. In our work at Tufts University School of
Veterinary Medicine, we are sponsoring research in treatments for animals with
naturally occurring tumors. We are also working to begin laboratory evaluation
of PH-10 together with green light to treat surface tumors in horses. Our equine
tumor research will be conducted through a research agreement being negotiated
with the University of Tennessee School of Veterinary Medicine.
DEVELOPMENT AND COMMERCIALIZATION STRATEGY
Our overall strategy is to leverage our proprietary technologies
through contractual collaborations with third-parties. In particular, we plan
to:
- Address product development by demonstrating basic technical
feasibility in animal models internally and then, using
third-party clinicians experienced in the specific indication,
to conduct formal preclinical trials. We intend to use the
expertise of the third party clinicians to collect data
necessary to obtain IND's (an Investigational New Drug
Application with the FDA) or IDE's (an Investigational Device
Exemption from the FDA) required to begin human trials.
- Utilize our clinical development team and contractual
collaborative arrangements with third parties to access the
skills and resources required to design, test, obtain
regulatory
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approval, and manufacture photoactive agents, treatment
regimens, diagnostic products and laser devices.
- Market potential products through strategic or distribution
collaborations as determined by the specific characteristics
of each product application.
- Consider opportunities in related fields for technological
licensing when those opportunities could lead to faster
development of products and FDA approval. This includes
obtaining technology through licenses from others and
licensing our own technology to third-parties.
We do not expect to generate material revenues from operations in the
near future. Our first revenues, if any, are expected to derive from licensing
fees and royalties from collaborative relationships and from sales of certain
products related to our expertise in PDT (which currently includes computer
software we developed and our two-photon imaging patent). If we develop a
saleable therapeutic or diagnostic method, device or drug, we expect to generate
revenues from product sales or licensing fees.
Our ability to successfully develop and manufacture any product is
subject to numerous contingencies and uncertainties, including certain Risk
Factors described below. Our objectives, business strategy and product
development efforts are subject to change based on numerous factors, including
the results of preclinical and clinical testing, the availability of suitable
collaborative relationships, the nature of competition, regulatory requirements
and the availability of capital. The description of our business strategy
contains "forward-looking statements" that should be read in conjunction with
the Risk Factors, described below.
Currently, we have not developed any therapeutic or diagnostic products
that are available to manufacture and sell to the public or a pricing structure
for any potential products. However, we developed a software program for
ultrafast, pulsed lasers called PulseView(TM) that is being distributed through
Coherent, Inc. (which currently includes computer software and a hardware
computer interface).
Some of our research agreements provide generally that inventions
developed during the course of research by the institution's investigators,
alone or jointly with us, will be owned by the institution and subject to a
right of first refusal that we can exercise for a stated period allowing us to
enter into an exclusive license for that invention. Our agreements presently in
effect with Tufts University School of Veterinary Medicine, Massachusetts Eye
and Ear Infirmary and our recently completed agreement with Massachusetts
General Hospital's Center for Imaging and Pharmaceutical Research each contain
provisions of this type. In some cases the key terms of the license are stated
in the research agreement, with other terms to be negotiated at the time we
exercise the right of first refusal (if we choose to exercise it).
ELAN JOINT VENTURE
We implemented a major component of our business strategy in October of
1999 when we entered into a joint venture with affiliates of Elan Corporation,
plc (collectively, "Elan"). Elan is a multi-national, billion dollar
pharmaceutical company. The joint venture -- called Sentigen Ltd. ("Sentigen")
- -- will work towards developing and commercializing lymphography agents. We
licensed to Sentigen certain methods we acquired from Alliance Pharmaceutical
Corp. and certain other
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proprietary technology for use in lymphography, and we sub-licensed proprietary
compounds we licensed from Massachusetts General Hospital and Nycomed Imaging
AS. Elan, through its drug delivery division, Elan Pharmaceutical Technologies,
licensed to Sentigen its NanoCrystal(TM) stabilized nanoparticulate formulation
technology to develop the diagnostic imaging agents.
In addition to the technology we gained access to through the Sentigen
joint venture, Elan provided us with a $4.8 million credit facility we can draw
on to fund our share of the anticipated development costs of the joint venture.
Elan may convert borrowings under that credit facility into our Common Stock at
a price of $18.15 per share. Also as part of that transaction, Elan purchased
461,538 shares of our Common Stock at $13.00 per share for a total purchase
price of $6 million.
We also issued 12,015 shares of Series A Exchangeable Convertible
Preferred Stock ("Series A Preferred") to Elan for $1,000 per share. The terms
of the Series A Preferred are described in more detail in "Market for
Registrant's Common Equity and Related Shareholder Matters -- Series A
Convertible Preferred Stock" below. We used the $12,015,000 proceeds from the
sale of our Series A Preferred to purchase 80.1% of the equity of Sentigen. Elan
purchased the other 19.9% of Sentigen's equity for $2,985,000 (Elan may in the
future increase its ownership to 50%). Sentigen used the entire $15 million it
received from us and Elan to pay Elan for Sentigen's license fee for the use of
intellectual property licensed to Sentigen by Elan.
Our agreement with Elan provides that Elan has the right to nominate a
member to our Board of Directors until October 2004 or as long as Elan owns 10%
of our Common Stock. The Elan Board nominee will be on the management slate of
directors at our 2000 annual meeting of shareholders. Elan also has a preemptive
right to participate in our future equity offerings to maintain its pro rata
interest in Photogen. In addition, if we issue Common Stock or Common Stock
equivalents in our next bona fide offering at less than $13 per share, we must
issue additional shares of Common Stock to Elan so that the average price per
share paid by Elan for its aggregate ownership of our Common Stock will equal
the effective price in that offering.
AKORN AGREEMENTS
In November 1999, we announced that we had entered into agreements
with Akorn Inc., a diagnostic and therapeutic pharmaceutical manufacturer, in
which Akorn agreed to develop certain formulations of PH-10 and supply us
with sample quantities for our use in experimental oncology and dermatology
treatments. Akorn will also provide us with necessary background information
for meeting regulatory requirements for FDA approval of PH-10. Akorn will
develop and document raw materials, production and testing procedures and
specifications necessary for us to use when we have new drug applications
("NDA") to file with the FDA for PH-10. Akorn also agreed to negotiate in
good faith with us to enter into a supply contract for PH-10.
COHERENT AGREEMENT
In January 2000, we entered into an exclusive distribution agreement
with Coherent, Inc., in which Coherent will market and sell our PulseView(TM)
software package and computer interface. PulseView(TM) is our first product to
reach commercial distribution. The PulseView(TM) package provides a simple,
rapid means for characterization and validation of the performance of ultrafast,
pulsed lasers.
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Currently these advanced lasers are primarily used for scientific research. We
do not expect our revenues from this product to exceed $200,000 for the next two
years.
PATENTS
We are continuing to pursue patent protection for our proprietary
technologies with the U. S. Patent and Trademark Office, and in various foreign
jurisdictions. We plan to prosecute, assert and defend our patent rights
whenever appropriate. However, securing patent protection does not necessarily
assure us of competitive success. See "Risk Factors -- Loss of patent and other
intellectual property protection would have a material adverse effect on our
business, results of operations and financial condition," below. We are
currently the owner of five patents issued by the U.S. Patent and Trademark
Office of which two are set to expire in 2010 and three in 2016.
In November 1998, we were issued a United States patent with claims
directed to methods for the treatment of plant or animal tissue with
simultaneous two-photon excitation of at least one photoactive molecular agent.
Other methods claimed in the patent include the treatment of cancerous tissue
using simultaneous two-photon excitation. Further, some claims are directed to a
method for using two-photon excitation at a confocal region substantially below
the tissue surface. In December 1999, we were issued a divisional of this patent
relating to methods for producing at least one photo-activated molecular agent
in a particular volume of material using simultaneous two photon excitation or
promoting two photon excitation at a confocal region including those
substantially below a material surface. In November 1998, we were issued a
United States patent directed to our methods for improving selectivity in
photoactivation and detecting molecular diagnostic agents and the imaging of
tissue containing photoactive molecular agents using simultaneous two photon
excitation. This process causes the photoactive agent to emit energy that can be
detected to produce a signal or alternatively, image deep tissue. The patent
also includes a method for imaging of a particular volume of material containing
photoactive molecular agents using two photon excitation at a confocal region
including those regions in deep tissue.
We have also filed patent applications, corresponding to the two
initial patents issued in the United States, under the Patent Cooperation
Treaty ("PCT") covering a number of foreign countries. A preliminary
examination report has been received at the international level, indicating
the novelty, inventive step and industrial applicability of the claims of
each PCT application. The European Patent Office ("EPO") regional phases of
the PCT applications have been entered into along with the national phases
for applications in Australia, Canada, China, India, Israel, Korea, New
Zealand, Singapore, and certain other countries, including Taiwan.
We recently acquired from Alliance Pharmaceutical Corp. certain
patented technology that describes methods for using certain particulate
contrast materials in lymphography, and we have sub-licensed another group of
nanoparticulate contrast materials through Massachusetts General Hospital.
Together, these lymphography methods and compounds involve four U.S. patents
with additional patents in certain foreign jurisdictions and a U.S. patent
application and corresponding foreign applications.
We are continuing to pursue patent protection for our other proprietary
technologies with the U.S. Patent and Trademark Office, the PCT and in various
foreign jurisdictions. In addition to our issued
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patents and applications discussed above, we have filed another 12 U.S. patent
applications relating to inventions in the following areas:
- Multi-photon activation technology
- Methods and apparatus for imaging and treating tissue
using photodynamic
therapies
- Additional photodynamic therapy methods and apparatus
for topical treatment of
disease
- Methods and apparatus for treatment of tissue
containing an endogenous pigment (for example,
melanoma destruction)
- Radiocontrast (X-ray contrast) agents and methods for
treating tissue using those
agents
- Radiosensitizer (radiation sensitizer) agents and
methods for treating tissue using those agents
- Methods for enhanced production of cell lines.
Like other entities whose research is sponsored in any manner by the
United States Government, certain patents that we own or license are subject to
Confirmatory Licenses in favor of the United States Government, as required by
applicable federal regulations. These regulations require us or the patent owner
to agree to convey to the Government, upon the Government's request, rights in
the technology if we decide not to continue prosecution of the patent
applications or if the patent owner does not wish to retain title to the
inventions covered in the patents. The Government also retains certain "march-in
rights" that permit the Government to use the technology under certain
circumstances, including if that action is necessary because we or the patent
owner have not taken or are not expected to take effective steps to achieve
practical application of the inventions; it is necessary to alleviate health or
safety needs not being met by us or the patent owner; or to meet the
requirements for public use specified in certain federal regulations and those
requirements are not being met us or the patent owner. We intend to prosecute
patent applications and in other respects develop patents we own so that the
Government will not exercise its rights under these confirmatory licenses.
"Photogen," the "ray of light" logo and "PulseView" are trademarks of
Photogen. All other trademarks or trade names used in this Form 10-KSB are
trademarks or trade names of their respective owners.
SCIENTIFIC ADVISORY COUNCIL
Our Scientific Advisory Council was formed in September 1998 to provide
scientific advice and counsel to the Board of Directors and Company management
team. It is charged with providing guidance and recommendations to help us
pursue commercially important applications; benefit from the latest developments
in chemistry, biochemistry, laser design and photochemistry; avoid investing our
resources in unprofitable areas; benefit fully from our proprietary
technologies; become properly staffed and equipped; and advance our interests by
facilitating the development of licenses and collaborative agreements. The
Council met twice during 1999 and focused its efforts on clinical trial designs.
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In addition to our President, the following persons serve on the
Council:
- Daniel Tosteson, M.D. - Former Dean of the Faculty of Medicine
of Harvard Medical School and an accomplished contributor in
the fields of molecular biology and medical education
- Harry Morrison, Ph.D. - Dean of Purdue School of Science and
specialist in the fields of photochemistry and photobiology
- Merrill Biel, M.D., Ph.D. - Practicing physician specializing
in head and neck concerns and president of Ear, Nose & Throat
Specialty Care of Minnesota.
Each member of the Council (other than the Company's President) has
entered into a consulting agreement with us providing for the confidentiality of
our proprietary information, and also entered into an award agreement providing
for the grant of non-qualified stock options (vesting over five years) under our
1998 Long Term Incentive Compensation Plan.
GOVERNMENT REGULATIONS
All of the therapeutic and diagnostic products we currently contemplate
developing will require approval by the United States Food and Drug
Administration ("FDA") prior to sales being made within the United States and by
comparable foreign agencies prior to sales being made outside the United States.
The FDA and comparable regulatory agencies impose substantial requirements on
the manufacturing and marketing of pharmaceutical products and medical devices.
These agencies and other entities extensively regulate, among other things,
research and development activities and the testing, manufacturing, quality
control, safety, effectiveness, labeling, storage, record keeping, approval,
advertising and promotion of our proposed products.
One of our contemplated products, based on nanoparticulate compounds we
obtained through a license, has been through a Phase I trial. However, we have
not submitted any information to the FDA regarding any of our other proposed
products. See "Risk Factors -- Our proposed products are subject to extensive
testing and government regulation and approval, including by the Food and Drug
Administration," below.
The regulatory process required by the FDA through which our drug or
device products must successfully pass before they may be marketed in the U.S.
generally involves the following:
- Significant and periodic communication, including meetings,
with the FDA;
- Preclinical laboratory and animal testing;
- Submission of an application that must become effective before
clinical trials may begin;
- Adequate and well-controlled human clinical trials to
establish the safety and efficacy of
the product for its intended indication; and
- FDA approval of the application to market a given product for
a given indication.
For pharmaceutical products, preclinical tests include laboratory
evaluation of the product, its chemistry, formulation and stability, as well as
animal studies to assess the potential safety and efficacy of the product. Where
appropriate (for example, for human disease indications for which there exist
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inadequate animal models), we will attempt to obtain preliminary data concerning
safety and efficacy of proposed products using carefully designed human pilot
studies. Pilot studies will, in general, be sponsored using grants to leading
physician-investigators. Sponsored work will be conducted in compliance with
pertinent local and international regulatory requirements, including those
providing for Institutional Review Board approval and national governing agency
approval and patient informed consent, using protocols consistent with ethical
principles stated in the "Declaration of Helsinki" and other internationally
recognized standards. We expect any pilot studies to be conducted outside the
United States; but if any are conducted in the United States, they will comply
with applicable FDA regulations. Data obtained through pilot studies will allow
us to make more informed decisions concerning possible expansion into
traditional FDA-regulated clinical trials.
If the FDA is satisfied with the results and data from preclinical
tests, it will authorize human clinical trials. Human clinical trials are
typically conducted in three sequential phases which may overlap. Each of the
three phases involves testing and study of specific aspects of the effects of
the pharmaceutical on human subjects, including testing for safety, dosage
tolerance, side effects, absorption, metabolism, distribution, excretion and
clinical efficacy.
Historically, obtaining FDA approval for photodynamic therapies has
been a significant challenge. Not only must the photoactive agent be approved as
a drug, but the laser activation system must also be approved as a medical
device. The FDA is gaining experience with lasers by virtue of having reviewed
and acted upon many 510(k) and premarket approval filings submitted to it for
non-photodynamic therapy laser applications. Applicable medical devices can be
cleared for commercial distribution through a notification to the FDA under
Section 510(k) of the applicable statute. The 510(k) notification must
demonstrate to the FDA that the device is as safe and effective and
substantially equivalent to a legally marketed or classified device that is
currently in interstate commerce. Such devices may not require detailed testing.
Certain high-risk devices that sustain human life, are of substantial importance
in preventing impairment of human health, or that present a potential
unreasonable risk of illness or injury, are subject to an FDA approval process
initiated by filing a premarket approval ("PMA") application.
We have established a core clinical development team and have been
working with outside FDA consultants to assist us in developing product-specific
approval strategies, preparing the required submittals, guiding us through the
regulatory process, and providing input to the design and site selection of
human pilot and clinical studies. We prefer to select products and to address
indications that have no other effective treatments available, that involve only
a laser device, or that utilize a photoactive drug already approved for other
human applications. We believe this approach will allow the FDA to make the best
use of its existing experience with medical lasers, while allowing us to
introduce the FDA reviewers to the benefits of our photodynamic therapy
applications. The goal of this strategy is to obtain more rapid approval for a
few lead products, and accelerate approvals of other products that will require
more time to review.
The testing and approval process requires substantial time, effort, and
financial resources, and we may not obtain FDA approval on a timely basis, if at
all. Success in preclinical or early-stage clinical trials does not assure
success in later stage clinical trials. The FDA or the research institution
sponsoring the trials may suspend clinical trials or may not permit trials to
advance from one phase to another at any time on various grounds, including a
finding that the subjects or patients are being exposed to an unacceptable
health risk. Once issued, the FDA may withdraw a product approval if we do not
comply
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with pertinent regulatory requirements and standards or if problems occur after
the product reaches the market. If the FDA grants approval of a product, the
approval may impose limitations, including limits on the indicated uses for
which we may market a product. In addition, the FDA may require additional
testing and surveillance programs to monitor the safety and/or effectiveness of
approved products that have been commercialized, and the agency has the power to
prevent or limit further marketing of a product based on the results of these
post-marketing programs. Further, later discovery of previously unknown problems
with a product may result in restrictions on the product, including its
withdrawal from the market. Marketing our products abroad will require similar
regulatory approvals and is subject to similar risks.
In the ordinary course of business, we must also comply with a variety
of other federal and state governmental regulations. These regulations impose,
among other things, standards of conduct, recordkeeping, labeling and reporting.
Specific regulations affecting our current and proposed operations include:
environmental-type discharge requirements, good laboratory practices governing
animal testing, good manufacturing practices regarding the manufacture of drugs
and other FDA- regulated products, animal care and use regulations, laws and
regulations relating to labor and the use of lasers, and required general
business practices. We do not currently anticipate that the cost of compliance
in these areas, other than obtaining FDA approval, will present a major obstacle
to achieving our goals.
Another area of regulation that will impact our business is the recent
developments in health care reimbursement and delivery practices as a means to
better control health care costs. See "Risk Factors -- We cannot predict the
effect of changes in health care reimbursement and legislative reform on our
business," below. We believe that changes in health care reimbursement practices
by health insurers and third party payors may lead to an increased interest in
alternative medical procedures and methods such as photodynamic therapy and
lymphography which may generally be less complicated and costly than traditional
procedures. For these reasons, we believe that it may be possible for our
potential products to become attractive alternatives for health insurers and
third party payors.
COMPETITION
The industry in which we operate is intensely competitive, and there is
rapid change with respect to technology for the diagnosis and treatment of
disease. Existing or future pharmaceutical and device companies, government
entities and universities may create developments that accomplish similar
functions to our technologies in ways that are less expensive, receive faster
regulatory approval, or receive greater market acceptance than our potential
products. See "Risk Factors -- Our potential markets are extremely competitive,"
below.
Our competitors have, in general, been in existence for considerably
longer than we have, and thus generally have greater capital resources and
access to capital; greater internal resources for activities in research and
development, clinical testing and trials, production and distribution; existing
collaborative relationships with third parties; and have made greater progress
in the preclinical and clinical testing of their products. In addition, our
competitors may be disinclined to form collaborative relationships with us
directly, or to permit their collaborative partners to work with us. See "Risk
Factors -- Because we do not have, and do not intend to develop, internal
research, manufacturing or clinical testing facilities or marketing resources
for our proposed products, we will have to rely on third parties and
collaborative relationships," below.
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We are aware of one competitor, QLT PhotoTherapeutics, Inc. that has
already received FDA approval for use of its proprietary photoactive agent,
Photofrin(R), in the treatment of esophageal cancer and non-small cell lung
cancer. In conjunction with CIBA Vision, QLT PhotoTherapeutics, Inc. is expected
to soon have a second product, "Visudyne(R)," approved for photodynamic
treatment of certain forms of macular degeneration. Another competitor, Dusa
Pharmaceuticals, has recently received FDA approval for use of its proprietary
photodynamic product, Levulan(R) Kerastik(TM), for treatment of actinic
keratosis. Other competitors, namely Miravant Medical Technologies, Inc. and
Pharmacyclics, Inc., have advanced their proprietary photoactive agents to Phase
II/III clinical trials. Laser manufacturers are also making progress in using
laser technologies to treat certain indications. For example, Indigo Medical,
Inc., a subsidiary of Johnson & Johnson, uses a laser to treat prostate cancer.
In addition, there have been many dramatic developments in treatments for cancer
and other diseases that do not involve photodynamic therapy. These treatments
include new chemotherapy agents or other drugs, vaccines, hyperthermic
treatments, and ultrasound. All of these alternatives potentially compete with
products we may offer because they provide alternative methods and treatments
for certain indications.
We believe that our unique technologies may offset to some extent the
disadvantages from our competitive position. One or more of these technologies,
for example, may change the traditional emphasis in photodynamic therapy from
the drug to the light delivery source. We believe this may enable our technology
to add value to existing and future products of drug manufacturers. In addition,
the unique properties of our laser activation process may give it a competitive
advantage over other light delivery methods that require invasive procedures.
RISK FACTORS
This Form 10-KSB contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve risks, uncertainties and other factors that may cause our
actual results or performance to differ materially from any results or
performance expressed or implied by those statements. Examples of
forward-looking statements include predictive statements, statements that depend
on or refer to future events or conditions, which include words such as
"expects," "anticipates," "intends," "plans," "believes," "estimates," "should,"
"may" or similar expressions, or statements that involve hypothetical events.
The following are some of the key risk factors that may affect our
future results:
WE ARE A DEVELOPMENT STAGE COMPANY, WE HAVE CONDUCTED ONLY LIMITED STUDIES ON
OUR TECHNOLOGIES AND WE DO NOT HAVE ANY PRODUCTS OR REVENUES FROM SALES.
Our Company and our technology are in an early stage of
development. We have not generated revenues from sales or operations,
and we do not expect to generate any significant revenues for at least
several years.
Use of our technology has been limited primarily to laboratory
experiments or animal testing and only one compound has completed Phase
I clinical trials in humans. We have therefore not yet conducted
substantive studies on the effectiveness of any compound on human
subjects. The drug and device products we currently contemplate
developing will require significant additional research and
development, preclinical and clinical testing and regulatory approval
before they can be manufactured and sold. We cannot assure that we will
be able to
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develop our technology into marketable products or that the technology
will be effective for diagnosis or treatment of human diseases. As a
result of changing economic considerations, market, clinical or
regulatory conditions, or clinical trial results, we may shift our
focus or determine not to continue one or more of the projects we are
currently pursuing.
WE HAVE A HISTORY OF LOSSES AND MAY NOT ACHIEVE OR MAINTAIN FUTURE PROFITS OR
PAYMENT OF DIVIDENDS.
We have incurred losses since the beginning of our operations.
As of December 31, 1999, we have incurred total losses of approximately
$8,583,235. We expect our losses to increase in the future as our
financial resources are used for research and development, preclinical
and clinical testing, regulatory activities, manufacturing, marketing
and other related expenses. We may not be able to achieve or maintain
profitability in the future. We have never declared or paid any cash
dividends to stockholders, and do not expect to do so in the
foreseeable future.
WE MUST OBTAIN SIGNIFICANT ADDITIONAL FINANCING.
Under the present circumstances, we may exhaust our available
capital by approximately August, 2001 (depending on the pace of our
spending for preclinical and clinical trials). We will need substantial
additional financing for our research, clinical testing, product
development and marketing programs. We cannot accurately estimate the
amount of additional financing required; however, the amount could be
an additional $30 - 50 million or more. Depending on market conditions,
we will attempt to raise additional capital through stock and debt
offerings, collaborative relationships and other available sources.
Additional funds may not be available on acceptable terms, if at all,
and existing stockholders may be diluted as a result of those
offerings.
If we sell additional equity, Elan has a preemptive right
until October 2003 to participate in that offering. If in our next
third-party financing we sell Common Stock at a price less than $13 per
share, we must issue additional shares to Elan so that Elan's overall
price for its Common Stock equals the effective price in that other
offering.
OUR PROPOSED PRODUCTS ARE SUBJECT TO EXTENSIVE TESTING AND GOVERNMENT REGULATION
AND APPROVAL, INCLUDING BY THE FOOD AND DRUG ADMINISTRATION ("FDA").
Most of our proposed drug and device products have not begun,
and none has completed, the FDA's extensive approval process which must
be completed before proposed products can be sold in interstate
commerce. This process includes preclinical and clinical testing for
effective use and safety in animals and humans and it can be extremely
costly. The time frame necessary to perform these tasks for any
individual product is long and uncertain, and we may encounter problems
or delays which we cannot predict at this time. Even if clinical trials
are successful, our proposed products may not demonstrate sufficient
effectiveness or safety to warrant approval by the FDA or other
regulatory authorities. Any regulatory approval may not cover the
clinical symptoms or indications that we may seek. Marketing our
products in other countries will require seeking and obtaining
regulatory approvals comparable to those required in the U.S.
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LOSS OF PATENT AND OTHER INTELLECTUAL PROPERTY PROTECTION WOULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
One factor which may bear on our success is our ability to
obtain, assert and defend our patents, protect trade secrets and
operate without infringing the intellectual property of others.
Among the important risks in this area are that:
- Our patent applications may not result in issued patents.
Moreover, any issued patents may not provide us with adequate
protection of our intellectual property or competitive
advantages.
- Various countries limit the subject matter that can be
patented and also the ability to enforce patents in the
medical field, which may limit our ability to obtain or
utilize such patents against third parties.
- Our inventions may be "reverse engineered" by our competitors,
and third parties may challenge our existing patents and seek
to hold them invalid or unenforceable.
- Existing or future patents or patent applications (and the
products or methods they cover) of our competitors (or others,
such as research institutions or universities) may interfere,
invalidate, conflict with or infringe our patents or patent
applications. Similarly, our use of the methods or
technologies contained in our patents and other intellectual
property may conflict or infringe the rights of others.
- If an advance is made that qualifies as a joint invention, the
joint inventor or his or her employer may have rights in the
invention.
Litigation over patents and other intellectual property rights
occurs frequently in our industry, and there is a risk that we may not
prevail if we become involved in such litigation. Further, interference
may occur over the rights to certain inventions and there is a risk
that we may not prevail in such an interference. Those disputes can be
expensive and time consuming, even if we win. Intellectual property
disputes are often settled through licensing arrangements that could be
costly to us. In any intellectual property litigation, it is possible
that licenses necessary to settle the dispute would not be available,
or that we would not be able to redesign our technologies to avoid any
claimed infringement.
Confidentiality agreements covering our intellectual property
may be violated and we may not have adequate remedies for any
violation. Also, our intellectual property may in other ways become
known or be independently discovered by competitors.
To the extent we use intellectual property through licenses or
sub-licenses (as is the case for some of our lymphography technology),
our rights are subject to us performing the terms of the license or
sub-license agreement with third parties. Our rights are also subject
to the actions of third parties we may not be able to control, such as
our sub-licensor complying with the terms of its license with the
patent owner and the patent owner maintaining the patent.
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<PAGE>
In some cases where U.S. Government funding was used to
support a project, certain intellectual property is subject to the
Government's "march in" rights which include a royalty-free license
under certain circumstances pursuant to 35 U.S.C. Section 202(c).
WE ARE HIGHLY DEPENDENT UPON A SMALL NUMBER OF EMPLOYEES AND CONSULTANTS WHO
PROVIDE SCIENTIFIC AND MANAGEMENT EXPERTISE.
These individuals have entered into employment or consulting
agreements, confidentiality and/or non-competition agreements with us.
We could suffer competitive disadvantage, loss of intellectual property
rights or other material adverse effects on our business and results of
operations if any employee or consultant violates or terminates these
agreements or terminates their association with us. Our growth and
future success also depends upon the continued involvement and
contribution from these individuals, as well as our ability to attract
and retain highly qualified personnel now and in the future.
BECAUSE WE DO NOT HAVE, AND DO NOT INTEND TO DEVELOP, INTERNAL RESEARCH,
MANUFACTURING OR CLINICAL TESTING FACILITIES OR MARKETING RESOURCES FOR OUR
PROPOSED PRODUCTS, WE WILL HAVE TO RELY ON THIRD PARTIES AND COLLABORATIVE
RELATIONSHIPS.
We must continue to enter into collaborative relationships
with third parties for research and development, preclinical and
clinical testing, manufacturing, marketing and distribution of our
proposed products. We will also be dependent on third parties for the
supply of activation hardware (E.G., lasers and X-ray devices) and for
supplies of photodynamic drugs and other therapeutic and diagnostic
agents. We have several research and supply agreements with third
parties. However, we may not be able to negotiate other acceptable
collaborative and supply arrangements in the future.
Collaborative relationships may limit or restrict our
operations or may not result in an adequate supply of necessary
resources. Our collaborative partners could also pursue alternative
technologies as a means of developing or marketing products for the
diseases targeted by our collaborative programs. If a third party we
are collaborating with fails to perform under its agreement or fails to
meet regulatory standards, this could delay or prematurely terminate
clinical testing of our proposed products.
OUR POTENTIAL MARKETS ARE EXTREMELY COMPETITIVE.
We face substantial competition from competitors with greater
financial, technical and human resources and with greater experience in
developing products, conducting preclinical or clinical testing,
obtaining regulatory approvals, manufacturing and marketing. Our
competitors include firms in the field of photodynamic therapy as well
as other fields generally relating to the diagnosis and treatment of
disease using different technologies or scientific and medical
approaches. Examples of those technologies are novel chemotherapy or
other drugs, and hyperthermic and ultrasound procedures. Some of these
firms have drugs or devices that have completed or are in advanced
stages of clinical trials and regulatory approvals.
Our competitors may develop technologies and obtain patent
protection that could render our technologies or products obsolete or
less competitive or our patents invalid or unenforceable.
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<PAGE>
Due to the inherent risk of failure associated with the testing,
development and production of new and innovative technologies, our
technologies and products may be found to be ineffective, have
unanticipated limitations or otherwise be unsuccessful in the
marketplace. Also, although we believe our estimates of the possible
size of markets for our potential products are based on information we
consider reliable (including data from the American Cancer Society and
similar sources in the public domain), that data or our analysis of the
data could prove incorrect.
WE CANNOT PREDICT THE EFFECT OF CHANGES IN HEALTH CARE REIMBURSEMENT AND
LEGISLATIVE REFORM ON OUR BUSINESS.
Our success will depend, in part, on the extent to which
health insurers, managed care entities and similar organizations,
provide coverage or reimbursement for the medical procedures and
devices we plan to develop. These third-party payors are increasingly
challenging the price of medical procedures and services and
establishing guidelines that may limit physicians' selections of
innovative products and procedures. We also cannot predict the effect
of any current or future legislation or regulations relating to
third-party coverage or reimbursement on our business. We may not be
able to achieve market acceptance of our proposed products or maintain
price levels sufficient to achieve or maintain any profits on our
proposed products if adequate reimbursement coverage is not available.
A SMALL GROUP OF STOCKHOLDERS CONTROLS PHOTOGEN.
A small group of our officers, directors and others control
approximately 85% of our outstanding Common Stock. Several of our
principal stockholders are also parties to a Voting Agreement
concerning the election of certain designees to the Board of Directors
of Photogen Technologies, Inc. and Photogen, Inc. This group of
stockholders can significantly influence Photogen and the direction of
our business and affairs. This concentration of ownership may delay or
prevent a change in control of Photogen, and may also result in a small
supply of shares available for purchase in the public securities
markets. These factors may affect the market and the market price for
our Common Stock in ways that do not reflect the intrinsic value of the
stock.
OUR STOCK PRICE IS VOLATILE.
The price and trading volume of our Common Stock has
fluctuated and is likely to continue to fluctuate significantly for
reasons that may not have any relationship to our operating performance
or other factors that traditionally determine a company's value. The
following factors may have an impact on the price of our stock:
- Announcements by us or others regarding scientific
discoveries, technological innovations, commercial
products, patents or proprietary rights;
- The progress of preclinical or clinical trials;
- Changes in government regulation;
- Public concern about the safety of devices or drugs;
- Limited coverage by securities analysts;
- Changes in our financial performance from period to
period; securities analysts' reports; and general
market conditions.
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<PAGE>
OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ SMALLCAP MARKET WHICH WOULD
MAKE TRADING IN OUR STOCK MORE DIFFICULT.
Since November 1999, our Common Stock has been quoted in the
Nasdaq SmallCap Market. Our shares could be subsequently delisted if we
failed to maintain the listing requirements of the Nasdaq SmallCap
Market, which would force us to list our shares on the OTC Bulletin
Board or some other quotation medium, such as "pink sheets," depending
upon our ability to meet the specific listing requirements of those
quotation systems. As a result, an investor might find it more
difficult to dispose of, or to obtain accurate price quotations for,
our shares. Delisting might also reduce the visibility, liquidity, and
price of our Common Stock.
If our Common Stock were delisted from the Nasdaq SmallCap
Market and is not traded on another national securities exchange, we
could become subject to "penny stock" regulations that impose
additional sales practice disclosure and market making requirements on
broker-dealers who sell or make a market in our stock. If that were to
occur, the rules of the SEC would generally define "penny stock" to be
common stock that has a market price of less than $5.00 per share. If
our stock became subject to penny stock regulations, it would adversely
affect the ability and willingness of broker-dealers who sell or make a
market in our Common Stock and of investors to sell our stock in the
secondary market.
ITEM 2. DESCRIPTION OF PROPERTY.
We are occupying approximately 4,000 square feet of office and
laboratory space in Knoxville, Tennessee. We negotiated a new lease agreement
beginning July 1999, with a term expiring May 2001, for this space at a monthly
rental of $2,700 the facility (including certain scientific equipment located at
this facility) plus charges for utilities and similar items. We have two options
to renew the lease agreement for additional terms of three years each and an
option to purchase the facility at any time during the term of the lease or any
renewal.
We currently have a five year lease agreement for approximately 3,127
square feet of office space located in Westborough, Massachusetts being used for
our clinical development group for an initial rental of $4,300 per month. In
April 2000, we will expand offices in Westborough and begin occupying a total of
approximately 7,821 square feet for an initial rental of $10,754 per month
(increasing to $12,546 per month in the fifth year of the lease).
To our knowledge, the property and equipment in our Knoxville and
Westborough locations are in good condition. In the opinion of management, our
interest in these facilities is adequately covered by insurance.
ITEM 3. LEGAL PROCEEDINGS.
We are not currently a party to any material litigation or proceeding
and are not aware of any material litigation or proceeding against us.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the 1999 fiscal year, the sole
shareholder of Series A Preferred Stock voted to amend and restate the
Certificate of Designations, Preferences, and Rights of Series A Preferred
Stock. No matters were submitted to our Common Stockholders for a vote during
the fourth quarter of the 1999 fiscal year.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
We maintain no active trading market for our common stock. However,
during most of 1999 the Common Stock was traded in the over-the-counter
"bulletin board" market and, after November 29, 1999, in the Nasdaq SmallCap
Market from time to time under the symbol "PHGN."
COMMON STOCK
As of March 7, 2000 there were 37,383,386 shares of our Common Stock
outstanding held of record by approximately 339 stockholders, which includes
shares held in street name. Holders of our Common Stock are entitled to receive
such dividends as may be declared by the Board of Directors. We have not
declared or paid dividends on our Common Stock, and we do not anticipate paying
any dividends in the foreseeable future.
The high and low trading prices for the our Common Stock during each
quarter of the last two fiscal years are set forth below.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1999
(Amounts in $)
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
1st Quarter 18.75 10.75 13.50 8.00
2nd Quarter 28.00 17.75 10.75 8.50
3rd Quarter 20.75 10.00 14.50 8.50
4th Quarter 19.00 10.25 18.75 12.25
</TABLE>
For the period January 1, 2000 through March 7, 2000, the high and low
trading prices for our Common Stock were $19.00 and $14.25 respectively.
Aggregate trading volume for the period January 1, 2000 through March 7, 2000
was approximately 580,807 shares. The foregoing information was obtained from
the National Association of Securities Dealers as reported in the
over-the-counter bulletin board and the Nasdaq SmallCap Market. The quotations
generally reflect inter-dealer prices, without
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<PAGE>
retail mark-up, mark-down or commission and may not represent actual
transactions. The foregoing information for 1998 and 1999, however, reflects
trade prices, and not bid or ask prices, because the small number of trades
through market makers for our stock historically has not yielded meaningful bid
and ask prices. See "Risk Factors -- A small group of stockholders control
Photogen" and "-- Our stock price is volatile" above, regarding the possible
effects of the concentrated ownership of our stock on the market and price of
the stock.
In 1999, we granted qualified and non-qualified stock options pursuant
to our 1998 Long Term Incentive Plan to purchase an aggregate of 1,117,500
shares of Common Stock. The options have vesting requirements ranging from three
to five years from the date of the grant and some have performance-based vesting
requirements. Exercise prices range from $9.375 to $19.375.
We also issued warrants in 1999 to purchase 500,000 shares of Common
Stock at $9.45, 100,000 shares at $21.17, and 2,000 shares at $16.62 per share.
In 2000, we issued warrants to a consultant (covering 15,000 shares of Common
Stock with an exercise price of $15.625 per share) and to the placement agent
for services rendered in connection with our Series B Preferred Stock offering
covering 32,724 shares of our Common Stock at $16.88 per share.
We are subject to eight sets of registration rights agreements. All of
the agreements contain piggyback registration rights and three contain demand
registration rights upon the occurrence of certain events and subject to various
terms and conditions.
- Under the first agreement, if we register any Common Stock
before May 26, 2000 we must offer one shareholder piggyback
registration for 316,665 shares of Common Stock he owns.
- Under the second and third agreements, we granted certain
piggyback registration rights to the holders of warrants
covering an aggregate of 260,000 shares of our Common Stock
owned by two shareholders; which warrants are exercisable
before May 15, 2002.
- Under a fourth agreement, the holder of warrants covering
1,000,000 shares of our Common Stock may demand registration
for those shares in the event that holders of 50% or more of
those warrants make a request covered by at least 100,000
shares (in addition to certain piggyback registration rights).
Demand registration, however, is subject to Board approval.
These warrants are subject to vesting restrictions, and only
warrants for 500,000 shares have vested to date.
- Under the fifth agreement, if we register any Common Stock
before August 10, 2000, we must offer one shareholder
piggyback registration for 42,328 shares of Common Stock it
owns.
- Under the sixth agreement, we granted demand and piggyback
registration rights with respect to Common Stock resulting
from conversion of our Series A Preferred and also with
respect to 461,538 shares of our Common Stock held by Elan.
- Under the seventh and eighth agreements, we granted demand and
piggyback registration rights to the holders of Series B
Preferred Stock, covering Common Stock resulting from
conversions of Series B Preferred Stock. These agreements
provide that
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<PAGE>
"initiating holders" who collectively purchased a minimum of
$1 million worth of Series B Preferred may demand two
registrations of Common Stock issued upon conversion of Series
B Preferred if the registration is for an aggregate price to
the public, net of underwriting discounts and commissions, of
at least $2 million. Holders of Series B Preferred who own a
minimum of $250,000 worth of Series B Preferred are considered
"eligible holders" and may participate in those two demand
registrations.
Mr. Smolik and Drs. Dees, Fisher, Scott and Wachter, who as of
March 7, 2000, collectively hold approximately 22,558,435 shares of our Common
Stock, have agreed not to sell or otherwise dispose of those shares for a
period ending August 2001, without the prior consent of Theodore Tannebaum.
Until December 31, 2000, Mr. Tannebaum must consult with the placement agent
for our private placement of Series B Preferred concerning any proposed
disposition by those five individuals.
Approximately 28,359,469 shares of our Common Stock are "restricted
stock" or are beneficially owned by persons who as of December 31, 1999 were
affiliates of the Company as defined in Rule 144 under the Securities Act. A
portion of those shares would be eligible for resale by Company affiliates and
others who have satisfied the requisite holding periods, subject to the volume
limitations and other provisions of Rule 144 and applicable law. As of March
13, 2000, 875,000 shares of Common Stock that we sold in our March 13, 1998
Private Placement are no longer restricted stock or subejct to Rule 144
because two years have now passed.
SERIES A CONVERTIBLE PREFERRED STOCK
On October 20, 1999, we issued 12,015 shares of Series A Preferred
Stock to Elan International Services, Ltd. ("EIS"), an affiliate of Elan, in
conjunction with the formation of Sentigen Ltd., our joint venture with Elan.
Under the Amended and Restated Certificate of Designations, Preferences and
Rights of Series A Preferred Stock, the holder of Series A Preferred has a
liquidation preference entitling it to the first $12,015,000 of funds available
for distribution to stockholders upon liquidation of the Company and has the
right to convert shares of Series A Preferred into Common Stock at any time
after October 20, 2001 at a conversion price of $21.17 per share. Alternatively,
the holder of Series A Preferred may exchange shares of Series A Preferred for
common shares of Sentigen so that the holder of Series A Preferred owns 50% of
the equity of Sentigen. Each share of Series A Preferred will be paid a
mandatory payment-in-kind dividend equal to 7% (I.E., 0.07 additional shares of
Series A Preferred). The payment-in-kind dividend is cumulative, compounds on a
semi-annual basis and is payable twice a year, beginning April 2000. The holder
of Series A Preferred is only entitled to vote on matters that adversely affect
or change the rights of holders of Series A Preferred Stock. The holder of
Series A Preferred does not have the right to vote on the election of directors
of the Company.
SERIES B CONVERTIBLE PREFERRED STOCK
On February 11, 2000, we filed a Certificate of Designation, Rights and
Preferences of Series B Convertible Preferred Stock which authorized up to
402,000 shares of Series B Convertible Preferred Stock ("Series B Preferred").
We issued 327,240 shares of Series B Preferred to 32 accredited investors in a
private placement, for a purchase price of $16.88 per share and 9,816 shares to
the placement agent in connection with services rendered in our private
placement of Series B Preferred.
Each share of Series B Preferred is entitled to a payment-in-kind
dividend payable in additional shares of Series B Preferred, at a rate of 6%
(I.E., 0.06 additional shares of Series B Preferred).
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Dividends will be payable on January 15 of each year, beginning January 15, 2001
and will accrue from the date of such share's issuance. We may not make
dividends or distributions on Common Stock unless we also pay a dividend on the
Series B Preferred equal to the amount a holder of Series B Preferred would have
received on conversion of Series B Preferred into Common Stock.
Each share of Series B Preferred is entitled to a liquidation
preference equal to $16.88 per share, before any amounts are paid on the Common
Stock on liquidation, but subject to the senior preference of our Series A
Preferred and the liquidation preference of any senior or PARI PASSU securities
we create in the future with the requisite consent of the holders of Series B
Preferred. After payment of the Series B Preferred liquidation preference, we
will distribute our remaining assets pro rata among the holders of the Common
Stock and Series A Preferred and Series B Preferred (subject to the rights of
any senior securities). If we are acquired by another entity or sell all or
substantially all of our assets, and if we pay an amount equal to the
liquidation preference of the Series A Preferred and any other senior security,
holders of Series B Preferred will be entitled to receive the liquidation
preference unless our stockholders prior to the transaction hold at least 50% of
the voting power of the surviving or acquiring entity or if the holders of a
majority of Series B Preferred agree by vote or written consent to exclude the
acquisition or sale from this provision.
Each share of Series B Preferred will have the number of votes equal to
the number of shares of Common Stock into which the share of Series B Preferred
would be convertible, and will be entitled to vote together with the Common
Stock. Certain matters, such as an amendment to the terms of the Series B
Preferred Certificate of Designation or a change in the preferences or any
relative or other rights of the Series B Preferred, may have to be approved by a
majority of the holders of Series B Preferred voting as a separate class.
A holder of Series B Preferred may convert shares of Series B Preferred
into Common Stock at any time, according the following formula:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
IF THE CONVERSION TAKES PLACE: EACH SHARE OF SERIES B PREFERRED CONVERTS INTO:
- ------------------------------------------------------------------------------
<S> <C>
ON OR BEFORE 12/31/00 1.0 SHARES OF COMMON STOCK
- -----------------------------------------------------------------
1/1/01 - 12/31/01 1.2 SHARES OF COMMON STOCK
- -----------------------------------------------------------------
1/1/02 AND THEREAFTER 1.4 SHARES OF COMMON STOCK
- -----------------------------------------------------------------
</TABLE>
The conversion ratio is subject to adjustment for certain dilutive events,
including issuance of Common Stock or equivalent securities at less than
$16.88 per share. We may require holders of series b preferred to convert
their shares into Common Stock (at the same ratios that would apply for a
voluntary conversion, except as described in the second and third bullet
points below) in connection with any of the following events:
- If the holders of a majority of the Series B
Preferred approve a mandatory conversion;
- Immediately prior to a firm commitment, underwritten
public offering of our Common Stock in which we
receive $20 million or more in gross proceeds
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<PAGE>
(however, if a public offering occurs before December
31, 2000, the conversion ratio will be the ratio in
effect for the year 2001);
- If the holders of a majority of Series B Preferred do
not approve any transaction to issue a security
senior or PARI PASSU to the Series B Preferred in a
transaction involving any vendor, licensor or joint
venturer or other commercial transaction (a "special
senior security"), the purpose of which is not solely
to provide financing, and which the Board has
approved and recommended (however, if this occurs
before December 31, 2000, the conversion ratio will
be the ratio in effect for the year 2001); or
- At any time after January 1, 2005.
We must obtain the approval of a majority of the then outstanding
shares of Series B Preferred if we seek to amend our Restated Articles of
Incorporation in a way that adversely affects the shares of Series B preferred
(except for issuance of a special senior security), create certain senior or
PARI PASSU securities, or if we change the rights of Series B Preferred in the
Certificate of Designation in any other material respect. this right is subject
to our ability to require mandatory conversion of Series B Preferred if a
"special senior security" is not approved.
RECENT SALES OF UNREGISTERED SECURITIES
During 1999, we made the following sales of stock without registration
under the Securities Act of 1933 (the "Securities Act"):
- In December 1999, two employees exercised options to purchase
a total of 4,500 shares of our Common Stock under the
Company's 1998 Long Term Incentive Compensation Plan at an
exercise price of $11.125.
- On December 1, 1999, we issued warrants to acquire a total of
2,000 shares of Common Stock to Aqua Partners, LLC, as partial
consideration for consulting services Aqua agreed to perform
for us. The warrants are exercisable at any time before
December 1, 2004 for an exercise price of $16.62 per share.
- On October 20, 1999, we issued the following securities to
Elan International Services, Ltd.:
- 461,538 shares of Common Stock for a total purchase
price of $6,000,000 paid in cash.
- 12,015 shares of Series A Convertible Exchangeable
Preferred Stock for a total purchase price of
$12,015,000 paid in cash.
- Warrants to acquire a total of 100,000 shares of
Common Stock exercisable at any time on or before
October 20, 2004 for an exercise price of $21.17 per
share.
- A Convertible Promissory Note in the principal amount
of $4,806,000 bearing interest at 8% per annum. We
must use borrowings under the Note (if any) to fund
our portion of Sentigen Ltd.'s development costs;
borrowings are
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<PAGE>
convertible at Elan's election into our Common Stock
at a conversion price of $18.15 per share.
- On September 22, 1999, we issued 42,328 shares of Common Stock
to Alliance Pharmaceutical Corp. as partial consideration for
Alliance assigning patents and patent applications in the U.S.
and elsewhere to us relating to lymphography methods.
- On August 9, 1999, we issued warrants to acquire a total of
500,000 shares of Common Stock to Farcap Group, LLC as
consideration for consulting services Farcap agreed to perform
for us. the warrants are exercisable at any time before August
9, 2004 for an exercise price of $9.45 per share.
In each of the transactions described above:
- We did not use any underwriters or brokers and we paid no
commissions or underwriting discounts.
- Wherever we received cash consideration, we used the proceeds
for working capital and other general corporate purposes.
- These transactions were exempt from registration under the
Securities Act pursuant to Section 4(2) of that Act, on the
basis of one or more of the following factors: we made the
offers and sales to a limited number of "accredited investors"
within the meaning of Rule 501 of Regulation D under the
Securities Act, without public advertising or solicitation;
each investor had access to material information about the
Company and the opportunity to obtain further information;
each investor acquired the securities for investment and not
with a view to resale or distribution thereof; and the
certificates representing the shares bear a legend
restricting their transfer except in compliance with
applicable securities laws.
During 1999, we also awarded 1,117,500 options to acquire our Common
Stock pursuant to our 1998 Long Term Incentive Compensation Plan. Those options
are exercisable at prices ranging from $9.375 to $19.375 and are subject to
various vesting criteria.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION.
UNCERTAINTIES RELATING TO COMPANY. We are principally engaged in the
research and development of drugs and medical device products for use in
human therapeutic and diagnostic applications. We have not completed
development of any diagnostic or therapeutic product or process at this time
and have no revenue from operations. Portions of the discussion in this item
contain forward-looking statements and are subject to the Risk Factors
described above.
RESULTS OF OPERATIONS. We have not generated revenues from the sale of
any proposed diagnostic or therapeutic products or other operations, and
continue to experience losses. Our net loss increased from $1,973,913 in 1998 to
$6,052,841 in 1999. Our research and development costs
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increased from $1,258,000 in 1998 to $2,824,000 in 1999. The increase in losses
are attributable primarily to expenses related to pursuing patent protection for
our technology, designing and acquiring equipment and engaging in animal studies
and other research, research and development expenses, and other general and
administrative costs. We expect to continue to incur increasing losses for at
least the next several years as we intensify our research and development,
preclinical and clinical testing, regulatory approval activities and engage in
or provide for the manufacture and/or sale of any products that we may develop.
Our investment income decreased from $392,599 in 1998 to $179,795 in
1999. Our income in 1999 was investment income on the proceeds from the sale of
our Common Stock and Series A Preferred in 1997, 1998 and 1999. As we used
capital in 1999, it was no longer available to generate investment income which
resulted in lower income. The proceeds from the sales of our Common Stock are
invested primarily in United States Government obligations. Because we have no
revenues from operations at this time, investment of such funds in that manner
is necessary to enable us to avoid becoming subject to the Investment Company
Act of 1940.
LIQUIDITY; CAPITAL RESOURCES. In October 1999, we closed the sale of $6
million of our Common Stock to Elan as part of the formation of the Sentigen
Ltd. joint venture. We may use the proceeds from the sale of that stock for any
corporate purposes. In February 2000, we closed a private placement of our
Series B Convertible Preferred Stock ("Series B Preferred") which resulted in
net proceeds to us of $5,335,520. (The terms of the Series B Preferred are
discussed above at Item 5, "Market for Registrant's Common Equity and Related
Stockholder Matters -- Series B Convertible Preferred Stock".) We plan to use
the proceeds of our Series B Preferred offering for research and development
(including preclinical and clinical trials), the purchase or lease of scientific
and laboratory equipment, legal and regulatory consulting fees, corporate
overhead, general operating expenses and other working capital purposes.
We have used, and expect over the next 12 months to use, the proceeds
from our fourth quarter sale of Common Stock to Elan, the proceeds from our sale
in 2000 of Series B Preferred, and the proceeds remaining from our March 13,
1998 private placement of Common Stock for corporate overhead and operating
expenses, preclinical and clinical trials, the purchase or lease of scientific
and laboratory equipment and related facilities, legal and regulatory consulting
fees and for other working capital purposes, assuming we have no revenues during
that period. We expect our use of capital to increase significantly as we move
toward initiating human clinical trials.
We have a $4.8 million credit facility from Elan to fund a portion
of the operations of the Sentigen joint venture. We have also received a
binding commitment from one of our principal shareholders, Mr. Tannebaum, to
make a one million dollar credit facility available to us. If we utilize Mr.
Tannebaum's credit facility, borrowings will bear interest at 6% per year and
interest only will be paid annually, with the principal due in five years.
The loan would be secured by a lien on all of our assets.
Our use of cash and capital resources for the 1999 fiscal year averaged
about $425,440 per month. Our use of cash and capital resources is presently
about $700,000 per month. As of March 7, 2000 we had approximately $11,042,000
available to meet our operating expenses. At the current rate of spending, we
will exhaust our funds by approximately July, 2001. We can adjust our use of
cash and capital by not renewing or by seeking to modify research or other
contracts; or by seeking alternative methods of paying for portions of the
research and other contract obligations, such as issuing stock rather
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<PAGE>
than paying in cash (which may dilute stockholders). We expect to consider
additional financing transactions in the future. See "Risk Factors -- We must
obtain significant additional financing," above.
PATENT AND OPERATIONAL MATTERS. We are continuing to pursue patent
protection for our proprietary technologies with the U. S. Patent and Trademark
Office, and in various foreign jurisdictions. See "Patents and Status" and "Risk
Factors -- Loss of patent and other intellectual property protection would have
a material adverse effect on our business, results of operations and financial
condition," above. We recently filed patent applications covering inventions in
the following areas:
- Multi-photon activation technology
- Additional photodynamic therapy methods for topical
treatment of disease
- Melanoma destruction
- Radiocontrast agents and methods
- Radiosensitizer agents and methods
- Enhanced production of cell lines
We continue to pursue development of proprietary technologies as a
result of our research in chemistry, photochemistry, and biochemistry. However,
we cannot guarantee that we will develop new, patentable technology, or that
commercial products will be developed from those technologies and successfully
sold.
We recently renewed our research agreement with the University of
Tennessee School of Veterinary Medicine which in the current phase of research
is focusing on preclinical research on photodynamic therapy for Barretts
esophagus. We plan to continue to pursue preclinical and clinical testing of
proposed products, but we cannot assure investors that we will be able to
successfully develop and obtain proprietary protection for new technologies or
that we can develop products from these technologies that can be commercialized.
We occupy approximately 4,000 square feet of office and laboratory
space in Knoxville, Tennessee. We pay a monthly rental of $2,700 for this
facility (including certain equipment) plus charges for utilities and similar
items. We also currently occupy 3,127 square feet of office space in
Westborough, Massachusetts and pay a monthly rental or $4,300 per month. In
April 2000, we will increase our rental space in Westborough to a total of 7,821
square feet and pay an initial monthly rental of $10,754 for this facility
(increasing to $12,546 per month in the fifth year of the lease). We increased
our investment in office and laboratory equipment from approximately $846,114 in
1998 to $1,555,530 in 1999. We expect to spend an additional $1,114,000 during
the 2000 fiscal year to acquire the instruments necessary to support animal
preclinical and human clinical trials, and development of proprietary
photoactive agent and targeting systems.
In conjunction with Dr. Gerald Wolf's appointment as our Medical
Director and the research agreement we entered into with Tufts University School
of Veterinary Medicine to develop new cancer treatments, we are leasing and
providing to Tufts a new $1.2 million Picker CT scanner with highly
sophisticated imaging capabilities. We pay approximately $17,703 monthly for the
lease and service of the scanner, increasing to $28,748 next year.
We hired five employees during the 1999 fiscal year. This increased our
compensation expense to a total of $98,750 per month (excluding the value of
stock options). Compensation charged to operations in connection with
employee stock options was $225,000 in 1999. Grants and awards of stock
-32-
<PAGE>
options and warrants to consultants represented compensation expense of $1.2
million during 1999. Each of the five new employees work out of our Westborough
office in the areas of clinical development, regulatory approval processes, and
the use of CT imaging technologies.
PLAN OF OPERATION. During the next twelve months, we will focus our
efforts on completing preclinical studies, beginning human trial and human pilot
studies on selected indications, preparing for the design and assembly of laser
and other treatment devices, preparing to manufacture clinical quantities of our
drug formulations and preparation of required filings to FDA and foreign
regulatory bodies. We will also continue with animal studies and evaluation of
proprietary photoactive agent candidates, pursuing patent protection and seeking
potential research and development and collaboration candidates.
During the 12 months ended December 31, 1999, we spent approximately
$709,416 to acquire equipment necessary to support animal preclinical and human
clinical trials, and on development of photoactive agents and targeting systems.
We anticipate increased spending during fiscal 2000 for clinical equipment and
clinical work provided by third-party researchers. During the next twelve months
we expect to spend approximately $1,114,000 to obtain new equipment. The
research contracts to which we are currently a party in the aggregate will
require us to spend $454,107 during the next twelve months for the projects
presently contemplated under those agreements. Additional projects may be
undertaken with those institutions for compensation to be agreed upon at that
time.
We do not presently anticipate adding a significant number of
additional personnel to work in either the Westborough or the Knoxville offices.
We will consider faster growth if that would present opportunities to increase
our product pipeline, or opportunities for more rapid FDA approval or to attain
licensing revenues. We intend to structure our research and development and
collaborative arrangements to make the fullest possible use of personnel and
facilities provided by the parties with whom we may contract.
With the funds we received from our financings in 1999 and in the first
quarter of 2000, plus the credit available from Elan (to fund a portion of the
anticipated development costs of Sentigen) and from Mr. Tannebaum, we believe we
will have enough cash resources for our current commitments during the next 12
months. However, as we progress toward and into human clinical trials, our use
of capital will increase and will continue to do so at an accelerating pace.
Greater capital resources would enable us to quicken and expand our research and
development activities over that 12-month period; and our failure to raise
additional capital will (absent a suitable collaborative agreement providing for
a third party to take over these functions) significantly impair our ability to
conduct further research and development activities beyond those currently
contracted for and our ability to seek regulatory approval for any possible
product resulting from that research. In any event, complete development and
commercialization of our technology will require substantial additional funds.
See "Risk Factors -- We must obtain significant additional financing," above.
Accordingly, we are continuously evaluating capital formation activities and
opportunities, either as part of collaborative arrangements with third parties
or through offerings of equity or debt unrelated to collaborations.
-33-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
-34-
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Photogen Technologies, Inc.
Knoxville, Tennessee
We have audited the accompanying consolidated balance sheets of Photogen
Technologies, Inc., a development stage company, as of December 31, 1998 and
1999, and the related consolidated statements of operations, shareholders'
equity and cash flows for the period from November 3, 1996 (inception) to
December 31, 1999 and the years ended December 31, 1998 and 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Photogen
Technologies, Inc. at December 31, 1998 and 1999, and the results of its
operations and its cash flows for the period from November 3, 1996 (inception)
to December 31, 1999 and the years ended December 31, 1998 and 1999, in
conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
Chicago, Illinois
February 25, 2000
-35-
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 652,226 $ 1,681,773
Restricted cash (Note 5(b)) - 100,000
United States Treasury Notes, total face value $5,660,000 and
$5,470,000, respectively 5,682,105 5,472,564
Interest receivable 121,471 84,327
Prepaid expenses 435,395 531,710
Deferred offering costs (Note 8) - 59,000
- ------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 6,891,197 7,929,374
- ------------------------------------------------------------------------------------------------------------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, less accumulated
depreciation of $129,004 and $393,692, respectively (Note 4(a)) 1,169,388 1,279,441
PATENT COSTS, net of amortization of $17,361 - 482,639
DEPOSIT - 29,370
INVESTMENT IN AND ADVANCES TO AFFILIATE (Note 3) - 11,998,430
- ------------------------------------------------------------------------------------------------------------------
$ 8,060,585 $ 21,719,254
==================================================================================================================
</TABLE>
-36-
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 804,248 $ 833,163
Current portion of obligation under capital leases (Note 4(a)) 111,769 21,148
- --------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 916,017 854,311
OBLIGATION UNDER CAPITAL LEASES (Note 4(a)) 35,990 18,356
- --------------------------------------------------------------------------------------------------------------------
COMMITMENTS (Note 4)
SHAREHOLDERS' EQUITY (Notes 2, 3, 5 and 6)
Preferred stock; par value $.01 per share; 5,000,000 shares
authorized including:
Series A preferred stock; 12,015 shares authorized
and outstanding - 120
Common stock; par value $.001 per share; 150,000,000 shares
authorized; 36,875,020 and 37,383,386 shares issued and
outstanding 36,875 37,384
Unearned consulting expense - (1,585,575)
Additional paid-in capital 9,602,097 30,977,893
Deficit accumulated during the development stage (2,530,394) (8,583,235)
- --------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 7,108,578 20,846,587
- --------------------------------------------------------------------------------------------------------------------
$ 8,060,585 $ 21,719,254
====================================================================================================================
</TABLE>
-37-
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
Amounts
From
November 3,
1996
Year Ended YEAR ENDED (Inception) to
December 31, DECEMBER 31, December 31,
1998 1999 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OTHER INCOME
Investment income $ 392,599 $ 179,795 $ 679,527
EXPENSES
Operating (Notes 3, 4, 5 and 7) 2,366,512 6,232,636 9,262,762
- ------------------------------------------------------------------------------------------------------------------------
NET LOSS (1,973,913) (6,052,841) (8,583,235)
DIVIDENDS ON PREFERRED STOCK (Note 3) - (220,677)
- --------------------------------------------------------------------------------------------------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS (1,973,913) (6,273,518)
==================================================================================================
BASIC AND DILUTED LOSS PER COMMON SHARE $ (.05) $ (.17)
==================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC AND DILUTED 36,692,708 36,983,707
==================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
-38-
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
-------------------------- -----------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------
<S> <C><C> <C> <C>
Contribution of capital - $ - - $ -
Net loss for the period ended
December 31, 1996 - - - -
- ----------------------------------------------------------------------------------------------------
BALANCE, at December 31, 1996 - - - -
Net loss and capital contributions for
the Period January 1, 1997 to
May 15, 1997 - - - -
- ----------------------------------------------------------------------------------------------------
BALANCE, at May 15, 1997 - - - -
Issuance of common stock - - 6,312,833 6,313
Effect of recapitalization and merger - - 29,687,167 29,687
Cost associated with recapitalizaton
and Merger - - - -
Net loss for the period May 16, 1997
to December 31, 1997 - - - -
- ----------------------------------------------------------------------------------------------------
BALANCE, at December 31, 1997 - - 36,000,000 36,000
Issuance of common stock - - 875,020 875
Costs associated with common stock
Issuance - - - -
Options issued to consultants - - - -
Net loss for the year ended
December 31, 1998 - - - -
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Deficit
Accumulated
Unearned Additional During the
Members' Consulting Paid-in Development
Capital Expense Capital Stage Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contribution of capital $ 7,268 $ - $ - $ - $ 7,268
Net loss for the period ended
December 31, 1996 (1,779) - - - (1,779)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, at December 31, 1996 5,489 - - - 5,489
Net loss and capital contributions for
the Period January 1, 1997 to
May 15, 1997 3,511 - - (3,511) -
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, at May 15, 1997 9,000 - - (3,511) 5,489
Issuance of common stock - - 1,797,137 - 1,803,450
Effect of recapitalization and merger (9,000) - 1,181,500 1,732 1,203,919
Cost associated with recapitalizaton
and Merger - - (371,111) - (371,111)
Net loss for the period May 16, 1997
to December 31, 1997 - - - (554,702) (554,702)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, at December 31, 1997 - - 2,607,526 (556,481) 2,087,045
Issuance of common stock - - 6,999,125 - 7,000,000
Costs associated with common stock
Issuance - - (50,000) - (50,000)
Options issued to consultants - - 45,446 - 45,446
Net loss for the year ended
December 31, 1998 - - - (1,973,913) (1,973,913)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-39-
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------------ ---------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, at December 31, 1998 - $ - 36,875,020 $ 36,875
Exercise of stock options - - 4,500 5
Issuance of warrants and options - - - -
Issuance of common stock - - 503,866 504
Issuance of preferred stock 12,015 120 - -
Net loss for the year ended December 31,
1999 - - - -
- --------------------------------------------------------------------------------------------------
BALANCE, at December 31, 1999 12,015 $ 120 37,383,386 $ 37,384
- --------------------------------------------------------------------------------------------------
<CAPTION>
Deficit
Accumulated
Unearned Additional During the
Members' Consulting Paid-in Development
Capital Expense Capital Stage Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, at December 31, 1998 $ - $ - $ 9,602,097 $ (2,530,394) $ 7,108,578
Exercise of stock options - - 50,058 - 50,063
Issuance of warrants and options - (1,585,575) 3,664,749 - 2,079,174
Issuance of common stock - - 6,082,150 - 6,082,654
Issuance of preferred stock - - 11,578,839 - 11,578,959
Net loss for the year ended December 31,
1999 - - - (6,052,841) (6,052,841)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, at December 31, 1999 $ - $(1,585,575) $ 30,977,893 $ (8,583,235) $ 20,846,587
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
-40-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
Amounts
From
November 3,
1996
Year Ended YEAR ENDED (Inception) to
December 31, DECEMBER 31, December 31,
1998 1999 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,973,913) $ (6,052,841) $ (8,583,235)
Depreciation and amortization 148,761 282,049 448,388
Loss on sale of marketable securities 9,238 - (18,503)
United States Treasury Notes
amortization 22,364 24,914 55,052
Stock option compensation 45,446 381,321 426,767
Issuance of warrants in exchange for
services rendered - 1,043,466 1,043,466
Loss from investment in affiliate - 306,029 306,029
Changes in operating assets and
liabilities
Prepaid expenses (427,231) (96,315) (531,710)
Interest receivable (100,069) 37,144 (84,832)
Accounts payable 686,015 28,915 833,163
- -------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (1,589,389) (4,045,318) (6,105,415)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of marketable securities 400,000 - 2,164,464
Purchases of marketable securities - - (2,182,967)
Purchases of United States Treasury
Notes (14,516,754) (5,475,373) (22,037,003)
Sales of United States Treasury Notes 10,343,698 5,660,000 17,643,548
Purchase of equipment and leasehold
improvements (877,459) (374,741) (1,381,429)
Costs to acquire patent - (200,000) (237,335)
Investment in and advances to affiliate - (12,304,459) (12,304,459)
Increase in restricted cash - (100,000) (100,000)
Increase in deposit - (29,370) (29,370)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (4,650,515) (12,823,943) (18,464,551)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-41-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
Amounts
From
November 3,
1996
Year Ended YEAR ENDED (Inception) to
December 31, DECEMBER 31, December 31,
1998 1999 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on capital leases $ (140,501) $ (108,255) $ (252,200)
Net proceeds from issuance of equity 6,950,000 18,066,063 25,022,376
Increase in deferred offering costs - (59,000) (59,000)
Proceeds from capital contributions by
shareholders - - 1,911,674
Cost of recapitalization - - (371,111)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 6,809,499 17,898,808 26,251,739
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 569,595 1,029,547 1,681,773
CASH AND CASH EQUIVALENTS, at beginning
of year 82,631 652,226 -
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, at end of year $ 652,226 $ 1,681,773 $ 1,681,773
===================================================================================================================
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
1999
$300,000 of patent costs were paid through the issuance of common stock.
1998
Equipment purchased under capital leases amounted to $209,165.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
-42-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND
SIGNIFICANT ACCOUNTING
POLICIES
NATURE OF OPERATIONS Photogen Technologies, Inc. (the "Company"),
through its subsidiary Photogen, Inc.,
successor to Photogen, L.L.C., is a
development stage biotechnology company that
is focusing on developing minimally invasive
products for treatment and diagnosis of
disease. The Company's technologies involve
methods, materials and devices that are
intended to destroy diseased cells, remove
tissue or identify and diagnose disease.
PRINCIPLES OF Intercompany balances and transactions have
CONSOLIDATION been eliminated in consolidation.
ESTIMATES The financial statements include estimated
amounts and disclosures based on management's
assumptions about future events. Actual
results may differ from those estimates.
CASH EQUIVALENTS Highly liquid investments with a maturity of
three months or less when purchased are
classified as cash equivalents.
MARKETABLE SECURITIES Marketable securities consisting of
marketable debt securities are classified as
held-to-maturity securities and all
investments mature within one year.
Held-to-maturity securities are stated at
amortized cost which approximates market.
EQUIPMENT AND LEASEHOLD Equipment and leasehold improvements are
IMPROVEMENTS stated at cost. Depreciation and amortization
of equipment are provided for using the
straight-line method over the estimated
useful lives of the assets. Leasehold
improvements are being amortized on a
straight-line basis over the lives of the
respective leases or the service lives of the
improvements, whichever is shorter.
Depreciation expense was $148,761 and
$264,688 for 1998 and 1999.
The Company reviews the carrying values of
its other long-lived assets for possible
impairment whenever an event or change in
circumstances indicates that the carrying
amount of the assets may not be recoverable.
Any long-lived assets held for disposal are
reported at the lower of their carrying
amounts or fair value less cost to sell.
-43-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PATENT COSTS Internal patent costs are expensed in the
period incurred. Patents purchased are
capitalized and amortized over the life of
the patent.
RESEARCH AND Research and development costs are charged to
DEVELOPMENT expense when incurred. Research and
development costs were approximately
$1,258,000 in 1998 and $2,824,000 in 1999.
INCOME TAXES The Company recognizes deferred tax assets
and liabilities for the expected future tax
consequences of temporary differences between
the tax basis and financial reporting basis
of certain assets and liabilities based upon
currently enacted tax rates expected to be in
effect when such amounts are realized or
settled.
The Company has not recorded an income tax
benefit for losses incurred of approximately
$7,939,000 primarily expiring in 2018 and
2019. The Company is in the development stage
and realization of the losses is not likely.
An income tax valuation allowance has been
provided for the losses realized to date.
BASIC AND DILUTED LOSS Basic and diluted loss per common share is
PER COMMON SHARE computed based on the weighted average number
of common shares outstanding. Loss per share
excludes the impact of outstanding options
and warrants as they are antidilutive.
RECENT ACCOUNTING In June 1998, the FASB issued Statement of
PRONOUNCEMENTS Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments
and Hedging Activities," which establishes
accounting and reporting standards for
derivative instruments and hedging
activities. SFAS 133 is effective for years
beginning after June 15, 2000. It requires
that an entity recognize all derivatives as
either assets or liabilities in the statement
of financial position and measure those
instruments at fair value. The Company, to
date, has not engaged in derivative and
hedging activities.
RECLASSIFICATIONS Certain 1998 amounts have been reclassified
to conform with the 1999 presentation.
-44-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. RECAPITALIZATION AND On May 16, 1997, MT Financial Group, Inc. (an
MERGER inactive public company), through its wholly
owned subsidiary, effected a reverse merger
with Photogen, Inc. ("Photogen"), successor
to Photogen, L.L.C. Legally, Photogen is a
wholly owned subsidiary of Photogen
Technologies, Inc. (formerly known as MT
Financial Group, Inc.)
For financial reporting purposes, Photogen
was deemed to be the acquiring entity. The
transaction has been reflected in the
accompanying financial statements as (1) a
recapitalization of Photogen (consisting of a
48,000-for-one stock split and change in par
value) and (2) an issuance of shares by
Photogen in exchange for all of the
outstanding shares of MT Financial Group,
Inc.
As part of the recapitalization, the Company
sold 6,312,833 shares of common stock for a
total purchase price of approximately
$1,803,456. Further, as consideration for the
acquisition of Photogen, Inc., 24,000,000
shares of common stock were issued.
Legal and brokerage fees of approximately
$371,000 were charged to additional paid-in
capital as costs of the recapitalization and
merger. Included in the paid-in capital is
the net cash of approximately $109,000 from
MT Financial Group, Inc.
On March 13, 1998, the Company completed a
private placement of 875,020 shares of common
stock for $8.00 per share to a number of
accredited investors. The Company received
$7,000,000 in gross proceeds from this
offering.
-45-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. JOINT VENTURE/ On October 12, 1999, the Company formed a
INVESTMENT IN joint venture with Elan International
AFFILIATE Services, Ltd. ("Elan") to develop and
commercialize nanoparticulate diagnostic
imaging agents for the detection and
treatment of cancer through lymphography.
Sentigen Ltd. ("Sentigen") was formed to hold
the operations, assets and liabilities of the
joint venture. Elan purchased 2,980 shares of
Sentigen nonvoting convertible preferred
stock for $2,985,000 representing a 19.9%
ownership interest. Elan also purchased
12,015 shares of the Company's Series A
convertible exchangeable preferred stock for
$12,015,000. In connection with the issuance
of the preferred stock to Elan, the Company
granted warrants to Elan to purchase 100,000
shares of the Company's common stock at
$21.17 per share which was valued at
$678,000. As a result, a preferred stock
dividend is being recorded for the accretion
of the preferred stock to its face value of
$12,015,000 over the period until it is first
convertible.
The Company purchased 12,000 shares of
Sentigen's common stock for $12,015,000
representing a 80.1% ownership interest.
Sentigen used the $15,000,000 received from
the Company and Elan to purchase from Elan a
worldwide license to certain Elan technology
related to the joint venture. Expenses
incurred by the Company and Elan, which
relate to the development of the diagnostic
imaging agents, are charged to Sentigen.
Elan granted the Company a line of credit of
$4,806,000 to be used by the Company to fund
its portion of Sentigen's research and
development. The line of credit can be
converted into the Company's common stock.
Any borrowings under the line of credit would
bear interest at 8%. There were no borrowings
on this line of credit at December 31, 1999.
In connection with the joint venture
agreement, Elan also purchased 461,538 shares
of the Company's common stock for $6,000,000.
If the Company sells common stock in its next
offering at less than $13 per share, Elan
will receive additional shares of stock so
that its price per share will equal the price
in the offering.
The total cash proceeds from the equity
issuance to Elan of $18,015,000 were
allocated to the common stock, preferred
stock and the warrants.
-46-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Elan has substantive participating rights in
Sentigen. As a result, the Company's
investment in Sentigen is recorded under the
equity method.
Following is summarized financial information
for Sentigen at December 31, 1999:
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------------------------
<S> <C>
License purchased from Elan $ 15,000,000
Total assets 15,000,000
================================================================================
Due to affiliates 382,040
Total shareholders' equity 14,617,960
--------------------------------------------------------------------------------
Total liabilities and equity 15,000,000
================================================================================
Research and development expense 382,040
--------------------------------------------------------------------------------
Net loss $ 382,040
================================================================================
</TABLE>
4. COMMITMENTS (a) The Company leases offices and a
laboratory at two locations. One
lease expires in 2001, and the other
lease expires in 2004. As of
December 31, 1999, the Company
entered into an operating lease for
laboratory equipment beginning
January 1, 2000 and expiring in
2004. Total rental expense charged
to operations for the years ended
December 31, 1999 and 1998
aggregated approximately $28,000 and
$44,000, respectively. Commitments
for minimum rentals under
noncancellable leases as of December
31, 1999 are as follows.
Additionally, the Company leases
laboratory equipment under capital
leases.
-47-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Capitalized Operating
YEAR ENDING DECEMBER 31, Leases Leases
-------------------------------------------------------------------------------
<S> <C> <C> <C>
2000 $ 25,673 $ 287,520
2001 18,553 412,220
2002 1,574 405,380
2003 - 406,680
2004 - 397,560
-------------------------------------------------------------------------------
Total minimum lease payments 45,800 1,909,360
Less amount representing interest (6,296) -
-------------------------------------------------------------------------------
Present value of net minimum lease
payments $ 39,504
============================================================
The equipment which is leased under the
capitalized lease agreements and classified
as equipment has cost and accumulated
amortization as follows. Lease amortization
is included in depreciation and amortization
expense.
<CAPTION>
DECEMBER 31, 1998 1999
-------------------------------------------------------------------------------
<S> <C> <C>
Cost $ 316,561 $ 82,539
Accumulated amortization 40,599 35,767
-------------------------------------------------------------------------------
$ 275,962 $ 46,772
===============================================================================
</TABLE>
(b) The Company has entered into
employment agreements with certain
officers and employees for initial
terms ranging between three and five
years expiring in 2002 and 2003.
Under the terms of these agreements,
the officers and employees are each
entitled to initial annual salaries
ranging between $85,000 and $190,000
plus fringe benefits (subject to
adjustments).
-48-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. EQUITY TRANSACTIONS (a) The Company applies the recognition
provisions of Statement of Financial
Accounting Standards ("SFAS") No.
123 "Accounting for Stock-Based
Compensation" (SFAS 123) in
accounting for stock options issued
to nonemployees. During 1999, the
Company issued 10,000 options and
502,000 warrants for common stock in
exchange for consulting services
rendered. As the fair market value
of these services was not readily
determinable, these services were
valued based on the fair market
value for the options issued which
ranged from $5.22 to $9.52. Fair
market value was determined using
the Black-Scholes option pricing
model. Consulting costs charged to
operations were approximately
$45,000 in 1998 and $1,200,000 in
1999. $1,585,575 has been classified
as unearned consulting expense in
shareholders' equity as this amount
represents payment for services to
be provided in the future.
(b) In August 1999, the Company
purchased patents for $500,000 which
were satisfied by the issuance of
42,328 shares of the Company's
common stock valued at $300,000 and
cash of $200,000. $150,000 of the
cash was paid in 1999 and $50,000 is
to be paid in March 2000. In August,
the Company placed $100,000 of cash
in escrow as collateral for the
future payments. This cash is
recorded as restricted cash at
December 31, 1999.
(c) In 1999, the Company issued 740,000
variable stock options to employees
which vest upon completion of
performance milestones. Exercise
prices range from $9.38 to $18.13
and expire in 10 years. As of
December 31, 1999, 75,000 of these
shares had vested. Compensation
charged to operations was $225,000
in 1999.
-49-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(d) Series A Preferred Stock - The
Company designated 12,015 shares of
preferred stock as Series A
preferred stock ("Series A"). For
the first six years from issuance,
the preferred stock has a mandatory
dividend of 7%. Such dividends shall
be cumulative and shall compound on
a semiannual basis and are payable
semiannually solely by the issuance
of additional preferred Series A
stock. The Company has a deficit. As
a result, the dividends have been
recorded against paid-in capital.
The Series A shall rank senior to
any future series of preferred stock
unless the majority of the Series A
shareholders agree to rank pari
passu with any future issuances. The
liquidation preference is $1,000 per
share. The Series A is convertible,
after two years but before six years
from issuance, into common stock of
the Company with an initial
conversion price of $21.17.
Alternatively, the holders of the
Series A can elect to exchange the
Series A preferred shares for the
number of shares in Sentigen which
would allow the Series A holders to
then own a total of 50% of Sentigen.
The Series A holder is currently the
minority shareholder in Sentigen.
The exchange right is not available
for any shares which have been
converted to common stock. The
exchange right terminates six years
from the issuance of the Series A.
The Series A stock was issued in
October 1999.
6. STOCK INCENTIVE PLANS In May 1998, the shareholders approved the
AND WARRANTS 1998 Long-Term Incentive Compensation Plan
(the "Plan"), which provides for the granting
of up to 2,000,000 stock options to key
employees, directors and consultants. Options
granted may be either "incentive stock
options," within the meaning of Section 422A
of the Internal Revenue Code, or nonqualified
options.
The stock options are exercisable over a
period determined by the Board of Directors
(through its Compensation Committee), but
generally no longer than 10 years after the
date they are granted.
-50-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information with respect to the Plan follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at beginning of
year - 92,500
Options granted 92,500 1,117,500
Options exercised - (4,500)
--------------------------------------------------------------------------------
Options outstanding at end of year 92,500 1,205,500
================================================================================
Options prices per share granted $ 11.13-15.06 $ 9.38-19.38
================================================================================
Weighted average exercise price
Options granted $ 12.24 $ 11.83
Options exercised - 11.13
Options outstanding at end of
year 12.24 11.94
Options exercisable at end of
year - 9.88
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------
Weighted Weighted
Average Average
Number Remaining Number Remaining
Range of Outstanding at Contractual Range of Outstanding at Contractual
Exercise December 31, Life Exercise December 31, Life
Price 1999 (Years) Price 1999 (Years)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$9.38-11.13 802,500 9.9 $9.38-11.18 81.000 9.9
$12.75-19.38 400,000 9.9 $12.75-19.38 8.000 9.0
</TABLE>
The Company applies APB Opinion 25 and
related interpretations in accounting for
stock options granted to employees and
directors. Accordingly, no compensation cost
has been recognized for the Plan.
-51-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted-average, grant date fair value
of stock options granted to employees and
directors during the year, and the
significant assumptions used to determine
those fair values, using a modified
Black-Scholes option pricing model, and the
pro forma effect on earnings of the fair
value accounting for stock options under
Statement of Financial Accounting Standards
No. 123, are as follows:
<TABLE>
<CAPTION>
1998 1999
-----------------------------------------------------------------------------------
<S> <C> <C>
Weighted average fair value per
options granted $ 7.89 $ 10.76
Significant assumptions
(weighted average)
Risk-free interest rate at grant
date 5.1% 6.2%
Expected stock price volatility 60.0% 88.0%
Expected dividend payout - -
Expected option life (years) 7 7
Net loss
As reported $ (1,973,913) $ (6,052,841)
Pro forma $ (2,042,238) $ (6,511,604)
Net loss applicable to common
shares
As reported (1,973,913) (6,273,518)
Pro forma (2,042,238) (6,732,281)
Net loss per share - basic and
diluted
As reported $ (.05) $ (.17)
Pro forma $ (.06) $ (.18)
</TABLE>
-52-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information with respect to warrants follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1999
-----------------------------------------------------------------------------
<S> <C> <C>
Warrants outstanding at beginning of
year - -
Warrants granted - 602,000
-----------------------------------------------------------------------------
Warrants outstanding at end of year - 602,000
=============================================================================
Warrants prices per share granted $ - $ 9.45-21.17
=============================================================================
Weighted average exercise price
Warrants granted $ - $ 11.42
</TABLE>
7. GRANT Operating expenses for 1998 have been reduced
by a grant in the amount of $99,927 received
from the National Institutes of Health
National Cancer Institute.
8. SUBSEQUENT EVENT Subsequent to year end, the Company completed
a private placement of its Series B
convertible preferred stock. The Series B
stock has an annual dividend rate of 6%, is
subordinate to the Series A stock, is
convertible into common stock and is
redeemable at the Company's option after
January 1, 2002. Net proceeds of $5,335,520
were received. 1999 expenses for the private
placement were recorded as deferred offering
costs at December 31, 1999.
-53-
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required by Item 9 is incorporated by reference to the
information under the caption "Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the Exchange Act" in our
definitive proxy statement for the 2000 annual meeting of stockholders.
ITEM 10. EXECUTIVE COMPENSATION.
The information required by Item 10 is incorporated by reference to the
information under the caption "Executive Compensation" in our definitive proxy
statement for the 2000 annual meeting of stockholders.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 11 is incorporated by reference to the
information under the caption "Security Ownership of Certain Beneficial Owners
and Management" in our definitive proxy statement for the 2000 annual meeting of
stockholders.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 12 is incorporated by reference to the
information under the caption "Certain Relationships and Related Transactions"
in our definitive proxy statement for the 2000 annual meeting of stockholders.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS. The following is a list of exhibits filed as part of this
Form 10-KSB. Exhibits that were previously filed are incorporated by reference.
For exhibits incorporated by reference, the location of the exhibit in the
previous filings is indicated in parentheses.
-54-
<PAGE>
EXHIBIT NO. DESCRIPTION
3.1 Restated Articles of Incorporation of Photogen
Technologies, Inc. (Filed as exhibit 3.1 to the
Company's Current Report on Form 8-K dated June 17,
1998 and incorporated herein by reference.)
3.2 Amended and Restated Certificate of Designations,
Preferences and Rights of Series A Preferred Stock.
(Filed as exhibit 3.5 to the Company's Quarterly Report
on Form 10-QSB for the quarter ended September 30, 1999
and incorporated herein by reference.)
3.3 Certificate of Designation, Preferences and Rights of
Series B Convertible Preferred Stock. (Filed as exhibit
3 to the Company's Current Report on Form 8-K dated
February 18, 2000 and incorporated herein by
reference.)
3.4 Bylaws of Photogen Technologies, Inc. (Filed as exhibit
3.2 to the Company's Registration Statement on Form
10-SB dated December 24, 1997 and incorporated herein
by reference.)
3.5 Charter of Photogen, Inc. (Filed as exhibit 3.3 to the
Company's Registration Statement on Form 10-SB dated
December 24, 1997 and incorporated herein by
reference.)
3.6 Amended and Restated Bylaws of Photogen, Inc. (Filed as
exhibit 3.4 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998 and
incorporated herein by reference.)
9.1 Amended and Restated Voting Agreement dated as of June
17, 1998 entered into by Eric A. Wachter, Ph.D., Craig
Dees, Ph.D., Walter G. Fisher, Ph.D., Tim Scott, Ph.D.,
John Smolik, and Robert J. Weinstein, M.D., and joined
into by the Company. (Filed as exhibit 9 to the
Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998 and incorporated herein by
reference.)
10.1 1998 Long Term Incentive Compensation Plan. (Filed as
Exhibit A to the Company's Schedule 14-A dated April
30, 1998 and incorporated herein by reference.)
10.2 Lease entered into by the Company, P.C. Powell and
Wilma Powell dated July 1, 1999.
10.3 Lease Agreement entered into by the Company and
Westborough Mill, LLC dated November 1, 1999.
10.4 Lease Agreement entered into by the Company and
Westborough Mill, LLC dated March 1, 2000.
-55-
<PAGE>
EXHIBIT NO. DESCRIPTION
10.5 Confirmatory License in favor of the U.S. Department of
Energy relating to the Company's Method for Improved
Selectivity in Photo-Activation and Detection of
Molecular Diagnostic Agents (Serial No. 08/741,370)
dated February 4, 1997. (Filed as exhibit 10.4 to the
Company's Registration Statement on Form 10-SB dated
December 24, 1997 and incorporated herein by
reference.)
10.6 Confirmatory License in favor of the U.S. Department of
Energy relating to the Company's Method for Improved
Selectivity in Photo-Activation of Molecular Agents
(Serial No. 08/739,801) dated February 4, 1997. (Filed
as exhibit 10.5 to the Company's Registration Statement
on Form 10-SB dated December 24, 1997 and incorporated
herein by reference.)
10.7 Form of Employment Agreements entered into by the
Company and each of John Smolik, Eric A. Wachter,
Ph.D., Walter G. Fisher, Ph.D., and Craig Dees, Ph.D.
dated May 16, 1997. (Filed as exhibit 10.6 to the
Company's Registration Statement on Form 10-SB dated
December 24, 1997 and incorporated herein by
reference.)
10.8 Form of Non-competition/Non-disclosure Agreements
entered into by the Company and each of John Smolik,
Eric A. Wachter, Ph.D., Walter G. Fisher, Ph.D., Craig
Dees, Ph.D. and Timothy C. Scott dated May 16, 1997.
(Filed as exhibit 10.7 to the Company's Registration
Statement on Form 10-SB dated December 24, 1997 and
incorporated herein by reference.)
10.9 Employment Agreement entered into by the Company and
Gerald Wolf, Ph.D., M.D. dated July 1, 1999. (Filed as
exhibit 10.2 to the Company's Quarterly Report for the
quarter ended September 30, 1999 and incorporated
herein by reference.) Confidential portions of this
exhibit were redacted.
10.10 Employment Agreement entered into by the Company and
David D. Shaw, Ph.D. dated November 1, 1999.
10.11 Employment Agreement entered into by the Company and
Jay Zimmerman, M.Ed. dated November 15, 1999.
10.12 Form of Non-Qualified Stock Option Award Agreement
entered into by the Company and each of Lester
Mckeever, Jr., Daniel Tosteson, M.D., Mark Peterson,
Harry Morrison, Ph.D and Merrill Biel, M.D., Ph.D.
(Filed as exhibit 10.7 to the Company's Annual Report
for the year ended December 31, 1998 and incorporated
herein by reference.)
10.13 Form of Incentive Stock Option Award Agreement entered
into by the Company and each of Jay Harkins, Dan
Hamilton, Karen Richmond and Verdene Smith. (Filed as
exhibit 10.8 to the Company's Annual Report for the
year ended December 31, 1998 and incorporated herein by
reference.)
-56-
<PAGE>
EXHIBIT NO. DESCRIPTION
10.14 Incentive Stock Option Award Agreement entered into by
the Company and Gerald Wolf Ph.D., M.D. dated July 23,
1999.
10.15 Incentive Stock Option Award Agreement entered into by
the Company and David D. Shaw, Ph.D. dated November 1,
1999.
10.16 Incentive Stock Option Award Agreement entered into by
the Company and David D. Shaw, Ph.D dated November 30,
1999.
10.17 Incentive Stock Option Award Agreement entered into by
the Company and Jay Zimmerman, M.Ed. dated November 30,
1999.
10.18 Form of Consulting Agreement entered into by the
Company and each of Daniel Tosteson, M.D. and Harry
Morrison, Ph.D. (Filed as exhibit 10.12 to the
Company's Annual Report for the year ended December 31,
1998 and incorporated herein by reference.)
10.19 Research Agreement dated as of October 1, 1998 by and
between Photogen, Inc. and The Massachusetts Eye and
Ear Infirmary (relating to age-related macular
degeneration research). (Filed as exhibit 10.2 to the
Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1998 and incorporated
herein by reference.)
10.20 Research Agreement dated as of November 6, 1998 by and
between Photogen, Inc. and the Massachusetts Eye and
Ear Infirmary (relating to ocular melanoma research).
(Filed as exhibit 10.11 to the Company's Annual Report
for the year ended December 31, 1998 and incorporated
herein by reference.)
10.21 Tufts University Sponsored Research Agreement dated
August 1, 1999 by and between Photogen, Inc. and Tufts
University, a/k/a Trustees of Tufts College. (Filed as
exhibit 10.3 to the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1999 and
incorporated herein by reference.) Confidential
portions of this exhibit were redacted.
10.22 Consulting Agreement by and between Photogen
Technologies, Inc. and Farcap Group LLC effective
August 9, 1999. (Filed as exhibit 10.4 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1999 and incorporated herein by
reference.)
10.23 Warrant Agreement by and between Photogen Technologies,
Inc. and Farcap Group LLC effective August 9, 1999.
(Filed as exhibit 10.5 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended September
30, 1999 and incorporated herein by reference.)
-57-
<PAGE>
EXHIBIT NO. DESCRIPTION
10.24 Agreement effective August 9, 1999 by and among
Alliance Pharmaceutical Corp., Photogen Technologies,
Inc. and Gerald Wolf, Ph.D, M.D. (Filed as exhibit 10.6
to the Company's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1999 and incorporated
herein by reference.) Confidential portions of this
exhibit were redacted.
10.25 License Agreement effective as of September 30, 1999
between The General Hospital Corporation and Photogen,
Inc. (Filed as exhibit 10.7 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended September
30, 1999 and incorporated herein by reference.)
Confidential portions of this exhibit were redacted.
10.26 Securities Purchase Agreement dated as of October 20,
1999, among Photogen Technologies, Inc. and Elan
International Services, Ltd. (Filed as exhibit 10.8 to
the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1999 and incorporated
herein by reference.) Confidential portions of this
exhibit were redacted.
10.27 Warrant to Purchase Shares of Common Stock dated
October 20, 1999 between Photogen Technologies, Inc.
and Elan International Services, Ltd. (Filed as exhibit
10.9 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1999 and
incorporated herein by reference.)
10.28 Convertible Promissory Note dated October 20, 1999 from
Photogen Technologies, Inc. to Elan International
Services, Ltd. (Filed as exhibit 10.10 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1999 and incorporated herein by
reference.)
10.29 Registration Rights Agreement dated October 20, 1999 by
and among Photogen Technologies, Inc. and Elan
International Services, Ltd. (Filed as exhibit 10.11 to
the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1999 and incorporated
herein by reference.)
10.30 Funding Agreement dated October 20, 1999 among Elan
Pharma International Limited and Photogen Technologies,
Inc. (Filed as exhibit 10.12 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended September
30, 1999 and incorporated herein by reference.)
10.31 License Agreement dated October 20, 1999 between
Photogen Technologies, Inc, Photogen Newco Ltd. and
Elan Pharma International Limited. (Filed as exhibit
10.13 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1999 and
incorporated herein by reference.) Confidential
portions of this exhibit were redacted.
-58-
<PAGE>
EXHIBIT NO. DESCRIPTION
10.32 License Agreement dated October 20, 1999 between Elan
Pharma International Limited, Photogen Newco Ltd. and
Photogen Technologies, Inc. (Filed as exhibit 10.14 to
the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1999 and incorporated
herein by reference.) Confidential portions of this
exhibit were redacted.
10.33 Subscription, Joint Development and Operating Agreement
dated October 20, 1999 between Elan Pharma
International Limited, Elan International Services,
Ltd., Photogen Technologies, Inc. and Photogen Newco
Ltd. (Filed as exhibit 10.15 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended September
30, 1999 and incorporated herein by reference.)
Confidential portions of this exhibit were redacted.
10.34 Amended and Restated Standby Agreement dated November
9, 1999 among Theodore Tannebaum, John T. Smolik, Craig
Dees, Walter G. Fisher, Timothy Scott and Eric A.
Wachter.
10.35 Form of Registration Rights Agreement between the
Company and holders of Series B Convertible Preferred
Stock.
10.36 Coherent Software Distribution Agreement between
Photogen, Inc. and Laser Group of Coherent, Inc.
dated January 18, 2000.
10.37 Equipment Lease between Picker Financial Group,
L.L.C. and Photogen, Inc. dated October 25, 1999.
21 Subsidiaries of the registrant.
27 Financial Data Schedule.
-59-
<PAGE>
REPORTS ON FORM 8-K. During the quarter ended December 31, 1999, we
filed reports on Form 8-K regarding the following:
1. Our Press Release announcing that we acquired technology to advance
our lymphography programs (filed October 28, 1999).
2. Our Press Release announcing that we formed a joint venture with
affiliates of Elan Corporation, plc (filed November 2, 1999).
3. Our Press Release announcing that we signed an agreement with Akorn,
Inc. to develop PH-10 for our use in non-invasive oncology and dermatology
treatments (filed November 17, 1999).
4. Our Press Release announcing that our common stock had been approved
for listing on the NASDAQ SmallCap Market (filed November 23, 1999).
5. Our Press Release announcing the appointment of David D. Shaw, Ph.D.
as our Vice President of Clinical Research and Technology Development (filed
December 1, 1999).
6. Our Press Release announcing that our research revealed an over
80% eradication rate of ocular melanoma tumors in animals using photodynamic
treatment (filed December 9, 1999).
7. Our Press Release announcing that we were issued a notice of
allowance for two patent applications relating to advanced phototherapies (filed
December 16, 1999).
8. Our Report stating that we intended to price and close our private
placement of Series B Convertible Preferred Stock in January, 2000 (filed
December 23, 1999).
-60-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DATE: MARCH 27, 2000 PHOTOGEN TECHNOLOGIES, INC.
BY:/s/ TIMOTHY C. SCOTT
----------------------------------
Timothy C. Scott, Ph.D., President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ TIMOTHY C. SCOTT President, Chief Executive Officer, March 27, 2000
- ------------------------- Treasurer and Chief Financial Officer
Timothy C. Scott, Ph.D. (Principal executive and financial and
accounting officer)
/s/ ERIC A. WACHTER Director, Vice President and Secretary March 27, 2000
- -------------------------
Eric A. Wachter, Ph.D.
/s/ JOHN T. SMOLIK Director March 27, 2000
- -------------------------
John T. Smolik
/s/ CRAIG DEES Director March 27, 2000
- ------------------------
Craig Dees, Ph.D.
/s/ WALTER G. FISHER Director March 27, 2000
- ------------------------
Walter G. Fisher, Ph.D.
/s/ ROBERT J. WEINSTEIN Director March 27, 2000
- -----------------------
Robert J. Weinstein, M.D.
/s/ LESTER H. MCKEEVER, JR. Director March 27, 2000
- --------------------------
Lester H. McKeever, Jr.
</TABLE>
-61-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
+3.1 Restated Articles of Incorporation of Photogen
Technologies, Inc. (Filed as exhibit 3.1 to the
Company's Current Report on Form 8-K dated June 17,
1998.)
+3.2 Amended and Restated Certificate of Designations,
Preferences and Rights of Series A Preferred Stock.
(Filed as exhibit 3.5 to the Company's Quarterly Report
on Form 10-QSB for the quarter ended September 30,
1999.)
+3.3 Certificate of Designation, Preferences and Rights of
Series B Convertible Preferred Stock. (Filed as exhibit
3 to the Company's Current Report on Form
8-K dated February 18, 2000.)
+3.4 Bylaws of Photogen Technologies, Inc. (Filed as exhibit
3.2 to the Company's Registration Statement on Form
10-SB dated December 24, 1997.)
+3.5 Charter of Photogen, Inc. (Filed as exhibit 3.3 to the
Company's Registration Statement on Form 10-SB dated
December 24, 1997.)
+3.6 Amended and Restated Bylaws of Photogen, Inc. (Filed as
exhibit 3.4 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998.)
+9.1 Amended and Restated Voting Agreement dated as of June
17, 1998 entered into by Eric A. Wachter, Ph.D., Craig
Dees, Ph.D., Walter G. Fisher, Ph.D., Tim Scott, Ph.D.,
John Smolik, and Robert J. Weinstein, M.D., and joined
into by the Company. (Filed as exhibit 9 to the
Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998.)
+10.1 1998 Long Term Incentive Compensation Plan. (Filed as
Exhibit A to the Company's Schedule 14-A dated April
30, 1998.)
* 10.2 Lease Agreement entered into by the Company, P.C.
Powell and Wilma Powell dated July 1, 1999.
*10.3 Lease Agreement entered into by the Company and
Westborough Mill, LLC dated November 1, 1999.
*10.4 Lease Agreement entered into by the Company and
Westborough Mill, LLC dated March 1, 2000.
+10.5 Confirmatory License in favor of the U.S. Department of
Energy relating to the Company's Method for Improved
Selectivity in Photo-Activation and Detection of
Molecular Diagnostic Agents (Serial No. 08/741,370)
dated February 4, 1997. (Filed as exhibit 10.4 to the
Company's Registration Statement on Form 10-SB dated
December 24, 1997.)
-62-
<PAGE>
EXHIBIT NO. DESCRIPTION
+10.6 Confirmatory License in favor of the U.S. Department of
Energy relating to the Company's Method for Improved
Selectivity in Photo-Activation of Molecular Agents
(Serial No. 08/739,801) dated February 4, 1997. (Filed
as exhibit 10.5 to the Company's Registration Statement
on Form 10-SB dated December 24, 1997.)
+10.7 Form of Employment Agreements entered into by the
Company and each of John Smolik, Eric A. Wachter,
Ph.D., Walter G. Fisher, Ph.D., and Craig Dees,
Ph.D. dated May 16, 1997. (Filed as exhibit 10.6 to
the Company's Registration Statement on Form 10-SB
dated December 24, 1997.)
+10.8 Form of Non-competition/Non-disclosure Agreements
entered into by the Company and each of John Smolik,
Eric A. Wachter, Ph.D., Walter G. Fisher, Ph.D., Craig
Dees, Ph.D. and Timothy C. Scott dated May 16, 1997.
(Filed as exhibit 10.7 to the Company's Registration
Statement on Form 10-SB dated December 24, 1997.)
+10.9 Employment Agreement entered into by the Company and
Gerald Wolf, Ph.D., M.D. dated July 1, 1999. (Filed as
exhibit 10.2 to the Company's Quarterly Report for the
quarter ended September 30, 1999.) Confidential
portions of this exhibit were redacted.
*10.10 Employment Agreement entered into by the Company and
David D. Shaw, Ph.D. dated November 1, 1999.
*10.11 Employment Agreement entered into by the Company and
Jay Zimmerman, M.Ed. dated November 15, 1999.
+10.12 Form of Non-Qualified Stock Option Award Agreement
entered into by the Company and each of Lester
McKeever, Jr., Daniel Tosteson, M.D., Mark Peterson,
Harry Morrison, Ph.D and Merrill Biel, M.D., Ph.D.
(Filed as exhibit 10.7 to the Company's Annual Report
for the year ended December 31, 1998.)
+10.13 Form of Incentive Stock Option Award Agreement entered
into by the Company and each of Jay Harkins, Dan
Hamilton, Karen Richmond and Verdene Smith. (Filed as
exhibit 10.8 to the Company's Annual Report for the
year ended December 31, 1998.)
*10.14 Incentive Stock Option Award Agreement entered into by
the Company and Gerald Wolf Ph.D., M.D. dated July 23,
1999.
*10.15 Incentive Stock Option Award Agreement entered into
by othe Company and David D. Shaw, Ph.D. dated
November 1, 1999.
*10.16 Incentive Stock Option Award Agreement entered into
by he Company and David D. Shaw, Ph.D. dated November
30, 1999.
-63-
<PAGE>
EXHIBIT NO. DESCRIPTION
*10.17 Incentive Stock Option Award Agreement entered into by
the Company and Jay Zimmerman, M.Ed. dated November 30,
1999.
+10.18 Form of Consulting Agreement entered into by the
Company and each of Daniel Tosteson, M.D. and Harry
Morrison, Ph.D. (Filed as exhibit 10.12 to the
Company's Annual Report for the year ended December 31,
1998.)
+10.19 Research Agreement dated as of October 1, 1998 by and
between Photogen, Inc. and The Massachusetts Eye and
Ear Infirmary (relating to age-related macular
degeneration research). (Filed as exhibit 10.2 to the
Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1998.)
+10.20 Research Agreement dated as of November 6, 1998 by and
between Photogen, Inc. and the Massachusetts Eye and
Ear Infirmary (relating to ocular melanoma research).
(Filed as exhibit 10.11 to the Company's Annual Report
for the year ended December 31, 1998.)
+10.21 Tufts University Sponsored Research Agreement dated
August 1, 1999 by and between Photogen, Inc. and Tufts
University, a/k/a Trustees of Tufts College (Filed as
exhibit 10.3 to the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1999.)
Confidential portions of this exhibit were redacted.
+10.22 Consulting Agreement by and between Photogen
Technologies, Inc. and Farcap Group LLC effective
August 9, 1999. (Filed as exhibit 10.4 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1999.)
+10.23 Warrant Agreement by and between Photogen Technologies,
Inc. and Farcap Group LLC effective August 9, 1999.
(Filed as exhibit 10.5 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended September
30, 1999.)
+10.24 Agreement effective August 9, 1999 by and among
Alliance Pharmaceutical Corp., Photogen Technologies,
Inc. and Gerald Wolf, Ph.D, M.D. (Filed as exhibit 10.6
to the Company's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1999.) Confidential
portions of this exhibit were redacted.
+10.25 License Agreement effective as of September 30, 1999
between The General Hospital Corporation and Photogen,
Inc. (Filed as exhibit 10.7 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended September
30, 1999.) Confidential portions of this exhibit were
redacted.
+10.26 Securities Purchase Agreement dated as of October 20,
1999, among Photogen Technologies, Inc. and Elan
International Services, Ltd. (Filed as exhibit 10.8 to
the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1999.) Confidential
portions of this exhibit were redacted.
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<PAGE>
EXHIBIT NO. DESCRIPTION
+10.27 Warrant to Purchase Shares of Common Stock dated
October 20, 1999 between Photogen Technologies, Inc.
and Elan International Services, Ltd. (Filed as exhibit
10.9 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1999.)
+10.28 Convertible Promissory Note dated October 20, 1999 from
Photogen Technologies, Inc. to Elan International
Services, Ltd. (Filed as exhibit 10.10 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1999.)
+10.29 Registration Rights Agreement dated October 20, 1999 by
and among Photogen Technologies, Inc. and Elan
International Services, Ltd. (Filed as exhibit 10.11 to
the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1999.)
+10.30 Funding Agreement dated October 20, 1999 among Elan
Pharma International Limited and Photogen
Technologies, Inc. (Filed as exhibit 10.12 to the
Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1999.) Confidential
portions of this exhibit were redacted.
+10.31 License Agreement dated October 20, 1999 between
Photogen Technologies, Inc, Photogen Newco Ltd. and
Elan Pharma International Limited. (Filed as exhibit
10.13 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1999.) Confidential
portions of this exhibit were redacted.
+10.32 License Agreement dated October 20, 1999 between Elan
Pharma International Limited, Photogen Newco Ltd. and
Photogen Technologies, Inc. (Filed as exhibit 10.14 to
the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1999.) Confidential
portions of this exhibit were redacted.
+10.33 Subscription, Joint Development and Operating Agreement
dated October 20, 1999 between Elan Pharma
International Limited, Elan International Services,
Ltd., Photogen Technologies, Inc. and Photogen Newco
Ltd. (Filed as exhibit 10.15 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended September
30, 1999.) Confidential portions of this exhibit were
redacted.
*10.34 Amended and Restated Standby Agreement dated November
9, 1999 among Theodore Tannebaum, John T. Smolik, Craig
Dees, Walter G. Fisher, Timothy Scott and Eric A.
Wachter.
*10.35 Form of Registration Rights Agreement between the
Company and holders of Series B Convertible Preferred
Stock dated as of February 18, 2000.
*10.36 Coherent Software Distribution Agreement between
Photogen, Inc. and Laser Group of Coherent, Inc.
dated January 18, 2000.
*10.37 Equipment Lease between Picker Financial Group,
L.L.C. and Photogen, Inc. dated October 25, 1999.
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<PAGE>
EXHIBIT NO. DESCRIPTION
*21 Subsidiaries of the registrant.
*27 Financial Data Schedule.
+ Incorporated herein by reference from the filing indicated.
* Filed herewith.
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<PAGE>
Exhibit 10.2
LEASE AGREEMENT
This Lease Agreement (the "Agreement") entered into at Knoxville,
Tennessee, effective as of July 1, 1999 by and between P. C. Powell, Jr. and
Wilma Powell, husband and wife (hereinafter "Landlord"), and Photogen, Inc. a
Tennessee Corporation (hereinafter "Tenant").
WHEREAS, Landlord and Genase, L.L.C., a Tennessee corporation, are
parties to that certain Lease Agreement effective as of July 1, 1996 and
terminating June 30, 1999 for the lease of land, building and improvements
consisting of 3000 sq. ft. located at 7327 Oak Ridge Highway, Unit A, Knoxville,
Knox County, Tennessee ("Unit A Lease").
WHEREAS, Landlord and Tenant are parties to that certain Lease
Agreement effective as of June 1, 1997 and terminating May 31, 2000 for the
lease of land, building and improvements consisting of 1000 sq. ft. located at
7327 Oak Ridge Highway, Unit B, Knoxville, Knox County, Tennessee ("Unit B
Lease").
WHEREAS, Landlord and Tenant desire to terminate the Unit B Lease on
the effective date hereof and lease both Unit A (3000 sq. ft.) and Unit B (1000
sq. ft.) all on the terms and conditions set forth herein.
IN CONSIDERATION of the mutual covenants and agreements set forth above
and hereinafter contained, the parties hereto agree as follows:
1. PREMISES. In consideration of the rent, covenants and conditions that
Tenant herein agrees to pay, keep and perform, Landlord hereby leases to
Tenant land, building and improvements located at 7327 Oak Ridge Highway,
Units A and B, Knoxville, Knox County, Tennessee, hereinafter referred to
collectively as the "Premises".
2. TERM. The Lease Agreement shall commence as of the date first entered above
and terminate May 31, 2000.
3. RENT. Tenant agrees to pay Landlord the sum of $2,700.00 per month for
rental of the Premises and for the option to purchase, as provided herein,
said payments beginning as of the date entered above.
4. OPTION TO RENEW. Tenant shall have two (2) options to extend the term of
the lease agreement for additional terms of one year each at a rental to be
negotiated, and upon the same terms and conditions as set forth herein.
Notice shall be given Landlord, within 30 days of expiration of Lease term,
of Tenant's intent to exercise this option.
5. AUTOCLAVE. Tenant desires to lease the "Autoclave" and related equipment
during the term of the lease and any extensions thereof according to the
terms described below:
A. The additional equipment to be leased includes the
autoclave, steam generator, and any required auxiliary
equipment (such as the gas water preheater) located on
the Premises.
<PAGE>
B. Landlord agrees to have the units inspected and obtain
all necessary operating permits.
C. Operational status will be demonstrated by having
signed inspection and operating permit from the
appropriate State Authorities.
D. Tenant agrees to provide, at Tenant cost, all necessary
on-going maintenance during the term of the lease and
any extensions thereof, including periodic inspections
as required by state authorities.
E. Tenant will indemnify Landlord against any claim as a
result of injury to any Tenant personnel as a result of
operating the autoclave. Landlord will provide
insurance sufficient to cover the building against
damage caused as a result of operation of the
autoclave. Tenant will indemnify Landlord against all
loss of or damage to Tenants equipment as a result of
operating the autoclave.
F. Tenant shall have the option at its discretion to
purchase its own autoclave and install it on the
Premises at Tenants expense.
G. Tenant agrees to pay Landlord $100.00 per month during
the term of the Lease and any extensions thereof for
use of the autoclave and related equipment. Should
Tenant provide its own autoclave the lease payment
shall be reduced by $100.00 per month.
8. OPTION TO PURCHASE. Landlord hereby grants to Tenant the first right of
refusal and option to purchase the Premises at any time during the term
hereof or during any renewal period. In the event of a binding third party
offer, Landlord shall give Tenant written notice of such offer including
all terms and conditions and Tenant shall have a first right of refusal for
forty-five (45) days to purchase the premises under the same terms as
proposed to by the third party and as set forth in the offer.
9. TAXES. Landlord shall be responsible for payment of all taxes, assessments
or other governmental charges applicable to the Premises.
10. UTILITIES. Tenant shall pay for use of all gas, electricity, sewer, water
and other utilities consumed or wasted upon the Premises. Tenant shall
provide its own janitor and cleaning service. Tenant will pay all ongoing
usage fees.
11. MAINTENANCE AND REPAIRS. Landlord, at its expense, shall be responsible for
all maintenance and repairs to the building, including, but not limited to
the roof, floor, foundation, walls, general heating and air conditioning
systems, septic tank and lateral lines, and electrical and plumbing
systems. Tenant shall be responsible, at its own expense, for routine minor
maintenance and upkeep such as, repairing faucet leaks, and replacing light
bulbs. Tenant agrees to be responsible for the routine maintenance of the
back-up generator, which shall include the battery, oil changes and
periodic starting. In the event the Landlord shall fail to proceed with and
complete any repairs and
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<PAGE>
restorations which it may be required to make hereunder within a reasonable
time, Tenant, upon notice to Landlord, may contact designated repair
service personnel charging their services directly to the Landlord. Any
repairs made by the Tenant shall be such as are reasonably necessary to
protect the Premises and improvements for the account of and at the expense
of the Landlord.
12. IMPROVEMENTS AND ALTERATIONS. Tenant may, at its own expense, obtain,
maintain, and install in the Premises such trade fixtures as the Tenant
needs in order to operate its business, and may place such temporary
partitions, lighting fixtures, personal property, machines, motors and the
like in the premises, and may make such improvement and alterations to the
Premises, as it may desire, provided only, that such improvements and
alterations do not materially reduce the value of the Premises. All
improvements, alterations heretofore or hereafter made or installed or paid
for by Tenant, shall remain property of the Tenant.
In case of damage or destruction thereto by fire or other causes, Tenant
shall have the right to recover such items from any insurance with which it
has insured the same, notwithstanding that any such items might be
considered a part of real property. Tenant may remove all or any of such
items at any time during the term of this Agreement or any extension
thereof. Tenant may abandon the same, in whole or in part, to Landlord at
the end of the term or any extension thereof, or such other expiration of
the term, by vacating the Premises without removing the same. In the event
of removal of such items, Tenant shall repair any damage caused by such
removal.
Tenant shall be responsible for replacement and/or repairs to Premises for
any damage to Premises caused by abuse, neglect, or accident not recovered
by insurance that result directly from Tenant use of the Premises except as
provided for in Paragraph 5. It is understood by the Parties hereto that
the Landlord may enter the Premised during normal business hours to inspect
the building and to make routine repairs.
13. INSURANCE.
A. Landlord at its own expense and throughout the term of this Lease
Agreement and any extensions thereof, shall maintain insurance with
respect to the Premises of the following types and in the following
amounts:
1. Fire insurance with full standard form extended
coverage, in an amount not less than eighty percent
(80%) of the full replacement value of the building.
2. Public liability insurance protecting against claims
for personal injury, death and property damage
occurring upon, in or about the Premises with limits of
liability of not less than One Million Dollars
($1,000,000) per occurrence. Tenant will likewise
maintain public liability insurance protecting against
claims for personal injury, death and property damage
occurring upon, in or
- 3 -
<PAGE>
about the Premises with limits of liability of not
less than One Million Dollars ($1,000,000) per
occurrence.
B. Tenant, at its own expense and throughout the term of this Lease
Agreement and any extension thereof, shall maintain insurance of
contents of building.
C. All insurance required under the provisions of the Paragraph shall be
carried in favor of the Landlord or Tenant as their respective
interests may appear. All policies shall provide that same cannot be
canceled without giving at least ten (10) days prior written notice to
the other party.
14. DAMAGE TO PREMISES. If the Premises are destroyed or damaged to such an
extent as to be rendered substantially unfit for occupancy, when considered
as a whole, and the destruction or damage is not reasonably repairable
within ninety (90) days after it occurs, the lease shall terminate as of
the date the destruction or damage occurred and rent shall be abated
accordingly. If the Premises are destroyed or damaged as aforesaid, but the
destruction or damage is reasonably repairable within ninety (90) days
after it occurs, or if the Premises are damaged but not to such an extent
as to be rendered substantially unfit for occupancy when considered as a
whole, Landlord shall proceed diligently to repair the Premises and the
rent shall be abated or reduced, as may be equitable, while repairs are
being made.
15. CONDEMNATION. If any part of the Premises is taken, appropriated or
condemned for public use, the lease shall terminate as to the part taken on
the date of the taking or sale. In such event, Tenant may elect to
terminate the lease as to the remainder of the Premises, by mailing to the
Landlord written notice of Tenant's receipt of written notice of the taking
and Tenants statement of its desire to terminate, if the part taken or sold
renders the remainder unsuitable and insufficient to serve the business
needs of the Tenant.
16. MECHANICS LIENS. No mechanic's lien for labor or materials shall attach to
or affect Tenant's interest in the Premises. Landlord shall pay or
discharge by bond or deposit any and all mechanic's liens or other liens,
which are filed on any interest in the Premises for labor or materials,
furnished to Landlord.
17. DEFAULT BY TENANT. If Tenant defaults in performance of any of the
provisions, covenants or conditions of the lease and such default continues
for thirty (30) days after the Tenant is notified in writing by Landlord to
cure it or, if such default is of such a nature that it cannot be cured
within such thirty (30) day period and continues for longer than the period
reasonably required to cure it, or if Tenant abandons or vacates the
Premises at any time during the term of the Lease, or if Tenant makes an
assignment for the benefit of creditors, or if the interest of the Tenant
in the Premises is attached, levied upon or seized by a legal process, or
if Tenant is found to be bankrupt or insolvent by a court of competent
jurisdiction, or if a receiver is appointed for Tenant by any such court,
or if the Lease is assigned or terminated by the operation of law, then
immediately or any time thereafter, with reasonable notice given to Tenant,
Landlord may re-enter and take possession of the Premises by an action in
forcible entry and detainer or otherwise.
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<PAGE>
Landlord may thereupon elect, either (a) to declare the Lease terminated,
in which event Landlord may thereafter possess and enjoy the Premises as
though the Lease had never been made without prejudice to any and all
rights of action which the Landlord may have against Tenant at the time of
such termination for rent, damages or breach of covenant previously
accruing or occurring, or (b) to re-let the Premises on behalf of the
Tenant.
18. ASSIGNMENTS AND SUBLEASES. Tenant shall not assign this lease or sublet any
part of the Premises without the written consent of the Landlord, which
shall not be unreasonably withheld.
19. QUIET ENJOYMENT. Landlord warrants that Landlord has the right to Lease the
Premises to Tenant. So long as Tenant pays the rent herein provided and
observes and performs the covenants and conditions of the Lease, Tenant
shall be entitled to peaceably and quietly possess, occupy and enjoy the
Premises during the term of the Lease without disturbance or eviction by
the Landlord or by any other person lawfully claiming under the Landlord.
20. SUCCESSORS AND INTEREST. The Lease Agreement shall be binding upon, inure
to the benefit of, and be enforceable by and against the heirs, executors,
administrators, successors and assigns of the Landlord and Tenant. No
assignment of the Lease or Sublease hereunder, whether by act of Tenant or
by operation of law, in violation of any provisions of this lease shall
vest in any assignee or sublessee any right, title or interest whatsoever.
21. NOTICES. Any notice, statement or payment required or permitted by the
provisions of this Lease, is to be considered given, furnished or made when
mailed to the parties at the following addresses:
<TABLE>
<S> <C>
LANDLORD: Mr. P. C. Powell
8303 Beaver Ridge Road
Knoxville, TN 37931
TENANT: Photogen, Inc.
Mr. John Smolik
7327 Oak Ridge Hwy.
Knoxville, TN 37931
</TABLE>
22. EXPENSES. Any expense incurred as a result of performance of this Lease
except for those expenses set forth in Paragraphs 9 and 10 above will be
the responsibility of the person or entity, either Landlord or Tenant,
incurring the obligation.
23. HAZARDOUS SUBSTANCES. As used herein, "Hazardous Substances" means any
substance that is considered toxic and is the subject of any Local, State
or Federal regulation, and other substances that are considered flammable.
Tenant intends to use the Premises as a biological research and development
facility. Tenant may, from time to time, use small amounts of materials
that may be considered
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<PAGE>
"Hazardous". "Small" amounts mean volumes of less than a few liters per
month as a worst case.
Tenant will take all reasonable precautions for the storage and use of any
"Hazardous" materials as prescribed by law and good laboratory practice.
Tenant will indemnify Landlord against personal injury to any Tenant
employee and damage to the Premises caused as a result of the use of
"Hazardous" materials.
24. EFFECT OF THIS LEASE. This lease combines, amends and restates the Unit A
Lease and the Unit B Lease, both of which prior lease agreements shall have
no further force or effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease Agreement the
day ad year first above written.
<TABLE>
<CAPTION>
LANDLORD: TENANT:
<S> <C>
/s/ P.C. Powell Photogen, Inc.
- -------------------------------
P. C. Powell
/s/ John Smolik
-------------------------
John Smolik, President
/s/ Wilma Powell
- -------------------------------
Wilma Powell
</TABLE>
- 6 -
<PAGE>
LEASE
1. PARTIES
Westborough Mill, LLC, with an address at 13 Water Street, Holliston, MA, 01746
("LESSOR"), which expression shall include heirs, successors, and assigns where
the context so admits, does hereby lease to:
PHOTOGEN, INC.
with an address at 69 Milk Street, Suite 308, 310, Westborough, MA 10581
("LESSEE"), which expression shall include successors, executors,
administrators, and assigns where the context so admits, and the LESSEE hereby
leases the following described premises:
2. PREMISES
Those certain premises consisting of 3,127 rentable square feet of office space
located on the third floor, suite 308, 310, as shown on attached exhibit A
("Leased Premises") with the right to use in common, with others entitled
thereto, the hallways, stairways, necessary for access to said Leased Premises,
parking lot, bathrooms, dumpster, and loading docks.
3. TERM
The term of this Lease shall be for five (5) years commencing on November 1,
1999 and ending on October 31, 2004.
4. RENT
LESSEE shall pay to the LESSOR, rent at the rate of:
November 1-30, 1999 $3,056.62 per month for Suite 308
December 1-31, 1999 $3,056.62 per month for Suite 308
Commencing January 1, 2000 for Suites 308 and 310: Forty-Three Thousand Dollars
($43,000.00) for the ten month period ending October 31, 2000, payable in
advance in monthly installments of Four Thousand Three Hundred Dollars
($4,300.00).
Year Two: Fifty-One Thousand Five Hundred Ninety-Five and 50/100 Dollars
($51,595.50) per year, payable in advance in monthly installments of Four
Thousand Three Hundred Dollars ($4,300.00).
-1-
<PAGE>
Year Three: Fifty-Three Thousand One Hundred Fifty-Nine Dollars ($53,159.00) per
year, payable in advance in monthly installments of Four Thousand Four Hundred
Thirty Dollars ($4,430.00).
Years Four and Five: Fifty-Four Thousand Seven Hundred Twenty-Two Dollars
($54,722) per year, payable in advance in monthly installments of Four Thousand
Five Hundred Sixty Dollars ($4,560.00).
LESSEE shall incur a late payment penalty equal to 5% of the monthly installment
payment for payments not received by the 7th day of each month.
Upon execution of this lease, LESSEE shall deposit an amount equal to Seven
Thousand Six Hundred Sixteen Dollars and 62/100 ($7,616.62), which amount shall
be LESSEE's first and last month's lease payment.
5. SECURITY DEPOSIT
Upon execution of this lease, LESSEE shall pay a security deposit equal to Four
Thousand Five Hundred Sixty Dollars ($4,560.00), which amount shall be held as
security for the LESSEE's performance as herein provided and refunded to the
LESSEE at the end of the Lease, subject to the LESSEE's satisfactory compliance
with the conditions hereof. In no event shall the security deposit be considered
prepaid rent.
6. RENT ADJUSTMENTS
A. COMMON AREA CHARGES Intentionally omitted
B. REAL ESTATE TAXES
If in any tax year commencing with the fiscal year 2001, the real estate
taxes paid on the land and buildings, of which the Leased Premises are a
part, are in excess of the amount of the current real estate taxes
thereon for the fiscal year 2000 (hereinafter called the "Base Year") as
a sole result of a change in that tax rate, LESSEE will pay to LESSOR as
additional rent hereunder, when and as designated by notice in writing
by LESSOR, LESSEE's percentage share, 7.8 percent of such excess that
may occur in each year of the term of this Lease or any extension or
renewal thereof and proportionately for any part of a fiscal year.
7. UTILITIES
Except to the extent that the same are furnished through separately metered
utilities, LESSOR agrees to provide all utility service in common areas and to
furnish reasonable hot and cold water and reasonable heat and air conditioning
such that the LESSEE is comfortable in the leased
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<PAGE>
premises, the hallways, stairways and lavatories during normal business hours
(8am to 6pm) on regular business days of the heating and air conditioning
seasons of each year, and to light passageways and stairways during business
hours, all subject to interruption due to any accident, to the making of
repairs, alterations, or improvements, to labor difficulties, to trouble in
obtaining fuel, electricity, service or supplies from the sources from which
they are usually obtained for said building, or to any cause beyond LESSOR's
control. The LESSOR shall maintain heating and air conditioning equipment in
good operating order.
LESSOR shall have no obligation to provide utilities or equipment other than the
utilities and equipment within the premises as of the commencement of this
lease. In the event LESSEE requires additional utilities or equipment, as
confirmed by LESSEE, the installation and maintenance thereof shall be the
LESSEE's sole obligation, provided that such installation shall be subject to
the written consent of the LESSOR.
8. USE OF LEASED PREMISES
The LESSEE shall use the premises only for the purpose of:
GENERAL OFFICE AND RELATED USES
9. COMPLIANCE WITH LAWS
LESSEE acknowledges that no trade or occupation shall be conducted in the Leased
Premises or use made thereof which will be unlawful, improper, noisy or
offensive, or contrary to any law or municipal by-law or ordinance in force in
the town in which the premises are situated.
LESSOR acknowledges that it shall not rent or lease any portion of the building
for any use, which will be unlawful, improper, noisy or offensive, or contrary
to any law or municipal by-law or ordinance in force in the town in which the
premises are situated.
10. FIRE
LESSEE shall not permit any use of the Leased Premises which will make voidable
any insurance on the property of which the Leased Premises are a part, or on the
contents of said property or which shall be contrary to any law or regulation
from time to time established by the New England Fire Insurance Rating
Association, or any similar body succeeding to its powers.
11. MAINTENANCE
A. LESSEE agrees to maintain the Leased Premises in substantially the same
condition as it is on the commencement of the term of this Lease,
ordinary wear and tear, damage by fire and other casualty only excepted
subject to buildout. The LESSEE shall not permit the Leased Premises to
be overloaded, damaged,
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<PAGE>
stripped, or defaced, nor suffer any waste. The LESSEE shall obtain the
written consent of the LESSOR before erecting any sign in or on the
premises. LESSOR shall place signs naming the LESSEE on the building
directory and on the LESSEE's door.
B. LESSOR agrees to maintain the structure and heating, cooling systems of
the building of which the Leased Premises are a part in the same
condition as it is on the commencement of the term of this lease,
reasonable wear and tear, damage by fire and other casualty only
excepted. The LESSOR warrants that the structure and the mechanical
systems of the building of which the Leased Premises are a part are in
good operating order and/or condition at the time of the commencement of
the Lease.
12. ALTERATIONS/ADDITIONS
In the event that LESSEE performs any work on the premises, LESSEE shall not
permit any mechanic's liens, or similar liens, to remain upon the Leased
Premises for labor and materials furnished to LESSEE or claim to have been
furnished to LESSEE in connection with work of any character performed or
claimed to have been performed at the direction of LESSEE and shall cause any
lien to be released of record forthwith without cost to LESSOR. Any alterations
or improvements made by the LESSEE shall become the property of the LESSOR at
the termination of occupancy as provided herein.
13. ASSIGNMENT/SUBLEASING
LESSEE shall not assign or sublet the whole or any part of the Leased Premises
without LESSOR's prior written consent, which shall not be unreasonably withheld
or delayed. In the event of an attempted assignment without Lessor's prior
written consent, LESSOR reserves the right to release LESSEE from obligations
under this Lease. LESSEE shall engage the brokerage services of the real estate
broker currently representing the building in the event LESSEE seeks to sublet
the premises.
14. SUBORDINATION/NON-RECORDING/NON-DISTURBANCE AGREEMENT
This lease shall be subject and subordinate to any and all mortgages, deeds of
trust and other instruments in the nature of a mortgage, now or at any time
hereafter placed upon the property of which the Leased Premises are a part and
the LESSEE shall, when requested, promptly execute and deliver such written
instruments as shall be necessary to show the subordination of this Lease and to
said mortgages, deeds of trust or other such instruments in the nature of a
mortgage. LESSEE shall not record this lease. Any attempted recording shall be
considered a default under this lease. LESSOR agrees to make reasonable efforts
to obtain a Non-Disturbance Agreement from any future Mortgagee on behalf of the
LESSEE in the event that LESSOR is unable to
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<PAGE>
provide said Non-Disturbance Agreement then Lessee may contact Mortgagee
directly to seek same.
14A. ESTOPPEL CERTIFICATES
Each party agrees, at any time, and from time to time, upon not less than
fifteen (15) days prior notice by the other party, to execute, acknowledge, and
deliver to the other party, a statement in writing addressed to the other party,
certifying that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), stating the date to which the fixed
minimum rent, additional rent and other charges have been paid, and stating
whether or not to the best knowledge of the signer of such certificate, there
exists any default in the performance of any covenant, agreement, term,
provision, or condition contained in this lease, and if so, specifying each such
default of which the signer may have knowledge, it being intended that any such
statement delivered pursuant hereto may be relied upon by the other party and by
any Mortgagee or prospective Mortgagee or any mortgage affecting this lease and
by any LESSOR or LESSEE interest in this lease.
15. LESSOR'S ACCESS
The LESSOR or agents of the LESSOR may, at reasonable times and with reasonable
notice given to LESSEE (except in the case of emergencies), enter to view the
Leased Premises and make repairs as LESSOR shall elect to do and may show the
Leased Premises to others, and at any time within three (3) months before the
expiration of the term, may affix to any suitable part of the building of which
the Leased Premises are a part (but not the suite entrance of the LESSEE's
premises) a sign or notice for letting or selling the Leased Premises or
property of which the Leased Premises are a part and keep the same so affixed
without hindrance or molestation. LESSOR's entry of the Leased Premises shall
not interrupt the normal operation of the LESSEE's business or interfere with
the quiet enjoyment of the premises (except in the case of emergencies).
16. INDEMNIFICATION AND LIABILITY
LESSEE shall save the LESSOR harmless from all loss and damage to LESSEE's
property occasioned by the use or escape of water or by the bursting of pipes or
by any nuisance made or suffered on the Leased Premises, unless such loss is
caused by the neglect of the LESSOR.
17. FIRE, CASUALTY, EMINENT DOMAIN
Should a substantial portion of the Leased Premises, or of the property of which
they are a part, be substantially damaged by fire or other casualty, or be taken
by eminent domain, LESSOR may elect to terminate this Lease. When such fire,
casualty, or taking renders the Leased Premises substantially unsuitable for
their intended use, a just and proportionate abatement of rent shall be made,
and LESSEE may elect to terminate this lease if:
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<PAGE>
A. LESSOR fails to give written notice within thirty (30) days of intention
to restore Lease Premises, or
B. LESSOR fails to restore the Leased Premises to a condition substantially
suitable for their intended use within ninety (90) days of said fire,
casualty or taking.
LESSOR reserves, and LESSEE grants to LESSOR, all rights which LESSEE may have
for damages or injury to the Leased Premises for any taking by eminent domain,
except for damages to the LESSEE's fixtures, property or equipment or relocation
expenses of LESSEE.
18. DEFAULT AND BANKRUPTCY
In the event that:
A. LESSEE shall default in the payment of any installment of rent or other
sum herein specified and such default shall continue for ten (10) days
after written notice thereof; or
B. LESSEE shall default in the observance or performance of any of the
LESSEE's covenants, agreement, or obligations hereunder and such default
shall not be corrected within thirty (30) days after written notice
thereof; or
C. LESSEE shall be declared bankrupt or insolvent according to law, or, if
any assignment shall be made of LESSEE's property for the benefit of
creditors;
then the LESSOR shall have the right thereafter, while such default
continues, to re-enter and take complete possession of the Leased
Premises, to declare the term of this lease ended, and remove LESSEE's
effects, without prejudice to any remedies which might be otherwise
available to LESSOR. LESSEE shall indemnity LESSOR against all loss of
rent and other payments, which LESSOR may incur by reason of such
termination during the residue of the term. If LESSEE shall default,
after reasonable notice thereof, in the observance or performance of any
conditions or covenants on LESSEE's part to be performed or observed
under or by virtue of any of the provisions in any article of this
lease, LESSOR, without being under any obligation to do so and without
thereby waiving such default, may remedy such default for the account
and at the expense of LESSEE. If LESSOR makes any expenditures or incurs
any obligations for the payment of money in connection therewith, such
sums paid or obligations insured, with the interest at the rate of
twelve percent (12%) per annum and costs shall be paid to the LESSOR by
the LESSEE as additional rent.
D. If LESSOR breaches or defaults on its obligations under sections 7 and
23D of this lease, which breach or default continues for thirty days
after written notice of
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<PAGE>
said breach to LESSOR by LESSEE, then in that event, LESSEE may cure the
breach or default on LESSOR's behalf and make the appropriate deduction
from LESSEE's rent.
19. NOTICE
Any notice from the LESSOR to the LESSEE relating to the Leased Premises or to
the occupancy thereof, shall be deemed duly served, if mailed to LESSEE at 69
Milk Street, Westborough, MA, with a copy to Photogen Technologies, Inc., 7327
Oakridge Highway, Knoxville, TN 37831, Attention: President, registered mail,
return receipt requested, postage prepaid or at such address as the LESSEE may
from time to time advise in writing. All rent and notices shall be paid and sent
to LESSOR's address written above.
20. SURRENDER
LESSEE shall at the expiration date or other termination of this lease remove
all LESSEE's goods and effects from the Lease Premises (including, without
hereby limiting the generality of the foregoing, all signs and lettering affixed
or painted by the LESSEE, either inside or outside the Leased Premises). LESSEE
shall deliver to the LESSOR the Leased Premises and all keys, locks thereto, and
other fixtures connected therewith and all alterations and additions made to or
upon the Leased Premises, in substantially the same condition as it is on the
commencement of the term of this lease, ordinary wear and tear, damage by fire
or other casualty only excepted, subject to buildout. In the event of the
LESSEE's failure to remove any of LESSEE's property from the premises, LESSOR is
hereby authorized, without liability to LESSEE for loss and damage thereof, and
at the sole risk of LESSEE to remove, store or dispose of any of the property at
LESSEE's expense, or to retain same under LESSOR's control or to sell at public
or private sale as the case may be, without notice and to apply the net proceeds
of such sale to the payment of any sum due hereunder. In the event that LESSEE
has not vacated the Leased Premises upon the expiration of the lease term, then
in that event the per diem rent for the demised premises shall be one and
one-half (1-1/2) times the most recent per diem amount.
21. BROKERAGE
The parties acknowledge that there is a broker's commission due to Investment
Property Specialists, Inc., payable by the LESSOR as a result of this lease.
22. INSURANCE
A. LESSEE INSURANCE
LESSEE shall maintain insurance coverage for worker compensation,
general liability, and hazards covering LESSEE's employees, visitors,
and LESSEE's premises and contents. Coverage shall be no less than
$2,000,000 general liability
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and $2,000,000 property naming LESSOR as additional insured. Each policy
of insurance shall contain a provision requiring no less than ten (10)
days notice to LESSOR prior to cancellation of the policy.
B. LESSOR INSURANCE
LESSOR shall maintain general liability coverage for the property
covering the common areas. Coverage shall be no less than $2,000,000.
23. OTHER PROVISIONS
A. GENERAL BUILDOUT
LESSOR will build out Suites 308 and 310 to a similar level of finish
and with the same color schemes as exist in the finished areas of the
third floor for a turnkey delivery to LESSEE. LESSOR shall complete all
items described on Exhibit B that is attached hereto and made a part
here (LESSOR's Work) at its sole cost and expense, in a good and
workmanlike manner.
B. PHONE DATA/CABLING
LESSEE shall be solely responsible for contracting with and paying for a
phone/data cabling company to install phone/data wiring and outlets in
Suites 308 and 310. LESSEE may commence installation of phone/data
wiring in the Leased Premises upon execution of this lease and receipt
by LESSOR of payment of the first month's rent, last month's rent and
security deposit. Such wiring and outlets shall become the property of
the LESSOR at the termination of this lease.
C. OCCUPANCY
i. LESSOR shall notify LESSEE in writing when the Leased Premises are ready
for LESSEE's occupancy.
ii. LESSOR will deliver Suite 308 on November 1, 1999. LESSEE acknowledges
that some buildout of the two offices contained in that suite will occur
after LESSEE's occupancy and some disruption of LESSEE's business may
occur. Suite 310 shall be delivered to LESSEE in turnkey condition no
later than January 1, 2000.
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D. QUIET ENJOYMENT
Without limiting any rights LESSEE may have by statute or common law,
LESSOR covenants and agrees that, so long as this lease is in full force
and effect, LESSEE shall lawfully and quietly hold, occupy and enjoy the
Lease Premises during the term of this lease without disturbance by
LESSOR or by any person having title paramount to LESSOR's title or by
any person claiming through or under the LESSOR.
E. LESSEE'S USE OF ANY HAZARDOUS SUBSTANCE
The only Hazardous Substance LESSEE may use in its operations are
cleaning solvents. LESSEE will manage such use in accordance with the
environmental laws. Other than using the foregoing cleaning solvents,
LESSEE does not have direct or indirect responsibility for or authority
to manage or control use, transportation, generation or disposal of any
hazardous substance on the premises, the building or the property.
F. MISCELLANEOUS
i. Window Blinds. LESSEE shall be solely responsible for purchase and
installation of any window blinds LESSEE deems necessary in
Suites 308 and 310. If purchased by LESSEE, such blinds shall be
horizontal and match the dark green color of other blinds seen
around the building, except as necessary for blocking light for
LESSEE's special purposes.
ii. Cleaning. LESSEE shall be solely responsible for all cleaning
within Suites 308 and 310, and for removal of any trash generated
by LESSEE to the common dumpster at the first floor level.
iii. Hours of Operation. Building hours of operation are normal
business hours (8am to 6pm). Notwithstanding the normal building
hours of operation, LESSEE shall have unrestricted twenty-four
hour access to LESSEE's suites.
G. PARKING
LESSEE will have the daily use of nine (9) parking spaces, non-assigned,
in the parking lot in addition to reasonable visitor parking.
IN WITNESS WHEREOF, the said parties hereunto set their hands and seals this
26th day of October, 1999.
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Photogen, Inc. Westborough Mill, LLC
By: /s/ John Smolik
------------------------------- By: /s/ James E. Levin
----------------------------------
Its: President James E. Levin
------------------------------ President
Photogen Technologies, Inc.
Guarantees LESSEE's compliance with the
terms and conditions of this lease
By: /s/ John Smolik
-------------------------------
Its: President
------------------------------
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<PAGE>
EXHIBIT A
[Diagram of Leased Premises]
<PAGE>
EXHIBIT B
As part of the buildout, LESSOR will provide:
- - In suite 308...
a. Construction of two (2) additional offices finished, insulated walls
eight (8) feet in height with wood trim painted and finished to match
existing offices.
b. Removal of interior windows and wall at hallway with an archway
constructed that is the width and height of the windows removed and
finished to match existing wall and trim.
- - Removal of the carpet in the hallway and carpeted to match existing.
- - Construction of a wall to close off the hallway immediately after the
entrance to suite 308.
- - In suite 310...
a. Construction of a storage room with a wall eight (8) feet in height with
wood trim painted and finished to match existing offices.
b. Sheetrock blocked window openings, paint and trim off windows to match.
c. carpeted to match existing.
d. electric writing, lighting and plugs throughout in accordance with code.
e. close up opening in floor in accordance with code.
Special Conditions:
a. All construction to be completed either prior to occupancy or with a
minimum of disruption to LESSEE which shall be construed to mean after
business hours (5pm) or on weekends for work in suite 308 and hallway
(except for carpeting) or with large steel fire door closed for noisy
work in suite 310.
b. LESSEE shall be responsible for all telephone and data cabling for
suites 308 and 310 to be completed during construction with reasonable
notice by LESSOR.
<PAGE>
Exhibit 10.4
LEASE
1. PARTIES
Westborough Mill, LLC, with an address at 13 Water Street, Holliston, MA, 01746
("LESSOR"), which expression shall include heirs, successors, and assigns where
the context so admits, does hereby lease to:
PHOTOGEN, INC.
with an address at 69 Milk Street, Suites 304, 306, 308, 310, Westborough, MA
01581 ("LESSEE"), which expression shall include successors, executors,
administrators, and assigns where the context so admits. Upon LESSEE's occupancy
of suites 304 and 306, the prior written lease agreement between the parties
dated October 26, 1999 for suites 308 and 310 shall terminate and this lease
will be the controlling lease agreement between the parties. Both parties
acknowledge that this lease represents the parties' entire understanding and
agreement concerning the Leased Premises at 69 Milk Street, Westboro, MA. LESSEE
hereby leases the following described premises:
2. PREMISES
Those certain premises consisting of 7,821 rentable square feet of office space
located on the third floor, suites 304*, 306*, 308** and 310**, as shown on
attached Exhibits A and B respectively ("Leased Premises") with the right to use
in common, with others entitled thereto the hallways, stairways, necessary for
access to said Leased Premises, parking lot, bathrooms, dumpster, and loading
docks.
*Suites 304 and 306 are space to be built-out by LESSOR
**Suites 308 and 310 are finished space currently occupied by LESSEE.
3. TERM
The term of this lease shall be for five (5) years commencing on the earlier of
delivery of the Premises or the LESSEE's occupancy of same, expected to be April
1, 2000.
4. RENT
LESSEE shall pay to the LESSOR, rent at the rate of:
Year One: Commencing April 1, 2000-March 31, 2001: One Hundred Twenty Nine
Thousand Forty Six and 50/100 Dollars ($129,046.50), payable in advance in
monthly installments of Ten Thousand Seven Hundred Fifty Three and 88/100
Dollars ($10,753.88).
<PAGE>
Year Two: One Hundred Thirty Four Thousand Nine Hundred Twelve and 25/100
Dollars ($134,912.25) per year, payable in advance in monthly installments of
Eleven Thousand Two Hundred Forty Two and 69/100 Dollars ($11,242.69).
Year Three: One Hundred Forty Four Thousand Six Hundred Eighty Eight 50/100
Dollars ($144,688.50) per year, payable in advance in monthly installments of
Twelve Thousand Fifty Seven and 38/100 Dollars ($12,057.38).
Year Four: One Hundred Forty Eight Thousand Five Hundred Ninety Nine Dollars
($148,599.00) per year, payable in advance in monthly installments of Twelve
Thousand Three Hundred Eighty Three and 25/100 Dollars ($12,383.25).
Year Five: One Hundred Fifty Thousand Five Hundred Fifty Four and 25/100 Dollars
($150,554.25) per year, payable in advance in monthly installments of Twelve
Thousand Five Hundred Forty Six and 19/100 Dollars ($12,546.19)
LESSEE shall incur a late payment penalty equal to 5% of the monthly installment
payment for payments not received by the 7th day of each month.
Upon execution of this lease, LESSEE shall have deposited an amount equal to
Twelve Thousand Five Hundred Forty Six and 19/100 Dollars ($12,546.19) which
amount shall be LESSEE's last month's lease payment. LESSEE has already
deposited on account Four Thousand Five Hundred and Sixty Dollars ($4,560.00)
and shall pay the balance due of Seven Thousand Nine Hundred Eighty Six and
19/100 ($7,986.19) upon execution of this lease.
5. SECURITY DEPOSIT
Upon execution of this lease, LESSEE shall have deposited a security deposit
equal to Twelve Thousand Five Hundred Forty Six and 19/100 Dollars ($12,546.19)
which amount shall be held as security for the LESSEE's performance as herein
provided and refunded to the LESSEE at the end of the Lease, subject to the
LESSEE's satisfactory compliance with the conditions hereof. LESSEE has already
deposited on account Four Thousand Five Hundred and Sixty Dollars ($4,560.00)
and shall pay the balance due of Seven Thousand Nine Hundred Eighty Six and
19/100 ($7,986.19) upon execution of this lease. In no event shall the security
deposit be considered prepaid rent.
TOTAL MONIES DUE UPON EXECUTION OF LEASE: $15,972.38.
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<PAGE>
6. RENT ADJUSTMENTS
A. OPERATING EXPENSES
If in any year commencing with calendar year 2001 the operating expenses for the
building (i.e. snow plowing, maintenance, etc.) shall exceed the operating
expenses for the building for the preceding calendar (year 2000 which is the
base year) then LESSEE shall pay its percentage share, 20 percent, of any such
excess as additional rent over the next calendar year.
B. REAL ESTATE TAXES
If in any tax year commencing with the fiscal year 2001, the real estate taxes
paid on the land and buildings, of which the Leased Premises are a part, are in
excess of the amount of the current real estate taxes thereon for the fiscal
year 2000 (hereinafter called the "Base Year"), LESSEE will pay to LESSOR as
additional rent hereunder, when and as designated by notice in writing by
LESSOR, LESSEE's percentage share, 20 percent, of such excess that may occur in
each year of the term of this Lease or any extension or renewal thereof and
proportionately for any part of a fiscal year.
7. UTILITIES
Except to the extent that the same are furnished through separately submetered
utilities, LESSOR agrees to provide all utility service in common areas and to
furnish reasonable hot and cold water and reasonable heat and air conditioning
such that the LESSEE is comfortable in the leased premises, the hallways,
stairways and lavatories during normal business hours (8am to 6pm) on regular
business days of the heating and air conditioning seasons of each year, and to
light passageways and stairways during business hours, all subject to
interruption due to any accident, to the making of repairs, alterations, or
improvements, to labor difficulties, to trouble in obtaining fuel, electricity,
service or supplies from the sources from which they are usually obtained for
said building, or to any cause beyond the LESSOR's control. The LESSOR shall
maintain heating and air conditioning equipment in good operating order.
LESSOR shall have no obligation to provide utilities or equipment other than the
utilities and equipment within the premises as of the commencement of this
lease. In the event LESSEE requires additional utilities or equipment, as
confirmed by LESSEE, the installation and maintenance thereof shall be the
LESSEE's sole obligation, provided that such installation shall be subject to
the written consent of the LESSOR.
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<PAGE>
8. USE OF LEASED PREMISES
The LESSEE shall use the premises only for the purpose of:
GENERAL OFFICE AND RELATED USES
9. COMPLIANCE WITH LAWS
LESSEE acknowledges that no trade or occupation shall be conducted in the Leased
Premises or use made thereof which will be unlawful, improper, noisy or
offensive, or contrary to any law or municipal by-law or ordinance in force in
the town in which the premises are situated.
LESSOR acknowledges that it shall not rent or Lease any portion of the building
for any use, which will be unlawful, improper, noisy or offensive, or contrary
to any law or municipal by-law or ordinance in force in the town in which the
premises are situated.
10. FIRE
LESSEE shall not permit any use of the Leased Premises which will make voidable
any insurance on the property of which the Leased Premises are a part, or on the
contents of said property or which shall be contrary to any law or regulation
from time to time established by the New England Fire Insurance Rating
Association, or any similar body succeeding to its powers.
11. MAINTENANCE
A. LESSEE agrees to maintain the Leased Premises in substantially the same
condition as it is on the commencement of the term of this Lease, ordinary wear
and tear, damage by fire and other casualty only excepted subject to buildout.
The LESSEE shall not permit the Leased Premises to be overloaded, damaged,
stripped, or defaced, nor suffer any waste. The LESSEE shall obtain the written
consent of the LESSOR before erecting any sign in or on the premises. LESSOR
shall place signs naming the LESSEE on the building directory and on the
LESSEE's door.
B. LESSOR agrees to maintain the structure and heating, cooling systems of the
building of which the Leased Premises are a part in the same condition as it is
on the commencement of the term of this Lease, reasonable wear and tear, damage
by fire and other casualty only excepted. The LESSOR warrants that the structure
and the mechanical systems of the building of which the Leased Premises are a
part are in good operating order and/or condition at the time of the
commencement of the Lease.
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<PAGE>
12. ALTERATIONS/ADDITIONS
In the event that LESSEE performs any work on the premises LESSEE shall not
permit any mechanic's liens, or similar liens, to remain upon the Leased
Premises for labor and materials furnished to LESSEE or claim to have been
furnished to LESSEE in connection with work of any character performed or
claimed to have been performed at the direction of LESSEE and shall cause any
lien to be released of record forthwith without cost to LESSOR. Any alterations
or improvements made by the LESSEE (i.e. kitchen cabinets, window blinds, built
in shelving) shall become the property of the LESSOR at the termination of
occupancy as provided herein.
13. ASSIGNMENT/SUBLEASING
LESSEE shall not assign or sublet the whole or any part of the Leased Premises
without LESSOR's prior written consent, which shall not be unreasonably withheld
or delayed. In the event of an attempted assignment without Lessor's prior
written consent LESSOR reserves the right to release LESSEE from obligations
under this Lease. LESSEE shall engage the brokerage services of the real estate
broker currently representing the building in the event LESSEE seeks to sublet
the premises.
14. SUBORDINATION/NON-RECORDING/NON-DISTURBANCE
AGREEMENT
This Lease shall be subject and subordinate to any and all mortgages, deeds of
trust and other instruments in the nature of a mortgage, now or at any time
hereafter placed upon the property of which the Leased premises are a part and
the LESSEE shall, when requested, promptly execute and deliver such written
instruments as shall be necessary to show the subordination of this Lease and to
said mortgages, deeds of trust or other such instruments in the nature of a
mortgage. LESSEE shall not record this Lease. Any attempted recording shall be
considered a default under this Lease. LESSOR agrees to make reasonable efforts
to obtain a Non-Disturbance Agreement from any future Mortgagee on behalf of the
LESSEE in the event that LESSOR is unable to provide said Non-Disturbance
Agreement then LESSEE may contact Mortgagee directly to seek same.
14A. ESTOPPEL CERTIFICATES
Each party agrees, at any time, and from time to time, upon not less than
fifteen (15) days prior notice by the other party, to execute, acknowledge, and
deliver to the other party, a statement in writing addressed to the other party,
certifying that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), stating the dates to which the fixed
minimum rent, additional rent and other charges have been paid, and stating
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<PAGE>
whether or not to the best knowledge of the signer of such certificate, there
exists any default in the performance of any covenant, agreement, term,
provision, or condition contained in this Lease, and if so, specifying each such
default of which the signer may have knowledge, it being intended that any such
statement delivered pursuant hereto may be relied upon by the other party and by
any Mortgagee or prospective Mortgagee or any mortgage affecting this Lease and
by any LESSOR or LESSEE interest in this Lease.
15. LESSOR'S ACCESS
The LESSOR or agents of the LESSOR may, at reasonable times and with reasonable
notice given to LESSEE (except in the case of emergencies), enter to view the
Leased Premises and make repairs as LESSOR shall elect to do and may show the
Leased Premises to others, and at any time within six (6) months before the
expiration of the term, may affix to any suitable part of the building of which
the Leased Premises are a part (but not the suite entrance of the LESSEE's
premises) a sign or notice for letting or selling the Leased Premises or
property of which the Leased Premises are a part and keep the same so affixed
without hindrance or molestation. LESSOR's entry of the Leased Premises shall
not interrupt the normal operation of the LESSEE's business or interfere with
the quiet enjoyment of the premises (except in the case of emergencies).
16. INDEMNIFICATION AND LIABILITY
LESSEE shall save the LESSOR harmless from all loss and damage to LESSEE's
property occasioned by the use or escape of water or by the bursting of pipes or
by any nuisance made or suffered on the Leased Premises, unless such loss is
caused by the neglect of the LESSOR.
17. FIRE, CASUALTY, EMINENT DOMAIN
Should a substantial portion of the Leased Premises, or of the property of which
they are a part, be substantially damaged by fire or other casualty, or be taken
by eminent domain, LESSOR may elect to terminate this Lease. When such fire,
casualty, or taking renders the Leased Premises substantially unsuitable for
their intended use, a just and proportionate abatement of rent shall be made,
and LESSEE may elect to terminate this Lease if:
(a) LESSOR fails to give written notice within thirty days (30) of
intention to restore Leased Premises, or
(b) LESSOR fails to restore the Leased Premises to a condition
substantially suitable for their intended use within ninety (90) days
of said fire, casualty, or taking.
LESSOR reserves, and LESSEE grants to LESSOR all rights which LESSEE may have
for damages or injury to the Leased Premises for any taking by eminent domain,
except
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<PAGE>
for damages to the LESSEE's fixtures, property or equipment or relocation
expenses of LESSEE.
18. DEFAULT AND BANKRUPTCY
In the event that:
(a) LESSEE shall default in the payment of any installment of rent or
other sum herein specified and such default shall continue for ten
(10) days after written notice thereof; or
(b) LESSEE shall default in the observance or performance of any of the
LESSEE's covenants, agreement, or obligations hereunder and such
default shall not be corrected within thirty (30) days after written
notice thereof; or
(c) LESSEE shall be declared bankrupt or insolvent according to law, or,
if any assignment shall be made of LESSEE's property for the benefit
of creditors;
then the LESSOR, shall have the right thereafter, while such default
continues, to re-enter and take complete possession of the Leased premises,
to declare the term of this Lease ended, and remove LESSEE's effects,
without prejudice to any remedies which might be otherwise available to
LESSOR. LESSEE shall indemnify LESSOR against all loss of rent and other
payments, which LESSOR may incur by reason of such termination during the
residue of the term. If LESSEE shall default, after reasonable notice
thereof, in the observance or performance of any conditions or covenants on
LESSEE's part to be performed or observed under or by virtue of any of the
provisions in any article of this Lease, LESSOR, without being under any
obligation to do so and without thereby waiving such default, may remedy
such default for the account and at the expense of LESSEE. If LESSOR makes
any expenditures or incurs any obligations for the payment of money in
connection therewith, such sums paid or obligations incurred, with the
interest at the rate of twelve percent (12%) per annum and costs shall be
paid to the LESSOR by the LESSEE as additional rent.
(d) If LESSOR breaches or defaults on its obligations under sections 7 and
23D of this Lease, which breach or default continues for thirty days after
written notice of said breach to LESSOR by LESSEE, then in that event,
LESSEE may cure the breach or default on LESSOR's behalf and make the
appropriate deduction from LESSEE's rent.
19. NOTICE
Any notice from the LESSOR to the LESSEE relating to the Leased Premises or to
the occupancy thereof, shall be deemed duly served, if mailed to LESSEE at 69
Milk Street Westboro MA, with a copy to Photogen Technologies, Inc. 7327
Oakridge Highway, Knoxville, TN 37831 Attention: President, registered mail,
return receipt requested, postage prepaid or at such address as the LESSEE may
from time to time advise in writing. All rent and notices shall be paid and sent
to LESSOR's address written above.
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<PAGE>
20. SURRENDER
LESSEE shall at the expiration date or other termination of this Lease remove
all LESSEE's goods and effects from the Leased Premises, (including, without
hereby limiting the generality of the foregoing, all signs and lettering affixed
or painted by the LESSEE, either inside or outside the Leased premises). LESSEE
shall deliver to the LESSOR the Leased Premises and all keys, locks thereto, and
other fixtures connected therewith and all alterations and additions made to or
upon the Leased Premises, in substantially the same condition as it is on the
commencement of the term of this Lease, ordinary wear and tear, damage by fire
or other casualty only excepted, subject to buildout. In the event of the
LESSEE's failure to remove any of LESSEE's property from the premises, LESSOR is
hereby authorized, without liability to LESSEE for loss and damage thereof, and
at the sole risk of LESSEE to remove, store or dispose of any of the property at
LESSEE's expense, or to retain same under LESSOR's control or to sell at public
or private sale as the case may be, without notice and to apply the net proceeds
of such sale to the payment of any sum due hereunder. In the event that LESSEE
has not vacated the Leased Premises upon the expiration of the Lease term then
in that event the per diem rent for the demised premises shall be one and
one-half (1 1/2) times the most recent per diem amount.
21. BROKERAGE
The parties acknowledge that there is a broker's commission due to Investment
Property Specialists, Inc., payable by the LESSOR as a result of this Lease.
22. INSURANCE
A) LESSEE INSURANCE
LESSEE shall maintain insurance coverage for worker compensation, general
liability, and hazards covering LESSEE's employees, visitors, and LESSEE's
premises and contents. Coverage shall be no less than $2,000,000 general
liability and $2,000,000 property naming LESSOR as additional insured. Each
policy of insurance shall contain a provision requiring no less than ten (10)
days notice to LESSOR prior to cancellation of the policy.
B) LESSOR INSURANCE
LESSOR shall maintain general liability coverage for the property covering the
common areas. Coverage shall be no less than $2,000,000.
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<PAGE>
23. OTHER PROVISIONS
A) GENERAL BUILDOUT
LESSOR will build out suites 304 and 306 at its sole cost and expense, in a good
and workmanlike manner and to a similar level of finish and with the same color
schemes as exist in the finished areas of the third floor for a turnkey delivery
to LESSEE pursuant to the plan Exhibit A, and item list Exhibit C attached
hereto and incorporated herein by referenced. LESSOR's build-out excludes:
i) LESSEE's payment for low voltage and telephone wiring (as referenced in
23 (b) incorporated herein by reference);
ii) LESSEE's supply of kitchen cabinets, countertops, sink disposal and
dishwasher (as referenced in Exhibit C incorporated herein by reference);
iii) LESSEE's cost for restoration of demising partition in the event LESSOR is
unable to let the Leased Premises without said restoration (as referenced
in 23 (h) incorporated herein by reference).
B) PHONE DATA/CABLING
LESSEE shall be solely responsible for contracting with and paying for a
phone/data cabling company to install phone/data wiring and outlets in suites
304, 306, 308 and 310. Such wiring and outlets shall become the property of the
LESSOR at the termination of this Lease.
C. OCCUPANCY
i. LESSOR shall notify LESSEE in writing when the Leased Premises are ready for
LESSEE'S occupancy.
ii. LESSOR will turnkey deliver suites 304 and 306 no later than April 1, 2000
dependent upon LESSOR obtaining the necessary permits for the build-out of
suites 304 and 306 described herein and in the attached exhibits. In the event
LESSOR is unable to obtain the necessary permits in a timely manner, LESSOR
shall promptly notify LESSEE and LESSOR shall turnkey deliver suites 304 and 306
on a date mutually agreeable to LESSOR and LESSEE subject to an appropriate
reduction in monthly rental to reflect the inability of LESSEE to occupy all of
any part of suites 304 and/or 306.
9
<PAGE>
D. QUIET ENJOYMENT.
Without limiting any rights LESSEE may have by statute or common law, LESSOR
covenants and agrees that, so long as this Lease is in full force and effect,
LESSEE shall lawfully and quietly hold, occupy and enjoy the Leased Premises
during the Term of this Lease without disturbance by LESSOR or by any person
having title paramount to LESSOR's title or by any person claiming through or
under the LESSOR.
E. LESSEE'S USE OF ANY HAZARDOUS SUBSTANCE.
The only Hazardous Substance LESSEE may use in its operations are cleaning
solvents. LESSEE will manage such use in accordance with the Environmental Laws.
Other than using the foregoing cleaning solvents, LESSEE does not have direct or
indirect responsibility for or authority to manage or control use,
transportation, generation or disposal of any Hazardous Substance on the
Premises, the Building or the Property.
F. MISCELLANEOUS
i. Window Blinds. LESSEE shall be solely responsible for purchase and
installation of any window blinds LESSEE deems necessary in Suites 304, 306, 308
and 310 which shall become the property of the LESSOR upon expiration of the
term.
ii. Cleaning. LESSEE shall be solely responsible for all cleaning within Suites
304, 306, 308 and 310, and for removal of any trash generated by LESSEE to the
common dumpster at the first floor level.
iii. Hours of Operation. Building Hours of operation are normal business hours
(8am to 6pm). Notwithstanding the normal building hours of operation, LESSEE
shall have unrestricted twenty-four hour access to LESSEE's suites.
G. PARKING
LESSEE will have the daily use of 22 parking spaces, non-assigned, in the
parking lot in addition to reasonable visitor parking.
H. RESTORATION OF DEMISING PARTITION FOR THE HALLWAY
LESSOR shall commence showing the Leased Premises to prospective tenants six
months prior to the expiration of the term of this lease and use its best
efforts to let the Leased Premises in its current condition (best efforts being
defined as LESSOR using commercially reasonable efforts to show and let Leased
Premises within that six month period). In the event that LESSOR is unable to
let the Leased Premises without restoring the demising partition for the hallway
within that six month period LESSEE shall pay
10
<PAGE>
LESSOR for the restoration of the demising partition for the hallway.
IN WITNESS WHEREOF, the said parties hereunto set their hands and seals this 1st
day of March, 2000.
<TABLE>
<CAPTION>
Photogen, Inc. Westboro Mill, LLC
<S> <C>
/s/ Timothy Scott /s/ James E. Levin
- ----------------------- ----------------------
By: Timothy Scott By: James E. Levin
Its: President Its: President
</TABLE>
Photogen Technologies, Inc.
Guarantees LESSEE's compliance with the terms and conditions of this Lease
/s/ Timothy Scott
- -------------------------
By: Timothy Scott
Its: President
11
<PAGE>
Exhibit 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is made effective as of the 1st day
of November, 1999, by and between Photogen, Inc., a Tennessee corporation
("COMPANY"), and David D. Shaw, Ph.D. ("EMPLOYEE").
RECITALS
A. Employee has substantial experience in development of medical
therapeutics and imaging agents; and
B. The Company desires to retain Employee and Employee hereby agrees to
serve in such capacity to assist it in various research projects, developing
product inventions and related matters, as hereinafter provided; subject to the
terms of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
1. DEFINITIONS. The following terms have the meanings set forth below:
(a) "COMPANY" means all affiliates of Photogen, Inc., including but not
limited to Photogen Technologies, Inc. and Photogen Newco Ltd., except
in the context of the entity directly employing Employee which shall
mean Photogen, Inc.
(b) "COMPETITIVE BUSINESS" means engaging in the research, development,
sale, lease, marketing, financing or distribution of technology,
products or services similar to or competitive with the Company's
products or services in the Field anywhere in the world.
(c) "CONFIDENTIALITY AGREEMENT" means that certain Employee
Confidentiality and Inventions Agreement of even date herewith between
the Employee and the Company attached hereto as Exhibit 4 and
incorporated herein in its entirety by reference.
(d) "CONFIDENTIAL INFORMATION" has that meaning set forth in the
Confidentiality Agreement.
(e) "FIELD" means the use of electromagnetic energy (including light
generated by ultra fast lasers or other sources, x-rays and other
sources of radiation), alone or in combination with photoactive
compounds or targeting agents, to treat, diagnose or image human or
animal tissue and/or disease.
<PAGE>
(f) "PATENTS" means patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, and all
improvements and inventions related thereto.
2. EMPLOYMENT SERVICES.
(a) During the Term of this Agreement, Employee shall use his best efforts
to and shall devote 100% of his working time, except as provided in
Section 4(b), to competently and faithfully promote the Company's
interests, develop the Company's products and to perform the following
services (collectively, the "EMPLOYMENT SERVICES"):
(i) assist the Company's Medical Director to direct, design,
implement and complete, the preclinical and clinical activities for
specific projects mutually agreed to between the Company and Employee,
including but not limited to the following: (A) sentinel lymph node
mapping, (B) enhanced radiation therapy through the use of
radiosensitizers, (C) photodynamic therapy of deep tissue cancer, (D)
evaluation of hair removal, psoriasis, and leg ulcer products; (E) new
treatments for Barretts esophagus, and (F) other research projects assigned
by the Company (individually and collectively, "RESEARCH PROJECTS");
(ii) design, implement and complete clinical trial programs sufficient
to obtain regulatory approval for sentinel node mapping and diagnostic
products;
(iii) design, implement and complete pre-clinical trials sufficient to
evaluate PH-10 as a radiosensitizer for the treatment of various cancers;
(iv) negotiate, prepare and monitor clinical contracts and Research
Projects;
(v) assist the Medical Director in developing new product inventions
for the Company;
(vi) design and assist in human clinical trials undertaken by the
Company;
(vii) assist the Company in obtaining patent or other protection for
any technologies developed by Employee and arising out of his Employment
Services ;
(viii) assist the Company in obtaining licenses to technologies
developed by third parties;
-2-
<PAGE>
(ix) assist Company in working with outside preclinical and clinical
researchers and research organizations; and
(x) perform such other duties assigned to Employee from time to time
by the Company's Medical Director, the Company's Chief Executive Officer
and/or Board of Directors.
(b) Employee will perform the Employment Services substantially in the
Boston, Massachusetts area. Employee may also be required to travel
from time to time to Knoxville, Tennessee and elsewhere as reasonably
necessary to perform the Employment Services.
3. COMPENSATION.
(a) Company shall pay Employee an annual base gross salary as set forth in
Exhibit 1, payable in accordance with normal Company payroll
procedures and subject to deductions and withholdings required by law
or by agreement with Employee. Company will reimburse Employee for
reasonable and necessary business expenses in accordance with
Company's policies.
(b) Concurrently with the execution of this Agreement, Company and
Employee will execute an Incentive Stock Option Award Agreement
("Award Agreement") providing for the Company to grant Employee a
total of 150,000 options to acquire Company common stock, pursuant to
Company's 1998 Long Term Incentive Compensation Plan. The options will
vest in accordance with and in all other respects be subject to the
provisions of the Award Agreement.
(c) Employee will be eligible to participate in and receive benefits
provided under Company's insurance and benefit plans as set forth on
Exhibit 1, in accordance with their respective provisions. Company
reserves the right to amend all insurance and benefit plans at any
time as necessary to accomplish Company's business objectives.
4. COVENANTS AND REPRESENTATIONS. Employee represents and warrants to,
and covenants with, the Company as follows:
(a) During the Term, Employee will render services (similar to the
Employment Services or otherwise) in the Field only to the Company and
will not enter into any other agreement, arrangement, understanding,
or other relationship pursuant to which Employee is obligated to
render advice and services in the Field to any third party.
-3-
<PAGE>
(b) Employee is under no contractual or other obligation or restriction
which is inconsistent with Employee's obligations under this Agreement
or the performance of the Employment Services. Employee's pre-existing
relationships with commercial, educational or other research
institutions are listed in Exhibit 2 attached hereto. Employee will
terminate all employment, consulting and similar affiliations with
commercial entities in the Field that are in competition with Company.
Notwithstanding the terms and conditions of the Confidentiality
Agreement, Employee may act as a consultant for a maximum of three (3)
days per month inside or outside the Field with any entity that is not
in competition with the Company. Employee will arrange to perform any
responsibilities to third parties in a manner that will not conflict
with Employee's responsibilities under this Agreement. Employee agrees
to indemnify, defend and hold Company and its affiliates, directors,
officers, employees and independent contractors harmless from all
claim, allegation, loss, liability (including settlement payments),
expenses (including reasonable attorneys' fees and expenses) any of
them incurs that arise out of or relate to (i) any wrongful act or
omission of Employee while he is engaged in such activities with third
parties, or (ii) the acts or omissions of those third parties.
(c) Employee has set forth on Exhibit 3 attached hereto, a complete list
of any patents or patent applications in the Field of which Employee
is the joint or sole inventor.
5. CONFIDENTIALITY.
(a) The Company has developed and will develop Confidential Information
over a substantial period of time and at substantial expense. The
Confidential Information is of great importance to the Company's
business. During the Term, Employee may develop, become aware of, or
have access to the Confidential Information. In consideration of the
foregoing and as an inducement for Company to extend employment to
Employee hereunder, Employee has executed the Confidentiality
Agreement and Employee acknowledges and agrees the Company is and
shall at all times remain the sole owner of the Confidential
Information.
(b) During the Term and thereafter, Employee shall exercise all
commercially reasonable precautions to physically protect the
integrity and confidentiality of the Confidential Information.
Employee will not remove any Confidential Information or copies
thereof from the Company's premises or the other places Employee is
authorized to perform the Employment Services to the extent necessary
to perform such Employment Services, and then only with the Company's
prior written consent.
-4-
<PAGE>
(c) Employee will comply with Company's policies concerning publication
with respect to his work for the Company.
6. NONCOMPETITION; NONSOLICITATION.
(a) During the Term, and for 12 months after termination of the Term, the
Employee agrees not to, directly or indirectly through any other
person or entity, (i) own, manage, control, participate in, consult
with, be employed by, render services for, any person or entity
engaged in a Competitive Business or in any manner or in any capacity
(except as owner of 2% or less of stock of a publicly registered and
traded entity) engage in any Competitive Business, (ii) solicit,
induce or attempt to influence any other person or entity to engage in
any Competitive Business or to curtail or cease any business or
business relationship with the Company, its affiliates, employees or
independent contractors, (iii) solicit any other employee or
independent contractor to terminate any employment or engagement with
the Company and engage in a Competitive Business, or (iv) disparage
the Company, its affiliates, employees, independent contractors or
their services or products.
(b) The Company consents to Employee performing services for the entities
listed in paragraph 4(b), provided that (i) Employee keeps the Company
advised on a current basis of his activities for such other entities
(or, to the extent Employee is unable to keep the Company advised
because of a confidentiality agreement with such other entity,
Employee will disclose as much information as possible without
breaching the confidentiality agreement and seek the other entity's
permission to make further limited disclosure to the Company), (ii)
Employee strictly observes the confidentiality obligations in
paragraph 7, above, and (iii) Employee uses his best efforts to assure
that those other entities do not obtain any interest in Developments
or the Company's Patents. Upon written notice by one party hereto to
the other of a conflict situation, Employee and the Company will
negotiate in good faith for a period of 30 days (or longer by mutual
agreement) to modify Employee's responsibilities under this Agreement
or to develop other protections and procedures to minimize the
possibility of competitive conflict, the disclosure of Confidential
Information and uncertainty as to the Company's ownership of
Developments or the Company's Patents. If Employee and the Company are
unable to agree on such modifications, either of them may terminate
this Agreement upon written notice to the other.
-5-
<PAGE>
7. TERM AND TERMINATION.
(a) Unless terminated earlier pursuant to paragraph 7(b) below, this
Agreement shall be in effect for an initial term of four years
beginning on the effective date hereof (the "INITIAL TERM"). This
Agreement may be renewed for successive renewal terms lasting for one
year (the "RENEWAL TERMS") upon mutual written agreement of the
parties. The Initial Term and any subsequent Renewal Terms are
collectively referred to as the "TERM."
(b) This Agreement and Employee's employment by the Company may be
terminated before the expiration of any Term as follows:
(i) By the Company in the event:
(1) Employee commits a material breach of this Agreement where
such breach, if curable, is not remedied to the Company's
reasonable satisfaction within thirty (30) days after
written notice to Employee (and termination shall be
effective as of the end of such 30-day period); or
(2) Employee is convicted for committing an act of fraud,
embezzlement, theft or another act constituting a felony
(and termination shall be effective upon written notice to
Employee); or
(3) Employee dies or becomes mentally or physically disabled
such that the Employee cannot, in the opinion of an
independent physician selected by the Company, perform the
Employment Services (with reasonable accommodation to the
extent required by law) for a period of 12 months (and
termination shall be effective on the date Employee dies or
upon written notice the Company has determined he is
disabled under the foregoing criteria);
in which case: (A) the Company shall pay Employee his base salary
and any other amounts required by applicable law to be paid
through the effective date of termination but the Company shall
have no other obligations under this Agreement as of the
effective date of the termination, and (B) the Company shall
permit the Employee or his beneficiary to exercise vested options
to acquire Company stock in accordance with and subject to the
Award Agreement.
(ii) By the Company in the event the Company is dissatisfied in its
reasonable judgment with the Employee's performance of the Employment
Services or the results thereof which, if curable, are not remedied to the
Company's reasonable satisfaction
-6-
<PAGE>
within forty-five (45) days after specific written notice thereof has been
delivered to the Employee (and termination shall be effective as of the end
of such 45-day period); in which case: (A) the Company shall pay Employee
his base salary and any other amounts required by applicable law to be paid
through the effective date of termination but the Company shall have no
other obligations under this Agreement as of the effective date of the
termination, and (B) the Company shall permit the Employee or his
beneficiary to exercise vested options to acquire Company stock in
accordance with and subject to the Award Agreement.
(iii) By the Employee, provided the Employee shall give the Company at
least 60 days prior written notice thereof (and termination shall be
effective as of the end of such 60-day or longer period); in which case (A)
the Company shall pay Employee his base salary and any other amounts
required by applicable law to be paid through the effective date of
termination but the Company shall have no other obligations under this
Agreement as of the effective date of the termination, and (B) the Company
shall permit the Employee to exercise vested options to acquire Company
stock in accordance with and subject to the Award Agreement.
(c) Notwithstanding anything to the contrary, the obligations under this
Agreement which by their terms survive termination, including, without
limitation, the applicable Confidentiality, Noncompetition, and
Nonsolicitation provisions of this Agreement as set forth in
paragraphs 5 and 6 hereof and the Confidentiality Agreement, shall
survive termination; and the representations and warranties, including
without limitation the provisions of paragraph hereof, shall survive
termination. Upon termination, and in any case upon the Company's
request, Employee shall return immediately to the Company all
Confidential Information and copies thereof and not retain any copies
thereof.
8. MISCELLANEOUS.
(a) This Agreement and the rights and obligations hereunder may not be
assigned, delegated or transferred by Employee without the prior
written consent of the Company. The Company may assign this Agreement
to an affiliate of the Company or to an acquirer or successor in
connection with the merger, consolidation, or sale of all or
substantially all of its assets, and this Agreement shall inure to the
benefit of the Company's assignee.
(b) This Agreement may not be amended or modified, or any provision hereof
waived, except by a written instrument duly signed by both parties
contemporaneously or after the date of this Agreement. This Agreement
(together with the Award Agreement and the Agreement regarding certain
conditions) constitutes the entire agreement between the parties
concerning the subject matter
-7-
<PAGE>
hereof and thereof, and supersedes all prior written or oral
negotiations, representations and agreements.
(c) The Employee acknowledges that a breach of paragraphs 5, 6 or the
Confidentiality Agreement may cause the Company and its affiliates
irreparable harm. Accordingly, in the event of a breach or threatened
breach by the Employee of any of the provisions of paragraphs 5, 6 or
the Confidentiality Agreement, the Employee agrees that the Company
may be entitled to injunctive relief restraining the Employee and any
individual or entity from participating in such breach or threatened
breach. The Employee waives any provision of law requiring the Company
to post a bond for any such injunctive relief. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies
available at law or in equity for any breach or threatened breach of
this Agreement.
(d) Any waiver of a breach of any provision of this Agreement shall not
operate as a waiver of any other breach of such provision or any other
provision, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision.
(e) If any provision of this Agreement is deemed in a final order by a
court of competent jurisdiction to be unenforceable or invalid, the
enforceability and validity of all other provisions shall not be
affected and that court shall modify the unenforceable or invalid
provision to the extent necessary to render it enforceable and valid
and that provision shall be enforced as modified. Employee agrees that
the time period and scope of the covenants in paragraphs 6, 7 and 8 of
this Agreement are reasonable and appropriate under the circumstances
of the Company's business.
-8-
<PAGE>
IN WITNESS WHEREOF, Employee and the President of the Company have
signed this Agreement as of the Effective Date.
-9-
<PAGE>
COMPANY EMPLOYEE
Photogen, Inc.
By: /s/ John T. Smolik By: /s/ David D. Shaw
------------------------------- -------------------------------
John T. Smolik, President David D. Shaw, Ph.D.
Address: 7327 Oak Ridge Highway Address: 600 Fairville Road
Suite B Chadds Ford, PA 19317
Knoxville, TN 37931
Telephone: 423/769-4011 Telephone:______________
Telecopier: 423/769-4013 Telecopier:_____________
E-mail: [email protected] E-mail: ________________
-10-
<PAGE>
EXHIBIT 1
TITLE AND COMPENSATION
Title: Vice President of Clinical Research and Technology Development
Gross Salary: Starting salary of $125,000 per year. Salary subject to periodic
review.
Bonus/Options: Bonus will be available and paid at the discretion of the Board
or its Compensation Committee.
Benefits: Medical/Dental/Term Life Insurance
Long term disability insurance
Paid vacation (4 weeks, 9 Company holidays and 2 floating days)
Benefit programs will be developed and implemented as approved by
the Board 401(k) salary deferral plan (non-contributory by
Company)
Relocation Assistance as follows:
- all customary and reasonable moving expenses (including
packing charges);
- two (2) three day house hunting trips from Pennsylvania
to Massachusetts;
- final transportation expenses to Massachusetts; and o
reimbursement up to a maximum of $15,000 for expenses
in connection with re-selling Employee's current home
located in Chadds Ford, Pennsylvania upon reasonable
documentation submitted to the Company
- one (1) month's salary to offset miscellaneous
non-reimbursed moving expenses
<PAGE>
EXHIBIT 2
EMPLOYEE'S PREEXISTING RELATIONSHIPS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUBJECT TO WRITTEN
AGREEMENT
(Y OR N)
IF "YES" ATTACH A
ENTITY SUMMARY OF RELATIONSHIP COPY OF AGREEMENT
(REDACTED AS
NECESSARY)
- --------------------------------------------------------------------------------
<S> <C> <C>
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
-1-
<PAGE>
EXHIBIT 3
EMPLOYEE'S INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION STATUS
- --------------------------------------------------------------------------------
<S> <C>
[List any patents or patent applications]
- --------------------------------------------------------------------------------
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 4
See attached Employee Confidentiality and Inventions Agreement.
<PAGE>
[PHOTOGEN TECHNOLOGIES, INC. LETTERHEAD]
November 1, 1999
David P. Shaw, Ph.D.
600 Fairville Road
Chadds Ford, PA 19317
RE: EMPLOYEE CONFIDENTIALITY AND INVENTIONS AGREEMENT ("AGREEMENT")
Dear Dr. Shaw:
In the course of your work for Photogen, Inc., its parent company
Photogen Technologies, Inc. or any of their affiliates (collectively,
"Photogen"), you may have access to Photogen's confidential and proprietary
information and/or you may create Developments (defined below). As a condition
to Photogen hiring and employing you (and for other legally sufficient
consideration, the receipt and adequacy of which you acknowledge), you and
Photogen agree as follows:
1. CONFIDENTIAL INFORMATION.
(a) During your employment by Photogen and for a period of three (3)
years following termination of your employment, for any reason,
you will hold in trust, keep confidential and not disclose,
directly or indirectly, to any third parties or make any use of
Confidential Information (defined below) for any purpose except
for the benefit of Photogen in the performance of your duties.
Confidential Information will not be subject to these
restrictions if it becomes generally known to the public or in
the industry without any fault by you or any other person or
entity, or if Photogen ceases to have a legally protectable
interest in it. Upon termination of your employment (regardless
of the reason for termination), you will immediately return to
Photogen all tangible Confidential Information and any other
material made or derived from Confidential Information, including
information stored in electronic format and handwritten notes,
which is in your possession or which you delivered to others.
(b) "Confidential Information" means any and all information that has
or could have value or utility to Photogen, whether or not
reduced to written or other tangible form and all copies thereof,
relating to Photogen's private or proprietary matters,
<PAGE>
[LOGO]
David Shaw, Ph.D.
November 1, 1999
Page 2
confidential matters or trade secrets. Confidential Information
includes, but is not limited to, the following:
(i) technical information (whether or not subject to patent
registration or protection), such as research and development,
methods, trade secrets, know-how, formulas, compositions, protocols,
processes and techniques, discoveries, machines, inventions, ideas,
computer programs (including software and data used in all such
programs), drawings, specifications;
(ii) except to the extent publicly disclosed by Photogen without
any fault by you or any other person or entity, information relating
to Photogen's patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, and all
improvements and inventions related thereto;
(iii) business information, such as information concerning any
products, customers, suppliers, production, developments, costs,
purchasing, pricing, profits, markets, sales, accounts, customers,
financing, acquisitions, strategic alliances or collaborations,
expansions; and
(iv) other information relating to Photogen's business practices,
strategies or policies which are deemed a "trade secret" under
applicable laws.
2. DEVELOPMENTS.
(a) You agree to promptly and fully disclose in writing to Photogen,
Inc.'s President all Developments that are related to or useful
in the business or demonstrably anticipated business of Photogen,
or result from duties assigned to you by Photogen or from the use
of any of Photogen's assets or facilities. "Developments" means
any and all inventions, discoveries, improvements, know-how,
works or other intellectual property (whether or not subject to
registration with any governmental office) you conceive, reduce
to practice, discover or make, alone or with others, during your
employment and for twelve (12) months after termination
(regardless of the reason for termination).
(b) You hereby assign and transfer to Photogen, Inc. all of your
right, title and interest in and to all Developments. You agree
to sign and deliver to Photogen, Inc. (during and after
employment) other documents Photogen, Inc. considers
<PAGE>
[LOGO]
David Shaw, Ph.D.
November 1, 1999
Page 3
necessary or desirable to evidence its ownership of
Developments. All copyrightable works that are Developments,
whether or not works made for hire (as defined in 17 U.S.C.
Section 101), shall be owned by Photogen, Inc. and it may file
and own the same as the author throughout the world. If
Photogen, Inc. is unable for any reason to secure your
signature on any document necessary or desirable to apply for,
prosecute, obtain, or enforce any patent, trademark, service
mark, copyright, or other right or protection relating to any
Development, you hereby irrevocably designate and appoint
Photogen, Inc. and each of its duly authorized officers and
agents, as your agent and attorney-in-fact to act for and in
your behalf and stead to execute and file any such document
and to do all other lawfully permitted acts to further the
prosecution, issuance, and enforcement of patents, trademarks,
service marks, copyrights, or other rights or protections with
the same force and effect as if personally executed and
delivered by you. You agree that this power of attorney is
irrevocable and is coupled with an interest and thereby
survives your death or disability.
3. NO CONFLICTS. You represent and warrant to, and agree with
Photogen that:
(a) You are under no contractual or other obligation or restriction
which is inconsistent with your obligations under this Agreement
or the performance of you duties for Photogen. Without limiting
the generality of the foregoing, performing your duties for
Photogen will not cause you to breach any agreement or other duty
which obligates you to keep in confidence any confidential or
proprietary information or trade secret of any third party or to
refrain from competing, directly or indirectly, with the business
of any third party.
(b) Neither you nor any third party has any ownership or other
interest in any idea, invention or other item of intellectual
property that will be used in performing your duties for
Photogen, and all Developments will be free and clear of any
encumbrances or claims of third parties. In performing your
duties for Photogen, you will not disclose to Photogen or use any
confidential or proprietary information or trade secret of any
third party, and you will not interfere with the business of any
third party in any way contrary to applicable law.
(c) In performing your duties for Photogen, you will comply with
applicable laws and regulations.
<PAGE>
[LOGO]
David Shaw, Ph.D.
November 1, 1999
Page 4
4. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect your
or Photogen's right to terminate your employment or Photogen's right modify your
terms of employment, or to confer on you any other rights or benefits in
connection with your employment.
5. SEVERABILITY; CHOICE OF LAW; INJUNCTION. If any provision of this
Agreement is deemed by a court of competent jurisdiction to be unenforceable or
invalid, the enforceability and validity of all other provisions shall not be
affected and that court shall modify the unenforceable or invalid provision to
the extent necessary to render it enforceable and valid and that provision shall
be enforced as modified. You agree that the time period and scope of the
covenants in this Agreement are reasonable and appropriate under the
circumstances of Photogen's business. This Agreement shall be governed and
interpreted in accordance with the laws of the State of Tennessee without regard
to its provisions on conflicts of law. Without limiting any other available
remedies at law or in equity, Photogen will be entitled to injunctive relief
restraining any individual or entity from participating in any breach or
threatened breach of this Agreement without having to post a bond or security.
6. MISCELLANEOUS. This Agreement may not be amended or modified
except by a written instrument signed by both parties after the date of this
Agreement. This Agreement may be assigned by Photogen and shall inure to the
benefit of Photogen, its successors and assigns, but may not be assigned or
delegated by you. This Agreement supersedes all prior agreements, negotiations
and representations, written or oral, between the parties with respect to the
subject matter contained herein. Any waiver of any breach of, or failure to
enforce, any of the provisions of this Agreement shall not operate as a waiver
of any other breach or waiver of performance of such provisions or any other
provisions. Your obligations under this Agreement survive termination of your
employment, regardless of the manner or reason for termination.
<PAGE>
[LOGO]
David Shaw, Ph.D.
November 1, 1999
Page 5
Please indicate your agreement to the foregoing by signing a copy of
this letter below and returning it to me. I look forward to working with you.
Very truly yours,
/s/ John Smolik
John T. Smolik, President
Accepted and Agreed to as of
November 1, 1999.
By: /s/ David D. Shaw
--------------------------
David D. Shaw, Ph.D.
<PAGE>
Exhibit 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is made effective as of the
15th day of November, 1999, by and between Photogen, Inc., a Tennessee
corporation ("COMPANY"), and Jay Zimmerman, MEd. ("EMPLOYEE").
RECITALS
A. Employee has substantial experience in the conduct of human
clinical trials utilizing images as surrogate endpoints; and
B. The Company desires to retain Employee and Employee hereby agrees to
serve in such capacity to assist it in various research projects, developing
product inventions and related matters, as hereinafter provided; subject to the
terms of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
1. DEFINITIONS. The following terms have the meanings set forth
below:
(a) "COMPANY" means all affiliates of Photogen, Inc., including
but not limited to Photogen Technologies, Inc. and Photogen
Newco Ltd., except in the context of the entity directly
employing Employee which shall mean Photogen, Inc.
(b) "COMPETITIVE BUSINESS" means engaging in the research,
development, sale, lease, marketing, financing or distribution
of technology, products or services similar to or competitive
with the Company's products or services in the Field anywhere
in the world.
(c) "CONFIDENTIALITY AGREEMENT" means that certain Employee
Confidentiality and Inventions Agreement of even date herewith
between the Employee and the Company attached hereto as
Exhibit 4 and incorporated herein in its entirety by
reference.
(d) "CONFIDENTIAL INFORMATION" has that meaning set forth in the
Confidentiality Agreement.
(e) "FIELD" means the use of electromagnetic energy (including
light generated by ultra fast lasers or other sources, x-rays
and other sources of radiation), alone or in combination with
photoactive compounds or targeting agents, to treat, diagnose
or image human or animal tissue and/or disease.
<PAGE>
(f) "PATENTS" means patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and
reexaminations thereof, and all improvements and inventions
related thereto.
2. EMPLOYMENT SERVICES.
(a) During the Term of this Agreement, Employee shall use his best
efforts to and shall devote 100% of his working time to
competently and faithfully promote the Company's interests,
develop the Company's products and to perform the following
services (collectively, the "EMPLOYMENT SERVICES"):
(i) assist the Company's Medical Director to plan, implement
and complete, the clinical activities for specific research projects
mutually agreed to between the Company and Employee, including but not
limited to the following: (A) sentinel lymph node mapping, (B) enhanced
radiation therapy through the use of radiosensitizers, (C) photodynamic
therapy of deep tissue cancer, (D) evaluation of hair removal,
psoriasis, and leg ulcer products; (E) new treatments for Barretts
esophagus, and (F) other research projects assigned by the Company
(individually and collectively, "RESEARCH PROJECTS");
(ii) plan, implement and complete clinical trial programs
sufficient to obtain regulatory approval for sentinel node mapping and
diagnostic products;
(iii) negotiate, prepare and monitor clinical contracts;
(iv) lead the implementation of human clinical trials
undertaken by the Company;
(v) assist the Company in obtaining patent or other protection
for any technologies developed by Employee and arising out of his
Employment Services ;
(vi) assist the Company in obtaining licenses to technologies
developed by third parties;
(vii) assist the Company in working with outside clinical
researchers and research organizations; and
(viii) perform such other duties assigned to Employee from
time to time by the Company's Medical Director, the Company's Chief
Executive Officer and/or Board of Directors.
(b) Employee will perform the Employment Services substantially in
the Boston, Massachusetts area. Employee may also be required
to travel from time to time to
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<PAGE>
Knoxville, Tennessee and elsewhere as reasonably necessary to
perform the Employment Services.
3. COMPENSATION.
(a) Company shall pay Employee an annual base gross salary as set
forth in Exhibit 1, payable in accordance with normal Company
payroll procedures and subject to deductions and withholdings
required by law or by agreement with Employee. Company will
reimburse Employee for reasonable and necessary business
expenses in accordance with Company's policies.
(b) Concurrently with the execution of this Agreement, Company and
Employee will execute an Incentive Stock Option Award
Agreement ("Award Agreement") providing for the Company to
grant Employee a total of 150,000 options to acquire Company
common stock, pursuant to Company's 1998 Long Term Incentive
Compensation Plan. The options will vest in accordance with
and in all other respects be subject to the provisions of the
Award Agreement.
(c) Employee will be eligible to participate in and receive
benefits provided under Company's insurance and benefit plans
as set forth on Exhibit 1, in accordance with their respective
provisions. Company reserves the right to amend all insurance
and benefit plans at any time as necessary to accomplish
Company's business objectives.
4. COVENANTS AND REPRESENTATIONS. Employee represents and warrants to,
and covenants with, the Company as follows:
(a) During the Term, Employee will render services (similar to the
Employment Services or otherwise) in the Field only to the
Company and will not enter into any other agreement,
arrangement, understanding, or other relationship pursuant to
which Employee is obligated to render advice and services in
the Field to any third party.
(b) Employee is under no contractual or other obligation or
restriction which is inconsistent with Employee's obligations
under this Agreement or the performance of the Employment
Services. Employee's pre-existing relationships with
commercial, educational or other research institutions are
listed in Exhibit 2 attached hereto. Employee will terminate
all employment, consulting and similar affiliations with
commercial entities in the Field.
(c) Employee has set forth on Exhibit 3 attached hereto, a
complete list of any patents or patent applications in the
Field of which Employee is the joint or sole inventor.
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<PAGE>
5. CONFIDENTIALITY.
(a) The Company has developed and will develop Confidential
Information over a substantial period of time and at
substantial expense. The Confidential Information is of great
importance to the Company's business. During the Term,
Employee may develop, become aware of, or have access to the
Confidential Information. In consideration of the foregoing
and as an inducement for Company to extend employment to
Employee hereunder, Employee has executed the Confidentiality
Agreement and Employee acknowledges and agrees the Company is
and shall at all times remain the sole owner of the
Confidential Information.
(b) During the Term and thereafter, Employee shall exercise all
commercially reasonable precautions to physically protect the
integrity and confidentiality of the Confidential Information.
Employee will not remove any Confidential Information or
copies thereof from the Company's premises or the other places
Employee is authorized to perform the Employment Services to
the extent necessary to perform such Employment Services, and
then only with the Company's prior written consent.
(c) Employee will comply with Company's policies concerning
publication with respect to his work for the Company.
6. NONCOMPETITION; NONSOLICITATION.
(a) During the Term, and for 12 months after termination of the
Term, the Employee agrees not to, directly or indirectly
through any other person or entity, (i) own, manage, control,
participate in, consult with, be employed by, render services
for, any person or entity engaged in a Competitive Business or
in any manner or in any capacity (except as owner of 2% or
less of stock of a publicly registered and traded entity)
engage in any Competitive Business, (ii) solicit, induce or
attempt to influence any other person or entity to engage in
any Competitive Business or to curtail or cease any business
or business relationship with the Company, its affiliates,
employees or independent contractors, (iii) solicit any other
employee or independent contractor to terminate any employment
or engagement with the Company and engage in a Competitive
Business, or (iv) disparage the Company, its affiliates,
employees, independent contractors or their services or
products.
(b) The Company consents to Employee performing services for the
entities listed in paragraph 4(b), provided that (i) Employee
keeps the Company advised on a current basis of his activities
for such other entities (or, to the extent Employee is unable
to keep the Company advised because of a confidentiality
agreement with such other entity, Employee will disclose as
much information as possible without
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<PAGE>
breaching the confidentiality agreement and seek the other
entity's permission to make further limited disclosure to the
Company), (ii) Employee strictly observes the confidentiality
obligations in paragraph 7, above, and (iii) Employee uses his
best efforts to assure that those other entities do not obtain
any interest in Developments or the Company's Patents. Upon
written notice by one party hereto to the other of a conflict
situation, Employee and the Company will negotiate in good
faith for a period of 30 days (or longer by mutual agreement)
to modify Employee's responsibilities under this Agreement or
to develop other protections and procedures to minimize the
possibility of competitive conflict, the disclosure of
Confidential Information and uncertainty as to the Company's
ownership of Developments or the Company's Patents. If
Employee and the Company are unable to agree on such
modifications, either of them may terminate this Agreement
upon written notice to the other.
7. TERM AND TERMINATION.
(a) Unless terminated earlier pursuant to paragraph 7(b) below,
this Agreement shall be in effect for an initial term of four
years beginning on the effective date hereof (the "INITIAL
TERM"). This Agreement may be renewed for successive renewal
terms lasting for one year (the "RENEWAL TERMS") upon mutual
written agreement of the parties. The Initial Term and any
subsequent Renewal Terms are collectively referred to as the
"TERM."
(b) This Agreement and Employee's employment by the Company may be
terminated before the expiration of any Term as follows:
(i) By the Company in the event:
(1) Employee commits a material breach of this
Agreement where such breach, if curable, is
not remedied to the Company's reasonable
satisfaction within thirty (30) days after
written notice to Employee (and termination
shall be effective as of the end of such
30-day period); or
(2) Employee is convicted for committing an act
of fraud, embezzlement, theft or another act
constituting a felony (and termination shall
be effective upon written notice to
Employee); or
(3) Employee dies or becomes mentally or
physically disabled such that the Employee
cannot, in the opinion of an independent
physician selected by the Company, perform
the Employment Services (with reasonable
accommodation to the extent required by law)
for a period of 12 months (and termination
shall be effective
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<PAGE>
on the date Employee dies or upon written
notice the Company has determined he is
disabled under the foregoing criteria);
in which case: (A) the Company shall pay Employee his
base salary and any other amounts required by
applicable law to be paid through the effective date
of termination but the Company shall have no other
obligations under this Agreement as of the effective
date of the termination, and (B) the Company shall
permit the Employee or his beneficiary to exercise
vested options to acquire Company stock in accordance
with and subject to the Award Agreement.
(ii) By the Company in the event the Company is dissatisfied
in its reasonable judgment with the Employee's performance of the
Employment Services or the results thereof which, if curable, are not
remedied to the Company's reasonable satisfaction within forty-five
(45) days after specific written notice thereof has been delivered to
the Employee (and termination shall be effective as of the end of such
45-day period); in which case: (A) the Company shall pay Employee his
base salary and any other amounts required by applicable law to be paid
through the effective date of termination but the Company shall have no
other obligations under this Agreement as of the effective date of the
termination, and (B) the Company shall permit the Employee or his
beneficiary to exercise vested options to acquire Company stock in
accordance with and subject to the Award Agreement.
(iii) By the Employee, provided the Employee shall give the
Company at least 60 days prior written notice thereof (and termination
shall be effective as of the end of such 60-day or longer period); in
which case (A) the Company shall pay Employee his base salary and any
other amounts required by applicable law to be paid through the
effective date of termination but the Company shall have no other
obligations under this Agreement as of the effective date of the
termination, and (B) the Company shall permit the Employee to exercise
vested options to acquire Company stock in accordance with and subject
to the Award Agreement.
(c) Notwithstanding anything to the contrary, the obligations
under this Agreement which by their terms survive termination,
including, without limitation, the applicable Confidentiality,
Noncompetition, and Nonsolicitation provisions of this
Agreement as set forth in paragraphs 5 and 6 hereof and the
Confidentiality Agreement, shall survive termination; and the
representations and warranties, including without limitation
the provisions of paragraph hereof, shall survive termination.
Upon termination, and in any case upon the Company's request,
Employee shall return immediately to the Company all
Confidential Information and copies thereof and not retain any
copies thereof.
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<PAGE>
8. MISCELLANEOUS.
(a) This Agreement and the rights and obligations hereunder may
not be assigned, delegated or transferred by Employee without
the prior written consent of the Company. The Company may
assign this Agreement to an affiliate of the Company or to an
acquirer or successor in connection with the merger,
consolidation, or sale of all or substantially all of its
assets, and this Agreement shall inure to the benefit of the
Company's assignee.
(b) This Agreement may not be amended or modified, or any
provision hereof waived, except by a written instrument duly
signed by both parties contemporaneously or after the date of
this Agreement. This Agreement (together with the Award
Agreement and the Agreement regarding certain conditions)
constitutes the entire agreement between the parties
concerning the subject matter hereof and thereof, and
supersedes all prior written or oral negotiations,
representations and agreements.
(c) The Employee acknowledges that a breach of paragraphs 5, 6 or
the Confidentiality Agreement may cause the Company and its
affiliates irreparable harm. Accordingly, in the event of a
breach or threatened breach by the Employee of any of the
provisions of paragraphs 5, 6 or the Confidentiality
Agreement, the Employee agrees that the Company may be
entitled to injunctive relief restraining the Employee and any
individual or entity from participating in such breach or
threatened breach. The Employee waives any provision of law
requiring the Company to post a bond for any such injunctive
relief. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available at law or
in equity for any breach or threatened breach of this
Agreement.
(d) Any waiver of a breach of any provision of this Agreement
shall not operate as a waiver of any other breach of such
provision or any other provision, nor shall any failure to
enforce any provision hereof operate as a waiver of such
provision or of any other provision.
(e) If any provision of this Agreement is deemed in a final order
by a court of competent jurisdiction to be unenforceable or
invalid, the enforceability and validity of all other
provisions shall not be affected and that court shall modify
the unenforceable or invalid provision to the extent necessary
to render it enforceable and valid and that provision shall be
enforced as modified. Employee agrees that the time period and
scope of the covenants in paragraphs 6, 7 and 8 of this
Agreement are reasonable and appropriate under the
circumstances of the Company's business.
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<PAGE>
IN WITNESS WHEREOF, Employee and the President of the Company
have signed this Agreement as of the Effective Date.
COMPANY EMPLOYEE
Photogen, Inc.
By: /S/ JOHN T. SMOLIK By: /S/ JAY ZIMMERMAN
John T. Smolik, President Jay Zimmerman, MEd.
Address: 7327 Oak Ridge Highway Address: 165 Codman Hill Rd.
Suite B Harvard, MA 01451
Knoxville, TN 37931
Telephone: 423/769-4011 Telephone:_______________
Telecopier: 423/769-4013 Telecopier:______________
E-mail: [email protected] E-mail: _________________
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<PAGE>
EXHIBIT 1
TITLE AND COMPENSATION
Title: Vice President of Clinical Operations
Gross Salary: Starting salary of $125,000 per year. Salary subject
to periodic review.
Bonus/Options: Bonus will be available and paid at the discretion
of the Board or its Compensation Committee.
Benefits: Medical/Dental/Term Life Insurance
Long term disability insurance
Paid vacation (4 weeks, 9 Company holidays and 2
floating days)
Benefit programs will be developed and
implemented as approved by the Board 401(k) salary
deferral plan (non-contributory by Company
<PAGE>
EXHIBIT 2
EMPLOYEE'S PREEXISTING RELATIONSHIPS
<TABLE>
<CAPTION>
SUBJECT TO WRITTEN
AGREEMENT
(Y OR N)
IF "YES" ATTACH A
ENTITY SUMMARY OF RELATIONSHIP COPY OF AGREEMENT
(REDACTED AS
NECESSARY)
<S> <C> <C>
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NF Foundation Board Member N
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WorldCare Inc. Past COO N
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</TABLE>
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<PAGE>
EXHIBIT 3
EMPLOYEE'S INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
DESCRIPTION STATUS
<S> <C>
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[List any patents or patent applications]
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- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
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</TABLE>
<PAGE>
EXHIBIT 4
See attached Employee Confidentiality and Inventions Agreement.
<PAGE>
[PHOTOGEN TECHNOLOGIES, INC. LETTERHEAD]
November 15, 1999
Mr. Jay Zimmerman, Ph.D
165 Codman Hill Rd.
Harvard, MA 01451
RE: EMPLOYEE CONFIDENTIALITY AND INVENTIONS AGREEMENT ("AGREEMENT")
Dear Mr. Zimmerman:
In the course of your work for Photogen, Inc., its parent
company Photogen Technologies, Inc. or any of their affiliates (collectively,
"Photogen"), you may have access to Photogen's confidential and proprietary
information and/or you may create Developments (defined below). As a condition
to Photogen hiring and employing you (and for other legally sufficient
consideration, the receipt and adequacy of which you acknowledge), you and
Photogen agree as follows:
1. CONFIDENTIAL INFORMATION.
(a) During your employment by Photogen and for a period of three
(3) years following termination of your employment, for any
reason, you will hold in trust, keep confidential and not
disclose, directly or indirectly, to any third parties or make
any use of Confidential Information (defined below) for any
purpose except for the benefit of Photogen in the performance
of your duties. Confidential Information will not be subject
to these restrictions if it becomes generally known to the
public or in the industry without any fault by you or any
other person or entity, or if Photogen ceases to have a
legally protectable interest in it. Upon termination of your
employment (regardless of the reason for termination), you
will immediately return to Photogen all tangible Confidential
Information and any other material made or derived from
Confidential Information, including information stored in
electronic format and handwritten notes, which is in your
possession or which you delivered to others.
(b) "Confidential Information" means any and all information that
has or could have value or utility to Photogen, whether or not
reduced to written or other tangible form and all copies
thereof, relating to Photogen's private or proprietary
matters,
<PAGE>
[LOGO]
Jay Zimmerman, Ph.D.
November 15, 1999
Page 2
confidential matters or trade secrets. Confidential
Information includes, but is not limited to, the following:
(i) technical information (whether or not subject to patent
registration or protection), such as research and development, methods,
trade secrets, know-how, formulas, compositions, protocols, processes
and techniques, discoveries, machines, inventions, ideas, computer
programs (including software and data used in all such programs),
drawings, specifications;
(ii) except to the extent publicly disclosed by Photogen
without any fault by you or any other person or entity, information
relating to Photogen's patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations
thereof, and all improvements and inventions related thereto;
(iii) business information, such as information concerning any
products, customers, suppliers, production, developments, costs,
purchasing, pricing, profits, markets, sales, accounts, customers,
financing, acquisitions, strategic alliances or collaborations,
expansions; and
(iv) other information relating to Photogen's business
practices, strategies or policies which are deemed a "trade secret"
under applicable laws.
2. DEVELOPMENTS.
(a) You agree to promptly and fully disclose in writing to
Photogen, Inc.'s President all Developments that are related
to or useful in the business or demonstrably anticipated
business of Photogen, or result from duties assigned to you by
Photogen or from the use of any of Photogen's assets or
facilities. "Developments" means any and all inventions,
discoveries, improvements, know- how, works or other
intellectual property (whether or not subject to registration
with any governmental office) you conceive, reduce to
practice, discover or make, alone or with others, during your
employment and for twelve (12) months after termination
(regardless of the reason for termination).
(b) You hereby assign and transfer to Photogen, Inc. all of your
right, title and interest in and to all Developments. You
agree to sign and deliver to Photogen, Inc. (during and after
employment) other documents Photogen, Inc. considers
<PAGE>
[LOGO]
Jay Zimmerman, Ph.D.
November 15, 1999
Page 3
necessary or desirable to evidence its ownership of
Developments. All copyrightable works that are Developments,
whether or not works made for hire (as defined in 17 U.S.C.
Section 101), shall be owned by Photogen, Inc. and it may file
and own the same as the author throughout the world. If
Photogen, Inc. is unable for any reason to secure your
signature on any document necessary or desirable to apply for,
prosecute, obtain, or enforce any patent, trademark, service
mark, copyright, or other right or protection relating to any
Development, you hereby irrevocably designate and appoint
Photogen, Inc. and each of its duly authorized officers and
agents, as your agent and attorney-in-fact to act for and in
your behalf and stead to execute and file any such document
and to do all other lawfully permitted acts to further the
prosecution, issuance, and enforcement of patents, trademarks,
service marks, copyrights, or other rights or protections with
the same force and effect as if personally executed and
delivered by you. You agree that this power of attorney is
irrevocable and is coupled with an interest and thereby
survives your death or disability.
3. NO CONFLICTS. You represent and warrant to, and agree with Photogen
that:
(a) You are under no contractual or other obligation or
restriction which is inconsistent with your obligations under
this Agreement or the performance of you duties for Photogen.
Without limiting the generality of the foregoing, performing
your duties for Photogen will not cause you to breach any
agreement or other duty which obligates you to keep in
confidence any confidential or proprietary information or
trade secret of any third party or to refrain from competing,
directly or indirectly, with the business of any third party.
(b) Neither you nor any third party has any ownership or other
interest in any idea, invention or other item of intellectual
property that will be used in performing your duties for
Photogen, and all Developments will be free and clear of any
encumbrances or claims of third parties. In performing your
duties for Photogen, you will not disclose to Photogen or use
any confidential or proprietary information or trade secret of
any third party, and you will not interfere with the business
of any third party in any way contrary to applicable law.
(c) In performing your duties for Photogen, you will comply with
applicable laws and regulations.
<PAGE>
[LOGO]
Jay Zimmerman, Ph.D.
November 15, 1999
Page 4
4. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect your or
Photogen's right to terminate your employment or Photogen's right modify your
terms of employment, or to confer on you any other rights or benefits in
connection with your employment.
5. SEVERABILITY; CHOICE OF LAW; INJUNCTION. If any provision of this
Agreement is deemed by a court of competent jurisdiction to be unenforceable or
invalid, the enforceability and validity of all other provisions shall not be
affected and that court shall modify the unenforceable or invalid provision to
the extent necessary to render it enforceable and valid and that provision shall
be enforced as modified. You agree that the time period and scope of the
covenants in this Agreement are reasonable and appropriate under the
circumstances of Photogen's business. This Agreement shall be governed and
interpreted in accordance with the laws of the State of Tennessee without regard
to its provisions on conflicts of law. Without limiting any other available
remedies at law or in equity, Photogen will be entitled to injunctive relief
restraining any individual or entity from participating in any breach or
threatened breach of this Agreement without having to post a bond or security.
6. MISCELLANEOUS. This Agreement may not be amended or modified except
by a written instrument signed by both parties after the date of this Agreement.
This Agreement may be assigned by Photogen and shall inure to the benefit of
Photogen, its successors and assigns, but may not be assigned or delegated by
you. This Agreement supersedes all prior agreements, negotiations and
representations, written or oral, between the parties with respect to the
subject matter contained herein. Any waiver of any breach of, or failure to
enforce, any of the provisions of this Agreement shall not operate as a waiver
of any other breach or waiver of performance of such provisions or any other
provisions. Your obligations under this Agreement survive termination of your
employment, regardless of the manner or reason for termination.
<PAGE>
[LOGO]
Jay Zimmerman, Ph.D.
November 15, 1999
Page 5
Please indicate your agreement to the foregoing by signing a
copy of this letter below and returning it to me. I look forward to working with
you.
Very truly yours,
/s/ John Smolik
John T. Smolik, President
Accepted and Agreed to as of
November 15, 1999.
By: /S/ JAY ZIMMERMAN
-------------------------
Jay Zimmerman, MEd.
<PAGE>
Exhibit 10.14
PHOTOGEN TECHNOLOGIES, INC.
INCENTIVE STOCK OPTION AWARD AGREEMENT
THIS AWARD AGREEMENT ("Agreement") is made effective as of July 23,
1999, by and between Photogen Technologies, Inc., a Nevada corporation (the
"Company"), and Gerald L. Wolf, Ph.D., M.D. (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company, through its Compensation Committee (the
"Committee"), desires to grant to the Optionee an incentive stock option
pursuant to its 1998 Long Term Incentive Compensation Plan (the "Plan") to
purchase shares of the Company's common stock, par value $.001 per share (the
"Common Stock").
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. GRANT OF OPTION AND TAX CONSEQUENCES. Subject to the terms and
conditions of this Agreement and the Plan, a copy of which has been delivered to
the Optionee, the Company hereby grants to the Optionee the right and option to
purchase from the Company all or part of an aggregate of 750,000 shares of
Common Stock (the "Option"). The per share exercise price at which the shares
subject to Option may be purchased by Optionee shall be $9-3/8, which price
equals the closing sale price of the Common Stock as reported by the National
Association of Securities Dealers in the over-the-counter "bulletin board" the
date of grant of this Option. This Option is intended to qualify as an Incentive
Stock Option within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code") (except to the extent limited by Section 422(d) of
the Code, in which case such portion of the Option that does not qualify as an
Incentive Stock Option under Section 422(a) shall be a Non-Qualified Stock
Option). Optionee should seek advice from his or her tax advisor concerning the
Federal and State income tax consequences of the Options and disposition of the
Common Stock following exercise.
2. TIME OF EXERCISE. The Option will vest in accordance with, and
Optionee's right to exercise this Option shall be subject to, the following:
150,000 shares covered by the Option will vest and may first be
exercised on the following schedule: a total of 50,000 shares will vest
and may first be exercised on the first anniversary date of this
Agreement, 50,000 additional shares will vest and may first be
exercised on the second anniversary date of this Agreement, and 50,000
additional shares will vest and may first be exercised on the third
anniversary date of this Agreement.
<PAGE>
75,000 shares covered by the Option will vest and may first be
exercised on the date the Company (or its subsidiary Photogen, Inc.)
acquires Optionee's U.S. Patents 5,114,703 and 5,496,536 and related
foreign patents from Alliance Pharmaceutical Corp. (by assignment or
license satisfactory to the Company) or the Company demonstrates to its
satisfaction that the inventions described in those patents can be
practiced by the Company without obtaining an assignment or
satisfactory license covering the inventions in those patents from
Alliance.
50,000 shares covered by the Option will vest and may first be
exercised on the date the Company (or Photogen, Inc.) first files an
investigational new drug application ("IND") regarding lymphography
agents with the U.S. Food & Drug Administration ("FDA") or with
equivalent regulatory agencies in other countries.
75,000 shares covered by the Option will vest and may first be
exercised on the date the Company (or Photogen, Inc.) first files a new
drug application ("NDA") regarding lymphography agents with the FDA or
with equivalent regulatory agencies in other countries.
100,000 shares covered by the Option will vest and may first be
exercised on the date the FDA or with equivalent regulatory agencies in
other countries grants the Company (or Photogen, Inc.) approval to
market a lymphography agent.
40,000 shares covered by the Option will vest and may first be
exercised on the date the Company (or Photogen, Inc.) demonstrates to
its satisfaction the efficacy in animal models of an appropriate
radiosensitizer used with the invention and technology described in
Massachusetts General Hospital's patent application no. 09/183,166
filed with the U.S. Patent and Trademark Office on October 29, 1998 and
entitled "Enhanced Radiation Therapy" (the "MGH Patent Application").
10,000 shares covered by the Option will best and may first be
exercised on the date the Company (or Photogen, Inc.) receives a notice
of allowance from the U.S. Patent and Trademark Office covering, in the
Company's judgment, a material portion of the claims in its patent
application no. 09 216 787.
75,000 shares covered by the Option will vest and may first be
exercised on the date the Company (or Photogen, Inc.) first files an
IND regarding the invention described in the MGH Patent Application
with the FDA or with equivalent regulatory agencies in other countries.
-2-
<PAGE>
75,000 shares covered by the Option will vest and may first be
exercised on the date the Company (or Photogen, Inc.) first files an
NDA regarding the invention in the MGH Patent Application with the FDA
or with equivalent regulatory agencies in other countries.
100,000 shares covered by the Option will vest and may first be
exercised on the date the FDA or with equivalent regulatory agencies in
other countries grants the Company (or Photogen, Inc.) approval to
market a product that practices the invention in the MGH Patent
Application.
Subject to Section 5, below, the right to exercise this Option shall in all
events expire at the close of business on the tenth anniversary of the date of
this Agreement, unless such right expires and terminates sooner in accordance
with this Agreement and the Plan. The Optionee's right to exercise this Option
shall be accelerated as provided in paragraph 9 below and as may be provided by
action of the Committee.
3. ISO PROVISIONS.
(a) Optionee represents and warrants to the Company that
Optionee does not own, directly or by reason of the applicable attribution rules
in Code Section 424(d) and related Treasury Regulations, more than 10% of the
total combined voting power of all classes of share capital of the Company or an
Affiliate.
(b) Optionee understands and agrees that Code Section 422(d)
provides that to the extent the Fair Market Value of stock with respect to which
incentive stock options are exercisable for the first time (and thereby vest)
during any calendar year (under the Plan and any other incentive stock option
plan of the Company or an Affiliate) exceeds $100,000, such options will be
non-qualified stock options. Accordingly, Optionee agrees that to the extent
this Option first becomes exercisable in any year with respect to stock whose
Fair Market Value exceeds $100,000, the remaining portion of the Option that
first becomes exercisable in that year shall be a Non-Qualified Stock Option.
(c) Optionee agrees to notify the Company in writing
immediately after Optionee makes a Disqualifying Disposition of any shares
acquired pursuant to the exercise of the Option. A "Disqualifying Disposition"
is any disposition (including any sale) of such shares before the later of (i)
two years after the date the Optionee was granted the Option hereunder, or (ii)
one year after the date the Optionee acquired shares by exercising any part of
the Option. If the Participant has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
-3-
<PAGE>
4. METHOD OF EXERCISE AND PAYMENT FOR SHARES. This Option shall be
exercised by written notice directed to the Company at its principal office,
specifying the number of shares to be acquired upon such exercise and indicating
that the exercise is being paid for (i) in cash or (ii) if applicable, by a
commitment by a broker-dealer to pay to the Company that portion of any sale
proceeds receivable by the Optionee upon the exercise of the Option and sale of
underlying shares. Full payment for the shares to be purchased on exercise shall
accompany the notice. The Option may be exercised by the designated beneficiary
or legal representative of Optionee in accordance with Section 8 of the Plan.
5. TERMINATION OF OPTION. Optionee is a party to that certain
Employment Agreement with the Company dated as of July 1, 1999 (the "Employment
Agreement"). Section 9 of the Employment Agreement provides that the Employment
Agreement and Optionee's employment by the Company may be terminated upon the
occurrence of certain events. The effective date of the termination under the
Employment Agreement is referred to herein as the "Effective Date." The Options
subject to this Agreement will terminate in accordance with the following
provisions if the Employment Agreement terminates:
(a) If the Employment Agreement is terminated pursuant to
Sections 9(b)(i)(1) or (2) or Section 9(b)(iii) thereof, all Options that not
were not vested before the Effective Date and all vested Options that Optionee
does not exercise before the Effective Date shall terminate as of the Effective
Date.
(b) If the Employment Agreement is terminated pursuant to
Section 9(b)(i)(3) thereof, Optionee (or his estate or personal representative)
will have 12 months after the Effective Date to exercise any Options that vested
in accordance with this Agreement before the Effective Date. All Options that
were not vested before the Effective Date shall terminate as of the Effective
Date and all vested Options that Optionee does not exercise within such 12-month
period shall terminate as of the end of such 12-month period.
(c) If the Employment Agreement is terminated pursuant to
Section 9(ii) thereof, Optionee will have 90 days after the Effective Date to
exercise any Options that vested in accordance with this Agreement before the
Effective Date. All Options that were not vested before the Effective Date shall
terminate as of the Effective Date and all vested Options that Optionee does not
exercise within such 90-day period shall terminate as of the end of such 90-day
period.
Upon a termination of employment related to a Change in Control or any other
reason, Options shall be treated in the manner set forth in Sections 6.7 and 10
of the Plan. Further, to the extent it has not been previously exercised (and
regardless of whether it has vested), this Option shall terminate in the event
Optionee breaches any contractual, statutory or common law duty to the Company
or its Affiliates to maintain the confidentiality of proprietary information or
trade secrets, to refrain from
-4-
<PAGE>
competing with the Company or its Affiliates, or to assign inventions and
similar developments to the Company or its Affiliates.
6. ADJUSTMENT. The Committee shall make adjustments to the aggregate
number and kind of shares or other securities subject to this Option and in the
purchase price of this Option to reflect any change in the capitalization of the
Company as contemplated in Section 4.2 of the Plan.
7. OPTION NON-ASSIGNABLE AND NON-TRANSFERABLE. This Option and all
rights hereunder shall be non-assignable and non-transferable other than by will
or the laws of descent and distribution and shall be exercisable during the
Optionee's lifetime only by the Optionee or the Optionee's guardian or legal
representative. The Plan and this Agreement shall be binding upon the Optionee
and any permitted successors and assigns.
8. LIMITATION OF RIGHTS.
(a) No Rights as an Employee. Nothing in this Agreement or the
Plan shall be deemed to: create or affect any contract of employment between the
Optionee and Company or an Affiliate; prevent the Company or an Affiliate from
terminating Optionee's employment; give Optionee a right to be retained in
employment by the Company or any Affiliate for any period of time; confer on any
person any right to be selected as a Participant under the Plan or the right to
any other compensation, remuneration or benefits (except to the extent expressly
set forth in this Agreement).
(b) No Rights as a Stockholder. The Optionee shall have no
rights as a stockholder with respect to the shares covered by this Option until
the date the Optionee tenders full payment of the exercise price for the portion
of the Option being exercised and the issuance of a stock certificate therefor,
and no adjustment will be made for any dividends or other rights for which the
record date is prior to the date such certificate is issued.
9. CHANGE OF CONTROL. Upon the occurrence of a Change of Control as
defined in the Plan, all of the Options shall become immediately exercisable as
provided in Section 10.1 of the Plan.
10. STOCK LEGEND. The Optionee hereby represents and warrants to the
Company that upon exercise of any portion of the Option hereunder that the
Optionee will be acquiring such shares for his or her own account, for
investment and not with a view to, or for the sale in connection with, the
distribution of any such shares. The Optionee hereby agrees that the following
legend shall be endorsed upon the certificates evidencing the Optionee's shares
issued pursuant to the exercise of this Option:
-5-
<PAGE>
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under state securities laws to the extent applicable. The
shares may not be sold, offered for sale, or otherwise
transferred in the absence of an effective registration
statement under said Act (and any registration or
qualification as may be required under such state laws) or an
opinion of counsel satisfactory to the Company and its counsel
that such registration or qualification is not required.
11. PLAN GOVERNS. The Optionee acknowledges that he or she has received
and reviewed a copy of the Company's Plan and acknowledges that the Award and
this Agreement are subject to all the terms and provisions of the Plan which are
applicable to Incentive Stock Options. All capitalized terms not otherwise
defined in this Agreement shall have the meanings given to them in the Plan. In
the event of any inconsistency between the term of this Agreement and the Plan,
the terms of the Plan (all of which are incorporated in this Agreement by
reference) shall prevail; provided, however, that the provisions of Section 5
hereof and Section 9 of the Employment Agreement shall prevail over any
conflicting provisions of Sections 2.6 or 6.8 of the Plan (it being agreed that
the conflicting provisions of Sections 2.6 and 6.8 of the Plan shall not be
applicable to this Agreement).
IN WITNESS WHEREOF, the Company has caused this Agreement to
be signed by its President, and the Optionee has affixed his or her signature
hereto on the date set forth above.
/s/ Gerald L. Wolf
-------------------------------------
Gerald L. Wolf, Ph.D., M.D., Optionee
Photogen Technologies, Inc.
By: /s/ John T. Smolik
----------------------------------
John T. Smolik, President
-6-
<PAGE>
Exhibit 10.15
PHOTOGEN TECHNOLOGIES, INC.
INCENTIVE STOCK OPTION AWARD AGREEMENT
THIS AWARD AGREEMENT ("Agreement") is made effective as of November 1,
1999, by and between Photogen Technologies, Inc., a Nevada corporation (the
"Company"), and David D. Shaw, Ph.D. (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company, through its Compensation Committee (the
"Committee"), desires to grant to the Optionee an incentive stock option
pursuant to its 1998 Long Term Incentive Compensation Plan (the "Plan") to
purchase shares of the Company's common stock, par value $.001 per share (the
"Common Stock").
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. GRANT OF OPTION AND TAX CONSEQUENCES. Subject to the terms and
conditions of this Agreement and the Plan, a copy of which has been delivered to
the Optionee, the Company hereby grants to the Optionee the right and option to
purchase from the Company all or part of an aggregate of 150,000 shares of
Common Stock (the "Option"). The per share exercise price at which the shares
subject to Option may be purchased by Optionee shall be $15.25, which price
equals the closing sale price of the Common Stock as reported by the National
Association of Securities Dealers in the over-the-counter "bulletin board" the
date of grant of this Option. This Option is intended to qualify as an Incentive
Stock Option within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code") (except to the extent limited by Section 422(d) of
the Code, in which case such portion of the Option that does not qualify as an
Incentive Stock Option under Section 422(a) shall be a Non-Qualified Stock
Option). Optionee should seek advice from his or her tax advisor concerning the
Federal and State income tax consequences of the Options and disposition of the
Common Stock following exercise.
2. TIME OF EXERCISE. The Option will vest in accordance with, and
Optionee's right to exercise this Option shall be subject to, the following:
80,000 shares covered by the Option will vest and may first be
exercised on the following schedule: a total of 20,000 shares will vest and may
first be exercised on the first anniversary date of this Agreement, 20,000
additional shares will vest and may first be exercised on the second anniversary
date of this Agreement, 20,000 additional shares will vest and may first be
exercised on the third anniversary date of this Agreement, and 20,000 additional
shares will vest and may first be exercised on the fourth anniversary date of
this Agreement.
<PAGE>
10,000 shares covered by the Option will vest and may first be
exercised on the date the Company (or Photogen, Inc.) first files an
investigational new drug application ("IND/IDE") with the U.S. Food &
Drug Administration ("FDA") or with equivalent regulatory agencies in
other countries.
10,000 shares covered by the Option will vest and may first be
exercised on the date the FDA grants the Company (or Photogen, Inc.)
approval to complete a Phase II study for a drug or device.
20,000 shares covered by the Option will vest and may first be
exercised on the date the Company (or Photogen, Inc.) first files a new
drug application ("NDA/PMA")with the FDA or with equivalent regulatory
agencies in other countries.
25,000 shares covered by the Option will vest and may first be
exercised on the date the FDA or with equivalent regulatory agencies in
other countries grants the Company (or Photogen, Inc.) approval to
market a drug or device.
5,000 shares covered by the Option will vest and may first be exercised
on the date the FDA grants the Company (or Photogen, Inc.) a 510k
market approval.
Subject to Section 5, below, the right to exercise this Option shall in all
events expire at the close of business on the tenth anniversary of the date of
this Agreement, unless such right expires and terminates sooner in accordance
with this Agreement and the Plan. The Optionee's right to exercise this Option
shall be accelerated as provided in paragraph 9 below and as may be provided by
action of the Committee.
3. ISO PROVISIONS.
(a) Optionee represents and warrants to the Company that
Optionee does not own, directly or by reason of the applicable attribution rules
in Code Section 424(d) and related Treasury Regulations, more than 10% of the
total combined voting power of all classes of share capital of the Company or an
Affiliate.
(b) Optionee understands and agrees that Code Section 422(d)
provides that to the extent the Fair Market Value of stock with respect to which
incentive stock options are exercisable for the first time (and thereby vest)
during any calendar year (under the Plan and any other incentive stock option
plan of the Company or an Affiliate) exceeds $100,000, such options will be
non-qualified stock options. Accordingly, Optionee agrees that to the extent
this Option first becomes exercisable in any year with respect to stock whose
Fair Market Value exceeds $100,000,
-2-
<PAGE>
the remaining portion of the Option that first becomes exercisable in that year
shall be a Non-Qualified Stock Option.
(c) Optionee agrees to notify the Company in writing
immediately after Optionee makes a Disqualifying Disposition of any shares
acquired pursuant to the exercise of the Option. A "Disqualifying Disposition"
is any disposition (including any sale) of such shares before the later of (i)
two years after the date the Optionee was granted the Option hereunder, or (ii)
one year after the date the Optionee acquired shares by exercising any part of
the Option. If the Participant has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
4. METHOD OF EXERCISE AND PAYMENT FOR SHARES. This Option shall be
exercised by written notice directed to the Company at its principal office,
specifying the number of shares to be acquired upon such exercise and indicating
that the exercise is being paid for (i) in cash or (ii) if applicable, by a
commitment by a broker-dealer to pay to the Company that portion of any sale
proceeds receivable by the Optionee upon the exercise of the Option and sale of
underlying shares. Full payment for the shares to be purchased on exercise shall
accompany the notice. The Option may be exercised by the designated beneficiary
or legal representative of Optionee in accordance with Section 8 of the Plan.
5. TERMINATION OF OPTION. Optionee is a party to that certain
Employment Agreement with the Company dated as of November 1, 1999 (the
"Employment Agreement"). Section 7 of the Employment Agreement provides that the
Employment Agreement and Optionee's employment by the Company may be terminated
upon the occurrence of certain events. The effective date of the termination
under the Employment Agreement is referred to herein as the "Effective Date."
The Options subject to this Agreement will terminate in accordance with the
following provisions if the Employment Agreement terminates:
(a) If the Employment Agreement is terminated pursuant to
Sections 7(b)(i)(1) or (2) or Section 7(b)(iii) thereof, all Options that not
were not vested before the Effective Date and all vested Options that Optionee
does not exercise before the Effective Date shall terminate as of the Effective
Date.
(b) If the Employment Agreement is terminated pursuant to
Section 7(b)(i)(3) thereof, Optionee (or his estate or personal representative)
will have 12 months after the Effective Date to exercise any Options that vested
in accordance with this Agreement before the Effective Date. All Options that
were not vested before the Effective Date shall terminate as of the Effective
Date and all vested Options that Optionee does not exercise within such 12-month
period shall terminate as of the end of such 12-month period.
-3-
<PAGE>
(c) If the Employment Agreement is terminated pursuant to
Section 7(ii) thereof, Optionee will have 90 days after the Effective Date to
exercise any Options that vested in accordance with this Agreement before the
Effective Date. All Options that were not vested before the Effective Date shall
terminate as of the Effective Date and all vested Options that Optionee does not
exercise within such 90-day period shall terminate as of the end of such 90-day
period.
Upon a termination of employment related to a Change in Control or any other
reason, Options shall be treated in the manner set forth in Sections 6.7 and 10
of the Plan. Further, to the extent it has not been previously exercised (and
regardless of whether it has vested), this Option shall terminate in the event
Optionee breaches any contractual, statutory or common law duty to the Company
or its Affiliates to maintain the confidentiality of proprietary information or
trade secrets, to refrain from competing with the Company or its Affiliates, or
to assign inventions and similar developments to the Company or its Affiliates.
6. ADJUSTMENT. The Committee shall make adjustments to the aggregate
number and kind of shares or other securities subject to this Option and in the
purchase price of this Option to reflect any change in the capitalization of the
Company as contemplated in Section 4.2 of the Plan.
7. OPTION NON-ASSIGNABLE AND NON-TRANSFERABLE. This Option and all
rights hereunder shall be non-assignable and non-transferable other than by will
or the laws of descent and distribution and shall be exercisable during the
Optionee's lifetime only by the Optionee or the Optionee's guardian or legal
representative. The Plan and this Agreement shall be binding upon the Optionee
and any permitted successors and assigns.
8. LIMITATION OF RIGHTS.
(a) No Rights as an Employee. Nothing in this Agreement or the
Plan shall be deemed to: create or affect any contract of employment between the
Optionee and Company or an Affiliate; prevent the Company or an Affiliate from
terminating Optionee's employment; give Optionee a right to be retained in
employment by the Company or any Affiliate for any period of time; confer on any
person any right to be selected as a Participant under the Plan or the right to
any other compensation, remuneration or benefits (except to the extent expressly
set forth in this Agreement).
(b) No Rights as a Stockholder. The Optionee shall have no
rights as a stockholder with respect to the shares covered by this Option until
the date the Optionee tenders full payment of the exercise price for the portion
of the Option being exercised and the issuance of a stock certificate therefor,
and no adjustment will be made for any dividends or other rights for which the
record date is prior to the date such certificate is issued.
-4-
<PAGE>
9. CHANGE OF CONTROL. Upon the occurrence of a Change of Control as
defined in the Plan, all of the Options shall become immediately exercisable as
provided in Section 10.1 of the Plan.
10. STOCK LEGEND. The Optionee hereby represents and warrants to the
Company that upon exercise of any portion of the Option hereunder that the
Optionee will be acquiring such shares for his or her own account, for
investment and not with a view to, or for the sale in connection with, the
distribution of any such shares. The Optionee hereby agrees that the following
legend shall be endorsed upon the certificates evidencing the Optionee's shares
issued pursuant to the exercise of this Option:
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under state securities laws to the extent applicable. The
shares may not be sold, offered for sale, or otherwise
transferred in the absence of an effective registration
statement under said Act (and any registration or
qualification as may be required under such state laws) or an
opinion of counsel satisfactory to the Company and its counsel
that such registration or qualification is not required.
11. PLAN GOVERNS. The Optionee acknowledges that he or she has received
and reviewed a copy of the Company's Plan and acknowledges that the Award and
this Agreement are subject to all the terms and provisions of the Plan which are
applicable to Incentive Stock Options. All capitalized terms not otherwise
defined in this Agreement shall have the meanings given to them in the Plan. In
the event of any inconsistency between the term of this Agreement and the Plan,
the terms of the Plan (all of which are incorporated in this Agreement by
reference) shall prevail; provided, however, that the provisions of Section 5
hereof and Section 7 of the Employment Agreement shall prevail over any
conflicting provisions of Sections 2.6 or 6.8 of the Plan (it being agreed that
the conflicting provisions of Sections 2.6 and 6.8 of the Plan shall not be
applicable to this Agreement).
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be signed by its President, and the Optionee has affixed his or her signature
hereto on the date set forth above.
/s/ David D. Shaw
------------------------------------
David D. Shaw, Ph.D., Optionee
Photogen Technologies, Inc.
By: /s/ John Smolik
---------------------------------
John T. Smolik, President
-6-
<PAGE>
Exhibit 10.16
PHOTOGEN TECHNOLOGIES, INC.
INCENTIVE STOCK OPTION AWARD AGREEMENT
THIS AWARD AGREEMENT ("Agreement") is made effective as of November 30,
1999, by and between Photogen Technologies, Inc., a Nevada corporation (the
"Company"), and David D. Shaw, Ph.D. (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company, through its Compensation Committee (the
"Committee"), desires to grant to the Optionee an incentive stock option
pursuant to its 1998 Long Term Incentive Compensation Plan (the "Plan") to
purchase shares of the Company's common stock, par value $.001 per share (the
"Common Stock").
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. GRANT OF OPTION AND TAX CONSEQUENCES. Subject to the terms and
conditions of this Agreement and the Plan, a copy of which has been delivered to
the Optionee, the Company hereby grants to the Optionee the right and option to
purchase from the Company all or part of an aggregate of 20,000 shares of Common
Stock (the "Option"). The per share exercise price at which the shares subject
to Option may be purchased by Optionee shall be $18.125, which price equals the
closing sale price of the Common Stock as reported by the National Association
of Securities Dealers in the over-the-counter "bulletin board" the date of grant
of this Option. This Option is intended to qualify as an Incentive Stock Option
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code") (except to the extent limited by Section 422(d) of the
Code, in which case such portion of the Option that does not qualify as an
Incentive Stock Option under Section 422(a) shall be a Non-Qualified Stock
Option). Optionee should seek advice from his or her tax advisor concerning the
Federal and State income tax consequences of the Options and disposition of the
Common Stock following exercise.
2. TIME OF EXERCISE. The Option will vest in accordance with, and
Optionee's right to exercise this Option shall be subject to, the following:
20,000 shares covered by the Option will vest and may first be
exercised on the following schedule: a total of 5,000 shares will vest and may
first be exercised on the first anniversary date of this Agreement, 5,000
additional shares will vest and may first be exercised on the second anniversary
date of this Agreement, 5,000 additional shares will vest and may first be
exercised on the third anniversary date of this Agreement, and 5,000 additional
shares will vest and may first be exercised on the fourth anniversary date of
this Agreement.
<PAGE>
Subject to Section 5, below, the right to exercise this Option shall in all
events expire at the close of business on the tenth anniversary of the date of
this Agreement, unless such right expires and terminates sooner in accordance
with this Agreement and the Plan. The Optionee's right to exercise this Option
shall be accelerated as provided in paragraph 9 below and as may be provided by
action of the Committee.
3. ISO PROVISIONS.
(a) Optionee represents and warrants to the Company that
Optionee does not own, directly or by reason of the applicable attribution rules
in Code Section 424(d) and related Treasury Regulations, more than 10% of the
total combined voting power of all classes of share capital of the Company or an
Affiliate.
(b) Optionee understands and agrees that Code Section 422(d)
provides that to the extent the Fair Market Value of stock with respect to which
incentive stock options are exercisable for the first time (and thereby vest)
during any calendar year (under the Plan and any other incentive stock option
plan of the Company or an Affiliate) exceeds $100,000, such options will be
non-qualified stock options. Accordingly, Optionee agrees that to the extent
this Option first becomes exercisable in any year with respect to stock whose
Fair Market Value exceeds $100,000, the remaining portion of the Option that
first becomes exercisable in that year shall be a Non-Qualified Stock Option.
(c) Optionee agrees to notify the Company in writing
immediately after Optionee makes a Disqualifying Disposition of any shares
acquired pursuant to the exercise of the Option. A "Disqualifying Disposition"
is any disposition (including any sale) of such shares before the later of (i)
two years after the date the Optionee was granted the Option hereunder, or (ii)
one year after the date the Optionee acquired shares by exercising any part of
the Option. If the Participant has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
4. METHOD OF EXERCISE AND PAYMENT FOR SHARES. This Option shall be
exercised by written notice directed to the Company at its principal office,
specifying the number of shares to be acquired upon such exercise and indicating
that the exercise is being paid for (i) in cash or (ii) if applicable, by a
commitment by a broker-dealer to pay to the Company that portion of any sale
proceeds receivable by the Optionee upon the exercise of the Option and sale of
underlying shares. Full payment for the shares to be purchased on exercise shall
accompany the notice. The Option may be exercised by the designated beneficiary
or legal representative of Optionee in accordance with Section 8 of the Plan.
-2-
<PAGE>
5. TERMINATION OF OPTION. Optionee is a party to that certain
Employment Agreement with the Company dated as of November 1, 1999 (the
"Employment Agreement"). Section 7 of the Employment Agreement provides that the
Employment Agreement and Optionee's employment by the Company may be terminated
upon the occurrence of certain events. The effective date of the termination
under the Employment Agreement is referred to herein as the "Effective Date."
The Options subject to this Agreement will terminate in accordance with the
following provisions if the Employment Agreement terminates:
(a) If the Employment Agreement is terminated pursuant to
Sections 7(b)(i)(1) or (2) or Section 7(b)(iii) thereof, all Options that not
were not vested before the Effective Date and all vested Options that Optionee
does not exercise before the Effective Date shall terminate as of the Effective
Date.
(b) If the Employment Agreement is terminated pursuant to
Section 7(b)(i)(3) thereof, Optionee (or his estate or personal representative)
will have 12 months after the Effective Date to exercise any Options that vested
in accordance with this Agreement before the Effective Date. All Options that
were not vested before the Effective Date shall terminate as of the Effective
Date and all vested Options that Optionee does not exercise within such 12-month
period shall terminate as of the end of such 12-month period.
(c) If the Employment Agreement is terminated pursuant to
Section 7(ii) thereof, Optionee will have 90 days after the Effective Date to
exercise any Options that vested in accordance with this Agreement before the
Effective Date. All Options that were not vested before the Effective Date shall
terminate as of the Effective Date and all vested Options that Optionee does not
exercise within such 90-day period shall terminate as of the end of such 90-day
period.
Upon a termination of employment related to a Change in Control or any other
reason, Options shall be treated in the manner set forth in Sections 6.7 and 10
of the Plan. Further, to the extent it has not been previously exercised (and
regardless of whether it has vested), this Option shall terminate in the event
Optionee breaches any contractual, statutory or common law duty to the Company
or its Affiliates to maintain the confidentiality of proprietary information or
trade secrets, to refrain from competing with the Company or its Affiliates, or
to assign inventions and similar developments to the Company or its Affiliates.
6. ADJUSTMENT. The Committee shall make adjustments to the aggregate
number and kind of shares or other securities subject to this Option and in the
purchase price of this Option to reflect any change in the capitalization of the
Company as contemplated in Section 4.2 of the Plan.
-3-
<PAGE>
7. OPTION NON-ASSIGNABLE AND NON-TRANSFERABLE. This Option and all
rights hereunder shall be non-assignable and non-transferable other than by will
or the laws of descent and distribution and shall be exercisable during the
Optionee's lifetime only by the Optionee or the Optionee's guardian or legal
representative. The Plan and this Agreement shall be binding upon the Optionee
and any permitted successors and assigns.
8. LIMITATION OF RIGHTS.
(a) No Rights as an Employee. Nothing in this Agreement or the
Plan shall be deemed to: create or affect any contract of employment between the
Optionee and Company or an Affiliate; prevent the Company or an Affiliate from
terminating Optionee's employment; give Optionee a right to be retained in
employment by the Company or any Affiliate for any period of time; confer on any
person any right to be selected as a Participant under the Plan or the right to
any other compensation, remuneration or benefits (except to the extent expressly
set forth in this Agreement).
(b) No Rights as a Stockholder. The Optionee shall have no
rights as a stockholder with respect to the shares covered by this Option until
the date the Optionee tenders full payment of the exercise price for the portion
of the Option being exercised and the issuance of a stock certificate therefor,
and no adjustment will be made for any dividends or other rights for which the
record date is prior to the date such certificate is issued.
9. CHANGE OF CONTROL. Upon the occurrence of a Change of Control as
defined in the Plan, all of the Options shall become immediately exercisable as
provided in Section 10.1 of the Plan.
10. STOCK LEGEND. The Optionee hereby represents and warrants to the
Company that upon exercise of any portion of the Option hereunder that the
Optionee will be acquiring such shares for his or her own account, for
investment and not with a view to, or for the sale in connection with, the
distribution of any such shares. The Optionee hereby agrees that the following
legend shall be endorsed upon the certificates evidencing the Optionee's shares
issued pursuant to the exercise of this Option:
-4-
<PAGE>
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under state securities laws to the extent applicable. The
shares may not be sold, offered for sale, or otherwise
transferred in the absence of an effective registration
statement under said Act (and any registration or
qualification as may be required under such state laws) or an
opinion of counsel satisfactory to the Company and its counsel
that such registration or qualification is not required.
11. PLAN GOVERNS. The Optionee acknowledges that he or she has received
and reviewed a copy of the Company's Plan and acknowledges that the Award and
this Agreement are subject to all the terms and provisions of the Plan which are
applicable to Incentive Stock Options. All capitalized terms not otherwise
defined in this Agreement shall have the meanings given to them in the Plan. In
the event of any inconsistency between the term of this Agreement and the Plan,
the terms of the Plan (all of which are incorporated in this Agreement by
reference) shall prevail; provided, however, that the provisions of Section 5
hereof and Section 7 of the Employment Agreement shall prevail over any
conflicting provisions of Sections 2.6 or 6.8 of the Plan (it being agreed that
the conflicting provisions of Sections 2.6 and 6.8 of the Plan shall not be
applicable to this Agreement).
IN WITNESS WHEREOF, the Company has caused this Agreement to
be signed by its President, and the Optionee has affixed his or her signature
hereto on the date set forth above.
/s/ David D. Shaw
------------------------------------
David D. Shaw, Ph.D., Optionee
Photogen Technologies, Inc.
By: /s/ John T. Smolik
-----------------------------------
John T. Smolik, President
-5-
<PAGE>
Exhibit 10.17
PHOTOGEN TECHNOLOGIES, INC.
INCENTIVE STOCK OPTION AWARD AGREEMENT
THIS AWARD AGREEMENT ("Agreement") is made effective as of November 30,
1999, by and between Photogen Technologies, Inc., a Nevada corporation (the
"Company"), and Jay Zimmerman, Ph.D (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company, through its Compensation Committee (the "Committee"),
desires to grant to the Optionee an incentive stock option pursuant to its 1998
Long Term Incentive Compensation Plan (the "Plan") to purchase shares of the
Company's common stock, par value $.001 per share (the "Common Stock").
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. GRANT OF OPTION AND TAX CONSEQUENCES. Subject to the terms and
conditions of this Agreement and the Plan, a copy of which has been delivered to
the Optionee, the Company hereby grants to the Optionee the right and option to
purchase from the Company all or part of an aggregate of 170,000 shares of
Common Stock (the "Option"). The per share exercise price at which the shares
subject to Option may be purchased by Optionee shall be $18.125, which price
equals the closing sale price of the Common Stock as reported by the National
Association of Securities Dealers in the over-the-counter "bulletin board" the
date of grant of this Option. This Option is intended to qualify as an Incentive
Stock Option within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code") (except to the extent limited by Section 422(d) of
the Code, in which case such portion of the Option that does not qualify as an
Incentive Stock Option under Section 422(a) shall be a Non-Qualified Stock
Option). Optionee should seek advice from his or her tax advisor concerning the
Federal and State income tax consequences of the Options and disposition of the
Common Stock following exercise.
2. TIME OF EXERCISE. The Option will vest in accordance with, and
Optionee's right to exercise this Option shall be subject to, the following:
100,000 shares covered by the Option will vest and may first be exercised
on the following schedule: a total of 25,000 shares will vest and may first be
exercised on the first anniversary date of this Agreement, 25,000 additional
shares will vest and may first be exercised on the second anniversary date of
this Agreement, 25,000 additional shares will vest and may first be exercised on
the third anniversary date of this Agreement, and 25,000 additional shares will
vest and may first be exercised on the fourth anniversary date of this
Agreement.
<PAGE>
10,000 shares covered by the Option will vest and may first be exercised on
the date the Company (or Photogen, Inc.) first files an investigational new
drug application ("IND/IDE") with the U.S. Food & Drug Administration
("FDA") or with equivalent regulatory agencies in other countries.
10,000 shares covered by the Option will vest and may first be exercised on
the date the FDA grants the Company (or Photogen, Inc.) approval to
complete a Phase II study for a drug or device.
20,000 shares covered by the Option will vest and may first be exercised on
the date the Company (or Photogen, Inc.) first files a new drug application
("NDA/PMA") with the FDA or with equivalent regulatory agencies in other
countries.
25,000 shares covered by the Option will vest and may first be exercised on
the date the FDA or with equivalent regulatory agencies in other countries
grants the Company (or Photogen, Inc.) approval to market a drug or device.
5,000 shares covered by the Option will vest and may first be exercised on
the date the FDA grants the Company (or Photogen, Inc.) a 510k market
approval.
Subject to Section 5, below, the right to exercise this Option shall in all
events expire at the close of business on the tenth anniversary of the date of
this Agreement, unless such right expires and terminates sooner in accordance
with this Agreement and the Plan. The Optionee's right to exercise this Option
shall be accelerated as provided in paragraph 9 below and as may be provided by
action of the Committee.
3. ISO PROVISIONS.
(a) Optionee represents and warrants to the Company that Optionee
does not own, directly or by reason of the applicable attribution rules in Code
Section 424(d) and related Treasury Regulations, more than 10% of the total
combined voting power of all classes of share capital of the Company or an
Affiliate.
(b) Optionee understands and agrees that Code Section 422(d) provides
that to the extent the Fair Market Value of stock with respect to which
incentive stock options are exercisable for the first time (and thereby vest)
during any calendar year (under the Plan and any other incentive stock option
plan of the Company or an Affiliate) exceeds $100,000, such options will be
non-qualified stock options. Accordingly, Optionee agrees that to the extent
this Option first becomes exercisable in any year with respect to stock whose
Fair Market Value exceeds $100,000,
-2-
<PAGE>
the remaining portion of the Option that first becomes exercisable in that year
shall be a Non-Qualified Stock Option.
(c) Optionee agrees to notify the Company in writing immediately
after Optionee makes a Disqualifying Disposition of any shares acquired pursuant
to the exercise of the Option. A "Disqualifying Disposition" is any disposition
(including any sale) of such shares before the later of (i) two years after the
date the Optionee was granted the Option hereunder, or (ii) one year after the
date the Optionee acquired shares by exercising any part of the Option. If the
Participant has died before such stock is sold, these holding period
requirements do not apply and no Disqualifying Disposition can occur thereafter.
4. METHOD OF EXERCISE AND PAYMENT FOR SHARES. This Option shall be
exercised by written notice directed to the Company at its principal office,
specifying the number of shares to be acquired upon such exercise and indicating
that the exercise is being paid for (i) in cash or (ii) if applicable, by a
commitment by a broker-dealer to pay to the Company that portion of any sale
proceeds receivable by the Optionee upon the exercise of the Option and sale of
underlying shares. Full payment for the shares to be purchased on exercise shall
accompany the notice. The Option may be exercised by the designated beneficiary
or legal representative of Optionee in accordance with Section 8 of the Plan.
5. TERMINATION OF OPTION. Optionee is a party to that certain Employment
Agreement with the Company dated as of November __, 1999 (the "Employment
Agreement"). Section 7 of the Employment Agreement provides that the Employment
Agreement and Optionee's employment by the Company may be terminated upon the
occurrence of certain events. The effective date of the termination under the
Employment Agreement is referred to herein as the "Effective Date." The Options
subject to this Agreement will terminate in accordance with the following
provisions if the Employment Agreement terminates:
(a) If the Employment Agreement is terminated pursuant to Sections
7(b)(i)(1) or (2) or Section 7(b)(iii) thereof, all Options that not were not
vested before the Effective Date and all vested Options that Optionee does not
exercise before the Effective Date shall terminate as of the Effective Date.
(b) If the Employment Agreement is terminated pursuant to Section
7(b)(i)(3) thereof, Optionee (or his estate or personal representative) will
have 12 months after the Effective Date to exercise any Options that vested in
accordance with this Agreement before the Effective Date. All Options that were
not vested before the Effective Date shall terminate as of the Effective Date
and all vested Options that Optionee does not exercise within such 12-month
period shall terminate as of the end of such 12-month period.
-3-
<PAGE>
(c) If the Employment Agreement is terminated pursuant to Section
7(ii) thereof, Optionee will have 90 days after the Effective Date to exercise
any Options that vested in accordance with this Agreement before the Effective
Date. All Options that were not vested before the Effective Date shall terminate
as of the Effective Date and all vested Options that Optionee does not exercise
within such 90-day period shall terminate as of the end of such 90-day period.
Upon a termination of employment related to a Change in Control or any other
reason, Options shall be treated in the manner set forth in Sections 6.7 and 10
of the Plan. Further, to the extent it has not been previously exercised (and
regardless of whether it has vested), this Option shall terminate in the event
Optionee breaches any contractual, statutory or common law duty to the Company
or its Affiliates to maintain the confidentiality of proprietary information or
trade secrets, to refrain from competing with the Company or its Affiliates, or
to assign inventions and similar developments to the Company or its Affiliates.
6. ADJUSTMENT. The Committee shall make adjustments to the aggregate
number and kind of shares or other securities subject to this Option and in the
purchase price of this Option to reflect any change in the capitalization of the
Company as contemplated in Section 4.2 of the Plan.
7. OPTION NON-ASSIGNABLE AND NON-TRANSFERABLE. This Option and all rights
hereunder shall be non-assignable and non-transferable other than by will or the
laws of descent and distribution and shall be exercisable during the Optionee's
lifetime only by the Optionee or the Optionee's guardian or legal
representative. The Plan and this Agreement shall be binding upon the Optionee
and any permitted successors and assigns.
8. LIMITATION OF RIGHTS.
(a) No Rights as an Employee. Nothing in this Agreement or the Plan
shall be deemed to: create or affect any contract of employment between the
Optionee and Company or an Affiliate; prevent the Company or an Affiliate from
terminating Optionee's employment; give Optionee a right to be retained in
employment by the Company or any Affiliate for any period of time; confer on any
person any right to be selected as a Participant under the Plan or the right to
any other compensation, remuneration or benefits (except to the extent expressly
set forth in this Agreement).
(b) No Rights as a Stockholder. The Optionee shall have no rights as
a stockholder with respect to the shares covered by this Option until the date
the Optionee tenders full payment of the exercise price for the portion of the
Option being exercised and the issuance of a stock certificate therefor, and no
adjustment will be made for any dividends or other rights for which the record
date is prior to the date such certificate is issued.
-4-
<PAGE>
9. CHANGE OF CONTROL. Upon the occurrence of a Change of Control as
defined in the Plan, all of the Options shall become immediately exercisable as
provided in Section 10.1 of the Plan.
10. STOCK LEGEND. The Optionee hereby represents and warrants to the
Company that upon exercise of any portion of the Option hereunder that the
Optionee will be acquiring such shares for his or her own account, for
investment and not with a view to, or for the sale in connection with, the
distribution of any such shares. The Optionee hereby agrees that the following
legend shall be endorsed upon the certificates evidencing the Optionee's shares
issued pursuant to the exercise of this Option:
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under state securities laws to the extent applicable. The
shares may not be sold, offered for sale, or otherwise
transferred in the absence of an effective registration
statement under said Act (and any registration or
qualification as may be required under such state laws) or
an opinion of counsel satisfactory to the Company and its
counsel that such registration or qualification is not
required.
11. PLAN GOVERNS. The Optionee acknowledges that he or she has received
and reviewed a copy of the Company's Plan and acknowledges that the Award and
this Agreement are subject to all the terms and provisions of the Plan which are
applicable to Incentive Stock Options. All capitalized terms not otherwise
defined in this Agreement shall have the meanings given to them in the Plan. In
the event of any inconsistency between the term of this Agreement and the Plan,
the terms of the Plan (all of which are incorporated in this Agreement by
reference) shall prevail; provided, however, that the provisions of Section 5
hereof and Section 7 of the Employment Agreement shall prevail over any
conflicting provisions of Sections 2.6 or 6.8 of the Plan (it being agreed that
the conflicting provisions of Sections 2.6 and 6.8 of the Plan shall not be
applicable to this Agreement).
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by
its President, and the Optionee has affixed his or her signature hereto on the
date set forth above.
/s/ Jay Zimmerman
-----------------------------------
Jay Zimmerman, MEd., Optionee
Photogen Technologies, Inc.
By: /s/ John Smolik
--------------------------------
John T. Smolik, President
-6-
<PAGE>
Exhibit 10.34
THEODORE TANNEBAUM
875 NORTH MICHIGAN AVENUE
SUITE 2930
CHICAGO, IL 60611-1901
November 9, 1999
Photogen Technologies, Inc.
7327 Oak Ridge Highway, Suite B
Knoxville, TN 37931
RE: AMENDED AND RESTATED STANDBY AGREEMENT
Gentlemen:
I understand that Photogen Technologies, Inc. (the "Company")
will be raising at least $5 million in additional financing during the fourth
quarter of 1999 to fund certain research projects and other working capital
needs. I am prepared to assure the success of that financing on the following
terms and conditions:
1. This Amended and Restated Standby Agreement, amends and
restates the Standby Agreement dated August 5, 1999 and executed August 9, 1999
by and between myself, Robert J. Weinstein, M.D., John T. Smolik as President of
the Company and individually, Craig Dees, Ph.D., Walter G. Fisher, Ph.D.,
Timothy Scott and Eric A. Wachter, Ph.D. attached hereto as Exhibit A.
2. During the fourth quarter of its 1999 fiscal year, the
Company agrees that it will offer to a number of accredited investors (within
the meaning of Regulation 501 under the Securities Act of 1933) a private
placement of Series B Convertible Preferred Stock, substantially in accordance
with the principal terms set forth in Exhibit B hereto and as set forth in the
Private Placement Memorandum dated November 15, 1999, resulting in not less than
$4 million of gross proceeds to the Company from the Preferred Stock. In
addition, at the request of the Company at any time before December 31, 2001, I
will purchase a secured term promissory note of the Company, in the principal
amount of $1 million, substantially in accordance with the principal terms set
forth in Exhibit C hereto. The total gross proceeds to the Company from the note
and Preferred Stock will be not less than $5 million. The parties to this
Agreement may change the terms of Exhibits B and C by mutual agreement.
<PAGE>
THEODORE TANNEBAUM
Photogen Technologies, Inc.
November 9, 1999
Page 2
3. I agree (directly or through trusts or related entities I
control) to purchase the $1 million note, and up to $4 million of the Preferred
Stock to make up for any shortfall if total subscriptions from private placement
investors for the Preferred Stock are less than $4 million. The precise amount
of Preferred Stock I agree to purchase will be determined by subtracting the
total gross proceeds of subscriptions the Company receives for the Preferred
Stock from $4 million. If private placement investors agree to purchase $4
million or more of Preferred Stock, I will not be obligated to purchase any
Preferred Stock; however I will continue to be obligated to purchase the $1
million note.
4. Attached to this Agreement as Exhibit D is a letter from
Morgan Stanley Dean Witter confirming that I have sufficient resources to
fulfill the entire $5 million obligation under this Agreement.
5. Each of John T. Smolik, Eric A. Wachter, Craig Dees, Walter
Fisher and Timothy Scott (the "Tennessee Stockholders") agrees that for a period
of two years from August 9, 1999, he will not, directly or indirectly, Transfer
or agree or attempt to Transfer any interest in any common stock of the Company
now owned beneficially (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934) by him without my express prior written consent. It is
agreed that consent for Transfers by the Tennessee Stockholders will be granted
for all or part of the common stock whenever a requested Transfer will not be
expected to adversely affect the best interest of the Company in my judgment.
The term "Transfer" means any offer, sale, assignment, transfer, conveyance,
pledge, hypothecation, or other similar transaction (whether for consideration
or as a gift) of any Company common stock or any interest therein, including
purchasing, granting or creating any options, warrants, security convertible
into such person's common stock, or any other type of derivative security or
derivative transaction (including short sales, sales against the box or forward
agreements), or other transactions that have the effect of reducing the economic
risk of holding the Company's common stock.
6. I agree that for a period ending December 31, 2000, I will
notify Gilford Securities Incorporated and consult with Gilford on any proposed
Transfer by any of the Tennessee Stockholders pursuant to paragraph 5 above.
7. The transactions in paragraphs 2 and 3 above are subject to
the conditions that (a) definitive documentation is developed satisfactory to
the parties to this Agreement concerning the transactions described in
paragraphs 2 and 3, and (b) each of the parties identified in paragraph 5
complies with the provisions of that paragraph.
<PAGE>
THEODORE TANNEBAUM
Photogen Technologies, Inc.
November 9, 1999
Page 3
Please indicate your agreement to the foregoing by signing
below.
Very truly yours,
/s/ Theodore Tannebaum
Accepted and agreed to as of
November 9, 1999.
Photogen Technologies, Inc.
By:/s/ JOHN SMOLIK
-------------------------------
John T. Smolik, President
/s/ CRAIG DEES
- -----------------------------------
Craig Dees, Ph.D.
/s/ WALTER G. FISHER
- -----------------------------------
Walter G. Fisher, Ph.D.
/s/ TIMOTHY SCOTT
- -----------------------------------
Timothy Scott
/s/ JOHN SMOLIK
- -----------------------------------
John T. Smolik
/s/ ERIC A. WACHTER
- ------------------------------------
Eric A. Wachter, Ph.D.
<PAGE>
THEODORE TANNEBAUM
Photogen Technologies, Inc.
November 9, 1999
Page 4
Paragraph 6 acknowledged as of
November 9, 1999.
Gilford Securities Incorporated
By: /s/ Robert Maley
------------------------
Its: Senior VP
-------------------------
<PAGE>
EXHIBIT A
THEODORE TANNEBAUM
875 NORTH MICHIGAN AVENUE
SUITE 2930
CHICAGO, IL 60611-1901
August 5, 1999
Photogen Technologies, Inc.
7327 Oak Ridge Highway, Suite B
Knoxville, TN 37931
RE: STANDBY AGREEMENT
Gentlemen:
Robert J. Weinstein, M.D. and I understand that Photogen Technologies, Inc.
(the "Company") will be raising at least $5 million in additional financing
during the fourth quarter of 1999 to fund certain research projects and other
working capital needs. Dr. Weinstein and I are prepared to assure the success of
that financing on the following terms and conditions:
1. During the fourth quarter of its 1999 fiscal year, the Company agrees
that it will (a) offer to Dr. Weinstein and me one or more secured term
promissory notes, $1 million aggregate principal amount, substantially in
accordance with the principal terms set forth in Exhibit A hereto; and (b) offer
to a number of accredited investors (within the meaning of Regulation 501 under
the Securities Act of 1933) a private placement of Series A Convertible
Preferred Stock, substantially in accordance with the principal terms set forth
in Exhibit B hereto, resulting in not less than $4 million of gross proceeds to
the Company from the Preferred Stock. The total gross proceeds to the Company
from the notes and Preferred Stock will be not less than $5 million. The parties
to this Agreement may change the terms of Exhibits A and B by mutual agreement.
2. Dr. Weinstein and I (directly or through trusts that each of us controls)
jointly and severally agree to purchase the $1 million of notes, and up to $4
million of the Preferred Stock to make up for any shortfall if total
subscriptions from private placement investors for the Preferred Stock are less
than $4 million. The precise amount of Preferred Stock Dr. Weinstein and I agree
to purchase will be determined by subtracting the total subscriptions
<PAGE>
THEODORE TANNEBAUM
Photogen Technologies, Inc.
August 5, 1999
Page 2
the Company receives for the Preferred Stock from $4 million. If private
placement investors agree to purchase $4 million or more of Preferred Stock, Dr.
Weinstein and I will not be obligated to purchase any Preferred Stock; however
we will continue to be obligated to purchase the $1 million of notes.
3. Attached to this Agreement as Exhibit C is a letter from Morgan Stanley
Dean Witter confirming that I have sufficient resources to fulfill the entire $5
million obligation under this Agreement.
4. Each of John T. Smolik, Eric A. Wachter, Craig Dees, Walter Fisher and
Timothy Scott (the "Tennessee Stockholders") agrees that for a period of two
years from the date hereof he will not, directly or indirectly, Transfer or
agree or attempt to Transfer any interest in any common stock of the Company now
owned beneficially (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934) by him without the express prior written consent of both
Dr. Weinstein and me. It is agreed that our consent for Transfers by the
Tennessee Stockholders will be granted for all or part of the common stock
whenever a requested Transfer will not be expected to adversely affect the best
interest of the Company in our judgment. The term "Transfer" means any offer,
sale, assignment, transfer, conveyance, pledge, hypothecation, or other similar
transaction (whether for consideration or as a gift) of any Company common stock
or any interest therein, including purchasing, granting or creating any options,
warrants, security convertible into such person's common stock, or any other
type of derivative security or derivative transaction (including short sales,
sales against the box or forward agreements), or other transactions that have
the effect of reducing the economic risk of holding the Company's common stock.
5. The transactions in paragraphs 1 and 2 above are subject to the
conditions that (a) the Company's Board of Directors approves the transactions
in paragraph 1 (including the separate approval of Lester H. McKeever, Jr. as a
disinterested director), (b) definitive documentation is developed satisfactory
to the parties to this Agreement concerning the transactions described in
paragraphs 1 and 2, and (c) each of the parties identified in paragraph 4
complies with the provisions of that paragraph. The provisions of paragraph 4
will become effective immediately, and are subject to the condition subsequent
that the Company's Board approves the transactions in paragraph 1 (as set forth
in clause (a) of this paragraph).
<PAGE>
THEODORE TANNEBAUM
Photogen Technologies, Inc.
August 5, 1999
Page 3
Please indicate your agreement to the foregoing by signing below.
Very truly yours,
/S/ THEODORE TANNEBAUM /S/ ROBERT J. WEINSTEIN
------------------------ ---------------------------
Theodore Tannebaum Robert J. Weinstein, M.D.
Accepted and agreed to as of
August 9, 1999.
Photogen Technologies, Inc.
By: /S/ JOHN SMOLIK
-----------------------------------
John T. Smolik, President
/S/ CRAIG DEES
-----------------------------------
Craig Dees, Ph.D.
/S/ WALTER G. FISHER
-----------------------------------
Walter G. Fisher, Ph.D.
/S/ TIMOTHY SCOTT
-----------------------------------
Timothy Scott
/S/ JOHN SMOLIK
-----------------------------------
John T. Smolik
/S/ ERIC A. WACHTER
-----------------------------------
Eric A. Wachter, Ph.D.
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
TERM SHEET
$1 MILLION TERM CREDIT FACILITY
<S> <C>
Borrower: Photogen, Inc. ("Borrower").
Lenders: Theodore Tannebaum and Robert J. Weinstein,
M.D. ("Lenders").
Guarantor: Photogen Technologies, Inc. ("PTI").
Principal amount: $1,000,000.00.
Purpose: To fund working capital requirements in connection
with pre-clinical research and clinical testing of
Borrower's technologies.
Advances: The credit facility may be utilized in advances of
$100,000 increments, upon 15 days' prior written
notice to the Lenders. Once repaid, no portion of the
credit facility can be reborrowed.
Interest: The daily rate equivalent of 6% per annum calculated
on the basis of a 360-day year.
Amortization; maturity: The notes will be payable over five
years. Interest only will be payable on an
annual basis until maturity, at which time
all outstanding principal and interest will
be due and payable.
Prepayment: Prepayment will be permitted at any time and without
penalty.
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
Collateral: The credit facility will be secured by a first
priority lien on all of the Borrower's present and
future real and personal properties, including all:
- accounts, chattel paper, tax refunds,
contract rights, options, leases, leasehold
interests, letters of credit, instruments,
documents, documents of title;
- patents, trade secrets, know how, copyrights,
trademarks, trade names, software, data,
licenses, goodwill;
- general intangibles, beneficial interests;
- goods, machinery, equipment, vehicles,
furniture, inventory;
- securities, cash or cash equivalents;
- real estate and improvements, fixtures; and -
products and proceeds (including without
limitation insurance and litigation proceeds)
of the foregoing, all accessions to the
foregoing and all substitutions, renewals,
improvements and replacements of and
additions to the foregoing.
The lien will be granted to Dr. Weinstein as collateral
agent for the Lenders. The lien will be perfected by
appropriate filings with the secretary of state, county
recorder and U.S. Patent and Trademark Office.
Events of Default: Upon the occurrence of any of the
following events, the notes will become immediately due
and payable and the Lenders will have the right to,
among other things, foreclose on the Collateral:
- failure to pay interest or principal under
the notes when due;
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
- a material default by the Borrower or PTI in any
agreement or obligation to the Lenders or to
any third party which is not cured within
the time period, if any, permitted in the
governing instrument for cure; or
- the Borrower, PTI or any of PTI's other
subsidiaries: becoming subject to bankruptcy
proceedings (which, if filed against the
Borrower, are not dismissed within 90 days),
making a general assignment for the benefit
of creditors, or authorizing such entity to
seek the protection of or relief under the
U.S. Bankruptcy Code or similar state laws
relating to insolvency, reorganization or
any other proceeding to modify or alter the
rights of such entity's creditors.
Miscellaneous: All terms, rights and other provisions of the
credit facility are subject to final negotiation and
the execution and delivery of mutually agreeable
definitive documentation, and approval by the
disinterested directors of the Borrower and PTI.
Documentation will include a loan and security
agreement, a promissory note, a collateral agency
agreement and a guaranty.
</TABLE>
3
<PAGE>
EXHIBIT B
TERM SHEET
SERIES A CONVERTIBLE PREFERRED STOCK
<TABLE>
<S> <C>
Issuer: Photogen Technologies, Inc., a Nevada corporation
(the "Company").
Series and class: Series A Convertible Preferred Stock, $.01 par
value per share ("Series A Preferred Stock").
Number of shares offered: A minimum of 400,000 shares and a maximum of
1,000,000 shares.
Price: Shares to be priced at 110% of the Common Stock
market price on the date of pricing. The Company
will receive a minimum of $4 million in gross
proceeds.
Offering: The Series A Preferred Stock will be offered
through a private placement only to accredited
investors.
Use of proceeds: - Purchasing clinical trial treatment systems;
- Conducting clinical trials; - Designing and
building clinical trial equipment;
- Developing manufacturing process and
formulate clinical trial supplies of drug;
- Hiring FDA consultants and preparing FDA
submissions;
- Funding addition of business development
personnel;
- Adding temporary space to house new staff;
- Other general operating expenses.
Dividends: Dividends will be paid-in-kind in additional
shares of Series A Preferred Stock at the rate of
6% per annum, resulting in each share of Series A
Preferred Stock receiving an annual dividend of
0.06 additional shares of Series A Preferred
Stock. Dividends will be payable annually
beginning on the first anniversary of the closing.
</TABLE>
-1-
<PAGE>
<TABLE>
<S> <C>
Liquidation: The Series A Preferred Stock will be entitled to
a liquidation preference in an amount equal to the
purchase price per share of Series A Preferred
Stock.
Redemption: At any time after January 1, 2002, the Company may
redeem the Series A Preferred Stock for an amount
equal to 1.4 times the Series A Preferred Stock
purchase price per share.
Voting rights: Each share of Series A Preferred Stock
will be entitled to one vote per share. Holders of
Series A Preferred Stock vote together with the
Common Stock, except as provided by the Articles
of Incorporation (see "Protective provisions,"
below) or by law.
Conversion: The Series A Preferred Stock will be convertible
into Common Stock at any time at the election of
the holder thereof, at the following ratios:
</TABLE>
<TABLE>
<CAPTION>
ONE SHARE OF SERIES A
IF THE CONVERSATION TAKES PLACE: PREFERRED WILL CONVERT INTO:
- -------------------------------- ----------------------------
<S> <C>
Before the first anniversary of the 1.0 shares of common stock
closing
After the first and before the 1.2 shares of common stock
second anniversary of the closing
After the second and before the 1.4 shares of common stock
fifth anniversary of the closing
</TABLE>
<TABLE>
<S> <C>
The Series A Preferred Stock will be automatically
and mandatorily converted into Common Stock:
- Upon the approval of 66.66% of the holders
Series A Preferred Stock;
- Immediately prior to the closing of a firm
commitment underwritten public offering of
the Company's Common Stock (however, if the
public offering occurs before the first
anniversary of the closing, the conversion
ratio will be 1.2 shares of Common Stock for
each share of Series A Preferred Stock,
rather than 1.0);
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C>
- At the discretion of the Board of Directors,
if the holders of a majority of the
outstanding Series A Preferred Stock do not
approve the issuance of a security senior to
the Series A Preferred Stock, or any other
transaction by the requisite vote (including
those described in "Protective provisions,"
below), which has been approved by the
Company's directors; or
- At the discretion of the Board of Directors
at any time after the fifth anniversary of
the closing at a conversion ratio of 1.3
shares of Common Stock for each share of
Series A Preferred Stock.
Anti-dilution: Shares of Series A Preferred Stock will be subject
to typical proportional adjustment in the event of
a stock split, stock dividend or similar event.
The Series A Preferred Stock is also protected
from dilution resulting from the Company issuing
Common Stock (or equivalent securities) at a lower
price than the Series A Preferred Stock, based on
the "weighted average" method of anti-dilution
adjustment. No anti-dilution adjustments will be
made for issuances of Common Stock: upon
conversion of Series A Preferred Stock; to
officers, directors, employees, or consultants to
the Company pursuant to an option plan approved by
the Board of Directors covering up to 2 million
shares; to vendors, licensors, lenders and others
up to 500,000 shares of Common Stock; and similar
transactions.
Protective provisions: In addition to matters requiring a class vote
under Nevada corporate law, the approval or
consent of the holders of 66.66% or more of the
Series A Preferred Stock, voting separately as a
class, is required for the Company to: redeem any
of its Common Stock (with exceptions for
redemptions from terminating employees, etc.);
sell all or substantially all of the Company's
assets, merge or consolidate (except where no
change of control is effected); reclassify or
recapitalize its stock; permit any subsidiary to
sell any stock that will result in a change of
control of that subsidiary; increase or decrease
the number of authorized shares of Series A
Preferred Stock; amend the Company's Articles of
Incorporation or Bylaws; or reduce the dividend
rates, liquidation preference or redemption price
on the Series A Preferred Stock.
Short sale restriction: No holder of Series A Preferred Stock may engage
in short sales of the Company's Common Stock.
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C>
Miscellaneous: No fractional shares of Series A Preferred Stock
or Common Stock will be recognized or issued.
Closing to occur on or about October 15, 1999.
All terms, rights, preferences, etc. of the Series
A Preferred Stock are subject to final negotiation
between the Company and the private placement
investors, and to Board approval.
</TABLE>
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<PAGE>
EXHIBIT B
CERTIFICATE OF DESIGNATION, PREFERENCES, AND RIGHTS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
PHOTOGEN TECHNOLOGIES, INC.
We, John T. Smolik and Eric A. Wachter, the President and the
Secretary, respectively, of Photogen Technologies, Inc., a corporation organized
and existing under the Nevada Revised Statutes (the "Corporation"), in
accordance with the provisions of Title 7, Chapter 78 of the Nevada Revised
Statutes thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors of the Corporation (the "Board of Directors") by the Restated Articles
of Incorporation of the said Corporation, the said Board of Directors on
November ___, 1999 adopted the following resolutions, pursuant to Article Fourth
of the Corporation's Restated Articles of Incorporation and Title 7, Chapter 78
of the Nevada Revised Statutes, creating one series of shares of Preferred Stock
designated as Series B Convertible Preferred Stock:
"RESOLVED, that pursuant to Article Fourth of the
Corporation's Restated Articles of Incorporation, a series of the class of
authorized Preferred Stock be, and it hereby is, created and the voting powers,
designation, preferences, limitations, restrictions, relative rights of the
shares of such series are as follows:
1. GENERAL MATTERS.
a. TITLE OF SERIES. A series of Preferred Stock (as defined in
the Restated Articles of the Corporation) shall be designated as the Series B
Convertible Preferred Stock (the "Series B Preferred Stock").
b. NUMBER OF SHARES. The number of authorized shares of Series
B Preferred Stock shall be ____________________ (_____________) shares, par
value $.01 per share.
<PAGE>
c. FRACTIONAL SHARES. For purposes of dividends and the Series
B Liquidation Preference (as defined below) only, the Corporation will recognize
fractional shares. For all other purposes (including Conversion Rights (as
defined below), voting rights or otherwise) all calculations resulting in a
fractional share with respect to Series B Preferred Stock, or Common Stock (as
defined in the Restated Articles of Incorporation) issuable in connection
therewith, provided for in this Certificate of Designation shall be increased to
the nearest whole share of Series B Preferred Stock or Common Stock, as the case
may be (after aggregating all shares of Series B Preferred Stock or Common Stock
into which such shares are convertible, as applicable). Under no circumstances
will any fractional share or scrip, or cash in lieu thereof, be issued or
recognized; provided, however, that to the extent fractional shares are
recognized for purposes of dividends and the Series B Liquidation Preference,
such fractional shares will be reflected as a book entry on the stock transfer
records of the Corporation (which records shall be conclusive and binding absent
manifest error).
d. PROHIBITION AGAINST SHORT SALES. No holder of Series B
Preferred Stock shall, so long as such person is a holder of Series B Preferred
Stock, engage in or agree or attempt to engage in any "short sale" (as such term
is defined in Rule 3b-3 promulgated under the Securities Exchange Act of 1934,
as amended, or any successor rule thereto) of the Corporation's Common Stock. As
a condition to the ability or right of any holder of Series B Preferred Stock to
participate in any redemption or conversion (whether voluntary or, to the extent
provided in Section 6(d)(iii) below, mandatory conversion), notwithstanding any
contrary provision in this Certificate of Designation or otherwise, such holder
shall certify to the Corporation's reasonable satisfaction that such holder has
complied with this Section 1(d).
e. SENIOR SECURITIES. The Board of Directors is authorized to
fix or alter the rights, preferences, privileges, and restrictions granted to or
imposed upon additional series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or of any of them.
Subject to compliance with applicable protective voting rights which have been
or may be granted to the Preferred Stock or any series thereof in Certificates
of Designation (including Section 10 hereof), the Corporation's Restated
Articles of Incorporation or the Nevada General Corporation Law ("Protective
Provisions"), the rights, privileges, preferences, and restrictions of any such
additional series of Preferred Stock may be subordinated to, PARI PASSU with, or
senior in any respect to any of those of the Series B Preferred Stock or any
future class or series of Preferred Stock. Such senior securities are referred
to as "Senior Securities."
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<PAGE>
2. DIVIDENDS.
a. The holders of record on the Series B Dividend Record Date
(as defined below) of the outstanding Series B Preferred Stock shall be entitled
to receive dividends, as and when declared by the Board of Directors out of
funds legally available therefor. Record holders of Series B Preferred Stock on
a Series B Dividend Record Date shall be entitled to one dividend-in-kind
payable each year in additional shares of Series B Preferred Stock at the rate
of six percent (6%) per annum, resulting in the holder of each share of Series B
Preferred receiving a dividend of 0.06 additional shares of Series B Preferred
Stock with respect to each share of Series B Preferred Stock. Each such dividend
shall be payable on or about each January 15 (a "Series B Dividend-in-Kind
Payment Date") (or if such date is not a business day, the dividends due on such
Series B Dividend-in-Kind Payment Date shall be paid on the next succeeding
business day) beginning on January 15, 2001. Such dividends shall be cumulative
and shall accrue on each share of Series B Preferred Stock from the date of such
share's issuance; provided, however, that dividends shall cease to accrue on a
share of Series B Preferred Stock following such share's redemption or
conversion, as the case may be. Dividends on the Series B Preferred Stock shall
be payable to holders of record as they appear on the stock register of the
Corporation on such record date, not less than 15 nor more than 60 days
preceding a dividend payment date (including a Series B Dividend-in-Kind Payment
Date), as shall be fixed by the Board of Directors (a "Series B Dividend Record
Date"). Except in the case of a redemption under Section 4 or mandatory
conversion under Section 6(c), below (in which case dividends shall accrue and
be paid through the date of such event), no dividends shall be payable on the
Series B Preferred Stock for any partial dividend period.
b. Subject to any rights of Senior Securities, no dividends or
other distributions shall be made with respect to the Common Stock unless at the
same time a dividend or distribution is paid with respect to all outstanding
shares of Series B Preferred Stock in an amount equal to the amount paid with
respect to a share of Common Stock as though the holders of the Series B
Preferred Stock were the holders of the number of shares of Common Stock of the
Corporation into which their respective shares of Series B Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
c. In the event the Corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by the
Corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then,
subject to any rights of Senior Securities, in each such case the holders of the
Series B Preferred Stock shall be entitled to a proportionate share of any such
distribution as though the holders of the Series B Preferred Stock were the
holders of the number
-3-
<PAGE>
of shares of Common Stock of the Corporation into which their respective shares
of Series B Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
3. Liquidation Preference.
a. In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the Series
B Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, but after and
subject to the payment in full of all amounts required to be distributed to the
holders of the Corporation's Series A Convertible Exchangeable Preferred Stock
(the "Series A Preferred Stock") and any other Senior Securities ranking on
liquidation prior and in preference to the Series B Preferred Stock, the amount
of $__ per share [THE PURCHASE PRICE PER SHARE FOR THE SERIES B PREFERRED STOCK]
(as adjusted for any stock dividends, combinations or splits with respect to
such shares) ("Series B Liquidation Preference"), respectively. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series B Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid Series B Liquidation Preference,
then the entire assets and funds of the Corporation legally available for
distribution to the holders of Series B Preferred Stock shall be distributed
ratably among the holders of the Series B Preferred Stock in proportion to the
Series B Liquidation Preference each such holder is otherwise entitled to
receive.
b. After payment to the holders of the Series A Preferred
Stock, the Series B Preferred Stock and any Senior Securities of the amounts set
forth in Section 3(a) above, the entire remaining assets and funds of the
Corporation legally available for distribution, if any, shall be distributed pro
rata among the holders of the Common Stock and all classes and Series of
Preferred Stock in proportion to the shares of Common Stock then held by them
and the shares of Common Stock which they have the right to acquire upon
conversion of the shares of Preferred Stock then held by them.
c. For purposes of this Section 3, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, or to
include, (i) the acquisition of the Corporation by another entity by means of
any transaction or series of related transactions (including any reorganization,
merger or consolidation, but excluding any merger effected exclusively to change
the domicile of the Corporation), or (ii) a sale of all or substantially all of
the assets of the Corporation, unless in either case (1) shareholders of record
of the Corporation as constituted immediately prior to such acquisition or sale
will, immediately after such acquisition or sale (by virtue of securities issued
as consideration for the acquisition or sale or
-4-
<PAGE>
otherwise) hold a majority of the voting power of the surviving or acquiring
entity, or (2) the holders of a majority of the outstanding Series B Preferred
Stock agree by vote or consent to exclude such acquisition or sale from this
provision.
d. Whenever the distribution provided for in this Section 3
shall be payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other property
as determined in good faith by the Board of Directors.
4. REDEMPTION.
a. Provided shares of Common Stock issuable on conversion of
Series B Preferred Stock may be resold by the holder thereof either (i) without
registration pursuant to Rule 144(k) under the Securities Act of 1933, as
amended, (the "Securities Act"), or (ii) pursuant to an effective registration
statement, and provided further that an amount equal to the liquidation
preference of all Senior Securities (including the Series A Preferred Stock) is
paid in full, the Corporation may at any time after January 1, 2002 at its
option and in its sole discretion, redeem, from any source of funds legally
available therefor, all or any part of the issued and outstanding Series B
Preferred Stock. To effect such redemption, the Corporation shall pay in cash in
exchange for the shares of Series B Preferred Stock to be redeemed a sum equal
to $_________ [PURCHASE PRICE X 1.4] per share of Series B Preferred Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) plus all declared or accumulated but unpaid dividends on such shares
(the "Series B Redemption Price"). Any redemption effected pursuant to this
Section 4 shall be made on a PRO RATA basis among the holders of the Series B
Preferred Stock in proportion to the shares of Series B Preferred Stock then
held by them.
b. The term "Series B Redemption Date" shall refer to the
effective date on which the Corporation redeems shares of Series B Preferred
Stock. At least 30 but no more than 60 days prior to each Series B Redemption
Date, written notice shall be mailed, first class postage prepaid, to each
holder of record (at the close of business on the business day next preceding
the day on which notice is given) of the Series B Preferred Stock to be
redeemed, at the address last shown on the records of the Corporation or its
transfer agent for such holder, notifying such holder of the redemption to be
effected, specifying the number of shares to be redeemed from such holder, the
Series B Redemption Date, the Series B Redemption Price, the place at which
payment may be obtained and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, his certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
Except as provided in Section 4(c), on or after the Series B Redemption Date,
each holder of Series B Preferred Stock to be redeemed shall surrender to this
Corporation the certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and thereupon the
aggregate Series B
-5-
<PAGE>
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
c. From and after the Series B Redemption Date, unless there
shall have been a default in payment of the Series B Redemption Price, all
rights of the holders of shares of Series B Preferred Stock designated for
redemption in the Redemption Notice as holders of Series B Preferred Stock
(except the right to receive the Series B Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of the
Corporation or its transfer agent or be deemed to be outstanding for any purpose
whatsoever.
5. VOTING RIGHTS. Each holder of shares of the Series B
Preferred Stock shall be entitled to one vote for each share of Common Stock
into which such Series B Preferred Stock could then be converted (subject to
Section 1(c) above regarding fractional shares). Except as otherwise expressly
provided in this Certificate of Designation, the Restated Articles of
Incorporation or as required by the Nevada General Corporation Law, the holders
of Series B Preferred Stock shall vote together with the Common Stock as a
single class and shall (subject to Section 6(e) below) be entitled to notice of
any stockholders' meeting in the same manner as holders of Common Stock in
accordance with the Bylaws of the Corporation.
6. CONVERSION.
a. CONVERSION RIGHTS. Each holder of Series B Preferred Stock
shall have the right to convert the Series B Preferred Stock into Common Stock
on and subject to the provisions of Section 6 and Section 7 of this Certificate
of Designation ("Series B Conversion Rights"). In the event of a liquidation of
the Corporation, all Series B Conversion Rights shall terminate at the close of
business on the fifth full business day preceding the date fixed for the payment
of any amounts distributable on liquidation to the holders of Series B Preferred
Stock.
b. OPTIONAL CONVERSION. Each share of Series B Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share and on or prior to the fifth day prior to the
Series B Redemption Date, if any, as may have been fixed in any Redemption
Notice with respect to the Series B Preferred Stock, at the office of the
Corporation or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing (i) (x)
the Series B Conversion Price times 1.0 by (y) the Series B Conversion Price if
the conversion takes place at any time on or before December 31, 2000; (ii) (x)
the Series B Conversion Price times 1.2 by
-6-
<PAGE>
(y) the Series B Conversion Price if the conversion takes place at any time
between January 1, 2001 through December 31, 2001; and (iii) (x) the Series B
Conversion Price times 1.4 by (y) the Conversion Price if the conversion takes
place at any time on or after January 1, 2002. The "Series B Conversion Price"
shall initially be $____ [the Series B Preferred Stock purchase price], and
shall be adjusted as provided in Section 7, below (provided, however, that the
Series B Conversion Price shall not exceed $_____ per share).
c. MANDATORY CONVERSION. The Corporation may at its option
require the holders of all outstanding shares of Series B Preferred Stock to
convert their Series B Preferred Stock into the number shares of Common Stock
into which such Series B Preferred Stock would be convertible pursuant to
Section 6(b) (subject, however, to the last sentence of this Section 6(c)) upon
the occurrence of any of the following:
(1) The date specified by the vote or written consent or
agreement of holders of a majority of the shares of Series B Preferred Stock
then outstanding;
(2) Immediately prior to the closing of the sale of the
Corporation's Common Stock in a firm commitment, underwritten public offering
registered under the Securities Act, which results in the Corporation receiving
$20,000,000 or more in gross proceeds (excluding underwriter's discounts,
commissions and similar compensation), other than a registration relating solely
to a transaction under Rule 145 under the Securities Act or to a stock option or
other type of employee benefit plan of the Corporation;
(3) At the discretion of the Board of Directors, if (A)
holders of the requisite majority of outstanding shares of Series B Preferred
Stock do not approve (by vote or written consent) of the creation, authorization
and/or issuance of any Special Senior Security (defined below) upon which such
holders are entitled to vote as a separate series or class pursuant to Section
10 below or pursuant to the Nevada General Corporation Law, but (B) such
transaction has been approved and recommended by the Board of Directors. A
"Special Senior Security" means any Senior Security or PARI PASSU security which
is issued to any vendor, licensor or other person or entity engaged in a joint
venture or other commercial or similar transaction or relationship with the
Corporation or any of the Corporation's affiliates, the bona fide purpose of
which transaction is (in the good faith business judgment of the Board of
Directors) to develop the Corporation's business and not solely to provide
financing to or invest in the securities of the Corporation;
(4) At the discretion of the Board of Directors, at any time
after January 1, 2005.
-7-
<PAGE>
Notwithstanding anything herein to the contrary, if any mandatory conversion
under Section 6(c) takes place pursuant to subparagraphs (ii) or (iii) hereof at
any time before December 31, 2000, the number of shares of Common Stock issuable
in connection with such conversion shall be calculated by dividing (x) Series B
Conversion Price times 1.2 by (y) the Conversion Price.
d. MECHANICS OF CONVERSION.
(1) Before any holder of Series B Preferred Stock shall be
entitled to convert the same on an optional basis pursuant to Section 6(b) into
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for such stock, and shall give written notice to the Corporation
at such office that such holder elects to convert the same and shall state
therein the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If required by the
Corporation or its transfer agent, such certificates surrendered for conversion
shall be endorsed or accompanied by written instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or such
holder's attorney duly authorized in writing. Such holder shall also provide the
compliance certificate regarding short sales of the Corporation's Common Stock
referred to in Section 1(d). The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series B
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have taken place immediately prior to the close of
business on the date of surrender of the shares of Series B Preferred Stock to
be converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock after such date.
(2) If the conversion is in connection with an underwritten
offering of securities pursuant to the Securities Act, the conversion may, at
the option of any holder tendering shares of Series B Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive the Common Stock upon conversion of the Series B Preferred Stock shall
not be deemed to have converted such Series B Preferred Stock until immediately
prior to the closing of such sale of securities.
(3) In the event of a mandatory conversion of Series B
Preferred Stock pursuant to Section 6(c) the conversion shall be deemed to
have taken place at the close of business on the effective date specified by
the Board of Directors. On such effective date, all of the outstanding
certificates which prior to that time represented shares of Series B
Preferred Stock shall be deemed for all purposes to evidence ownership of and
to represent the number of
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<PAGE>
shares of Common Stock into which the shares of Series B Preferred Stock have
been converted. The registered owner on the books and records of the Corporation
or its transfer agent of any such outstanding Series B Preferred Stock
certificate shall, until such certificate shall have been surrendered for
exchange or transfer or otherwise accounted for to the Corporation or its
transfer agent, have and be entitled to exercise any voting and other rights
with respect to the shares of Common Stock into which such Series B Preferred
Stock shall have been converted; provided, however, that dividends or other
distributions upon shares of Common Stock resulting from the conversion of such
Series B Preferred Stock shall accrue but shall not be delivered to any such
stockholder until such stockholder has surrendered or otherwise accounted for
the Series B Preferred Stock stock certificate representing the converted shares
and has provided the compliance certificate referred to in Section 1(d). The
Corporation shall issue new certificates for Common Stock in due course as
certificates for converted Series B Preferred Stock are tendered to the
Corporation or its transfer agent for exchange or transfer or otherwise
accounted for.
e. NOTICE TO HOLDERS OF SERIES B PREFERRED STOCK. In the
event:
(1) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities of
the Corporation;
(2) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(3) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon);
(4) of the involuntary or voluntary dissolution, liquidation
or winding up of the Corporation, or an acquisition or sale of assets which has
the effect of a dissolution under Section 3(c); or
(5) of any transaction that causes a mandatory conversion
pursuant to Section 6(c);
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series B Preferred Stock, and shall cause to
be mailed to the holders of the Series B Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least ten
days prior to the date specified in Sections 6(e)(v)(1) or 6(e)(v)(2) below or
twenty days before the date specified in Section 6(e)(v)(3) below, a notice
stating:
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<PAGE>
(a) the record date of such dividend,
distribution, subdivision or combination, or, if a record is
not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend,
distribution, subdivision or combination are to be
determined, or
(b) the effective date of any mandatory conversion
pursuant to Section 6(c), or
(c) the date on which such reclassification,
dissolution, liquidation, winding up, acquisition or sale of
assets is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution
or winding up.
f. NO IMPAIRMENT. The Corporation will not, by amendment of
its Restated Articles of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of all the
provisions of Section 6 and Section 7 in the taking of all such action as may be
necessary or appropriate in order to protect the Series B Conversion Rights
against impairment.
g. ISSUE TAXES. The Corporation shall pay any and all issue
and other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of shares of Series B Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be obligated
to pay any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
h. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of all shares of Series B Preferred Stock issuable pursuant to this
Certificate of Designation, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series B Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without
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<PAGE>
limitation, engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to the Corporation's Restated Articles of
Incorporation.
7. ADJUSTMENT TO SERIES B CONVERSION RIGHTS FOR CERTAIN
DILUTING EVENTS.
a. DEFINITIONS.
(1) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 7(b) below, deemed to be
issued) by the Corporation after the Original Issue Date (as defined in Section
7(a)(iv) below), but EXCLUDING shares of Common Stock issued or issuable:
(a) as a dividend or distribution on Series B
Preferred Stock;
(b) by reason of a dividend, stock split, or other
distribution on shares of Common Stock excluded from the
definition of Additional Shares of Common Stock by the
foregoing clause (1);
(c) upon the exercise of options excluded from the
definition of "Option" in Section 7(a)(iii);
(d) to vendors, licensors, lenders and similar
third parties engaged in commercial relationships with the
Corporation, up to 1,000,000 shares of Common Stock in the
aggregate, or Options to acquire or Convertible Securities
convertible into such Common Stock; or
(e) upon conversion of shares of Series B
Preferred Stock or any other Convertible Securities (as
defined in Section 7(a)(ii) below) outstanding as of the
date hereof (including the Series A Preferred Stock, the
Convertible Promissory Note in the principal amount of
$4,800,000 dated October 20, 1999 originally issued to Elan
International Services Ltd., the Warrant to acquire 100,000
shares of Common Stock originally issued to Elan
International Services, Ltd., and the Placement Agent's
Warrant Agreement originally issued or to be issued to
Gilford Securities Incorporated in connection with the
offering of Series B Preferred Stock).
(2) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
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<PAGE>
(3) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, but EXCLUDING rights, options or warrants excluded from the
definition of "Additional Shares of Common Stock" and rights, options or
warrants granted to employees, directors or consultants of the Corporation
pursuant to plans or agreements adopted or approved by the Board of Directors to
acquire up to that number of shares of Common Stock as is equal to ten (10%)
percent of the Common Stock outstanding at the time of such adoption or approval
(provided that, for purposes of this Section 7(a)(iii), all shares of Common
Stock issuable upon (1) exercise of rights, options or warrants granted or
available for grant under plans approved by the Board of Directors, (2)
conversion of shares of Preferred Stock, or (3) conversion of Preferred Stock
issuable upon conversion or exchange of any Convertible Security, shall be
deemed to be outstanding).
(4) "Original Issue Date" shall mean the date on which the
first share of Series B Preferred Stock is issued.
b. DEEMED ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If
the Corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue; provided, that Additional Shares of Common Stock shall
not be deemed to have been issued unless the consideration per share (determined
pursuant to Section 7(c)) hereof) of such Additional Shares of Common Stock
would be less than the Series B Conversion Price on the date such securities are
issued, and provided further that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(1) No further adjustment in the Series B Conversion Price
shall be made upon the subsequent issue of shares of Common Stock upon the
exercise of such Option or conversion or exchange of such Convertible Security;
(2) Upon the expiration or termination of any unexercised
Option, the Series B Conversion Price shall not be readjusted, but the
Additional Shares of Common Stock deemed issued as the result of the original
issue of such Option shall not be deemed issued for the purposes of any
subsequent adjustment of the Series B Conversion Price; and
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<PAGE>
(3) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Series B Conversion Price then in effect
shall forthwith be readjusted to such Series B Conversion Price as would have
obtained had the adjustment that was made upon the issuance of such Option or
Convertible Security not exercised or converted prior to such change been made
upon the basis of such change, but no further adjustment shall be made for the
actual issuance of Common Stock upon the exercise or conversion of any such
Option or Convertible Security.
c. DETERMINATION OF CONSIDERATION. For purposes of this Section 7, the
consideration received by the Corporation for the issue of any Additional Shares
of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY: Such consideration shall:
(a) insofar as it consists of cash, be computed at
the aggregate of cash received by the Corporation, excluding
amounts paid or payable for accrued interest or accrued
dividends;
(b) insofar as it consists of property other than
cash, be computed at the fair market value thereof at the
time of such issue, as determined in good faith by the Board
of Directors; and
(c) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other
assets of the Corporation for consideration which covers
both, be the proportion of such consideration so received,
computed as provided in clauses (1) and (2) above, as
determined in good faith by the Board of Directors.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued relating to Options and Convertible Securities, shall
be determined by dividing:
(a) the total amount, if any, received or
receivable by the Corporation as consideration for the issue
of such Options or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of
such consideration) payable to the
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<PAGE>
Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, by
(b) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities.
d. NO ADJUSTMENT OF SERIES B CONVERSION PRICE. No adjustment
in the number of shares of Common Stock into which the Series B Preferred Stock
is convertible shall be made by adjustment in the Series B Conversion Price: (i)
unless the consideration per share (determined pursuant to Section 7(c)) for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the then-current Series B Conversion Price, or (ii) if
prior to such issuance, the Corporation receives written notice from the holders
of a majority of the then outstanding shares of Series B Preferred Stock
agreeing that no such adjustment shall be made as the result of the issuance of
Additional Shares of Common Stock.
e. ADJUSTMENT OF SERIES B CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. If the Corporation shall at any time after
the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section 7(b),
but excluding shares issued as provided in Sections 7(f) through 7(i), without
consideration or for a consideration per share less than the then-current Series
B Conversion Price, then and in such event, the Series B Conversion Price shall
be reduced, concurrently with such issue to a price (calculated to the nearest
cent) determined by multiplying the Series B Conversion Price by a fraction,
(1) the numerator of which shall be (1) the number
of shares of Common Stock outstanding immediately prior to such issue plus (2)
the number of shares of Common Stock which the aggregate consideration received
by the Corporation for the total number of Additional Shares of Common Stock so
issued would purchase at such Series B Conversion Price; and
(2) the denominator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of such Additional Shares of Common Stock so issued.
Notwithstanding the foregoing, the Series B Conversion Price shall not be
reduced if the amount of such reduction would be an amount less than $.05, but
any such amount shall be carried forward and reduction with respect thereto made
at the time of and together with any subsequent
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<PAGE>
reduction which, together with such amount and any other amount or amounts so
carried forward, shall aggregate $.05 or more.
f. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Series B Conversion
Price then in effect immediately before that subdivision shall be
proportionately decreased. If the Corporation shall at any time or from time to
time after the Original Issue Date combine the outstanding shares of Common
Stock, the Series B Conversion Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.
g. ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall make or issue, a dividend or other distribution payable in Additional
Shares of Common Stock, then and in each such event the Series B Conversion
Price shall be decreased as of the time of such issuance, by multiplying the
Series B Conversion Price by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance, and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance plus the number of shares of Common Stock issuable in payment of
such dividend or distribution.
h. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall make or issue a dividend or other distribution payable in securities
of the Corporation other than shares of Common Stock, then and in each such
event provision shall be made so that the holders of shares of the Series B
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Series B Preferred Stock
been converted into Common Stock on the date of such event and had thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period given application to all adjustments called for during such period, under
this paragraph with respect to the rights of the holders of the Series B
Preferred Stock.
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<PAGE>
i. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR SUBSTITUTION.
If the Common Stock issuable upon the conversion of the Series B Preferred Stock
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for in Section 3(c) above), then and in each such event the
holder of each share of Series B Preferred Stock shall have the right thereafter
to convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by holders of the number of shares of Common Stock into which
such shares of Series B Preferred Stock might have been converted immediately
prior to such reorganization, reclassification, or change, all subject to
further adjustment as provided herein.
j. CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment or
readjustment of the Series B Conversion Price pursuant to this Section 7, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder, if
any, of Series B Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based and shall file a copy of such certificate with its
corporate records. The Corporation shall, upon the written request at any time
of any holder of Series B Preferred Stock, furnish or cause to be furnished to
such holder a similar certificate setting forth (1) such adjustments and
readjustments, (2) the Series B Conversion Price then in effect, and (3) the
number of shares of Common Stock and the amount, if any, of other property which
then would be received upon the conversion of Series B Preferred Stock. Despite
such adjustment or readjustment, the form of each or all Series B Preferred
Stock certificates, if the same shall reflect the initial or any subsequent
Series B Conversion Price, need not be changed in order for the adjustments or
readjustments to be valued in accordance with the provisions of this Certificate
of Designation, which shall control.
8. NO REISSUANCE OF SERIES B PREFERRED STOCK. No share or
shares of Series B Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be canceled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
9. NOTICES. Any notice required by the provisions of this
Certificate of Designation to be given to the holders of shares of Series B
Preferred Stock shall be deemed given if deposited in the United States mail,
postage prepaid, and addressed to each holder of record at his address appearing
on the books of the Corporation.
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<PAGE>
10. PROTECTIVE PROVISIONS. Subject in all cases to the
provisions of Section 6(c)(iii) above and the rights of any series of Preferred
Stock that may from time to time come into existence, so long as any shares of
Series B Preferred Stock are outstanding, the Corporation shall not, without
first obtaining the approval by vote or written consent of the holders of a
majority of the then-outstanding shares of Series B Preferred Stock, voting
separately as a series, (a) amend its Restated Articles of Incorporation so as
to adversely affect the shares of Series B Preferred Stock, (b) authorize or
issue any other equity security or security convertible into or exercisable for
any equity security having a preference over or being PARI PASSU with the Series
B Preferred Stock with respect to liquidation or dividend rights, or (c) change
the rights of the holders of the Series B Preferred Stock as set forth herein in
any other material respect."
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation, Preferences and Rights to be duly executed by its
President and Secretary as of November __, 1999.
----------------------------------------
John T. Smolik, President
----------------------------------------
Eric A. Wachter, Secretary
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<PAGE>
STATE OF _____________ )
) SS.
COUNTY OF ___________ )
On this ____ day of November, 1999, personally appeared before
me, a Notary Public in and for the State and County aforesaid, John T. Smolik,
known to me to be the person described in and did say that he is the President
of Photogen Technologies, Inc., a Nevada corporation, and that the foregoing
Certificate of Designation, Preferences, and Rights of Series B Preferred Stock
was signed on behalf of said corporation by authority of its board of directors,
and said John T. Smolik acknowledged to me that said instrument to be the free
act and deed of said corporation.
WITNESS my hand and official seal, the day and year first
above written.
------------------------------------
Notary Public
(Notarial Seal)
STATE OF _____________ )
) SS.
COUNTY OF ___________ )
On this ____ day of November, 1999, personally appeared before
me, a Notary Public in and for the State and County aforesaid, Eric A. Wachter,
known to me to be the person described in and did say that he is the Secretary
of Photogen Technologies, Inc., a Nevada corporation, and that the foregoing
Certificate of Designation, Preferences, and Rights of Series B Preferred Stock
was signed on behalf of said corporation by authority of its board of directors,
and said Eric A. Wachter acknowledged to me that said instrument to be the free
act and deed of said corporation.
WITNESS my hand and official seal, the day and year first
above written.
------------------------------------
Notary Public
(Notarial Seal)
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<PAGE>
EXHIBIT C
TERM SHEET
$1 MILLION TERM CREDIT FACILITY
<TABLE>
<S> <C>
Borrower: Photogen, Inc. ("Borrower").
Lenders: Theodore Tannebaum and Robert J. Weinstein, M.D. ("Lenders").
Guarantor: Photogen Technologies, Inc. ("PTI").
Principal amount: $1,000,000.00.
Purpose: To fund working capital requirements in connection with
pre-clinical research and clinical testing of Borrower's
technologies.
Advances: The credit facility may be utilized in advances of $100,000
increments, upon 15 days' prior written notice to the Lenders.
Once repaid, no portion of the credit facility can be reborrowed.
Interest: The daily rate equivalent of 6% per annum calculated on the basis
of a 360-day year.
Amortization; maturity: The notes will be payable over five
years. Interest only will be payable on an
annual basis until maturity, at which time
all outstanding principal and interest will
be due and payable.
Prepayment: Prepayment will be permitted at any time and without penalty.
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
Collateral: The credit facility will be secured by a first priority lien on all of
the Borrower's present and future real and personal properties,
including all:
- accounts, chattel paper, tax refunds, contract rights,
options, leases, leasehold interests, letters of credit,
instruments, documents, documents of title;
- patents, trade secrets, know how, copyrights, trademarks,
trade names, software, data, licenses, goodwill;
- general intangibles, beneficial interests;
- goods, machinery, equipment, vehicles, furniture,
inventory;
- securities, cash or cash equivalents;
- real estate and improvements, fixtures; and
- products and proceeds (including without limitation
insurance and litigation proceeds) of the foregoing, all
accessions to the foregoing and all substitutions, renewals,
improvements and replacements of and additions to the
foregoing.
The lien will be granted to Dr. Weinstein as collateral
agent for the Lenders. The lien will be perfected by
appropriate filings with the secretary of state, county
recorder and U.S. Patent and Trademark Office.
Events of Default: Upon the occurrence of any of the following events, the notes will become
immediately due and payable and the Lenders will have the
right to, among other things, foreclose on the Collateral:
- failure to pay interest or principal under the notes when due;
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
- a material default by the Borrower or PTI in any agreement
or obligation to the Lenders or to any third party which is
not cured within the time period, if any, permitted in the
governing instrument for cure; or
- the Borrower, PTI or any of PTI's other subsidiaries:
becoming subject to bankruptcy proceedings (which, if filed
against the Borrower, are not dismissed within 90 days),
making a general assignment for the benefit of creditors, or
authorizing such entity to seek the protection of or relief
under the U.S. Bankruptcy Code or similar state laws
relating to insolvency, reorganization or any other
proceeding to modify or alter the rights of such entity's
creditors.
Miscellaneous: All terms, rights and other provisions of the credit facility
are subject to final negotiation and the execution and
delivery of mutually agreeable definitive documentation,
and approval by the disinterested directors of the Borrower
and PTI. Documentation will include a loan and security
agreement, a promissory note, a collateral agency
agreement and a guaranty.
</TABLE>
3
<PAGE>
Exhibit 10.35
PHOTOGEN TECHNOLOGIES, INC.
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made as of
February 18, 2000 by and among Photogen Technologies, Inc., a Nevada corporation
(the "COMPANY"), and the holders of the Company's Series B Convertible Preferred
Stock signatory hereto.
R E C I T A L S:
A. Pursuant to a Stock Purchase Agreement dated as of the date
hereof by and between the Company and the Holder (the "PURCHASE AGREEMENT"),
such Holder has acquired, or will acquire in the future, certain shares of
Series B Convertible Preferred Stock, $.01 par value per share (the "SERIES B
PREFERRED STOCK"), which Series B Preferred Stock is convertible into shares of
Common Stock, $.001 par value per share, of the Company (the "COMMON STOCK").
B. The parties desire to set forth herein their agreement on the
terms and subject to the conditions set forth herein related to the granting of
certain registration rights to the Holders relating to the Common Stock issuable
upon conversion of shares of Series B Preferred Stock.
A G R E E M E N T:
The parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"COMMISSION" shall mean the U.S. Securities and Exchange Commission.
"DEMAND REGISTRATION" means a registration by the Company for a public
offering of Registrable Securities on Form S-3 (or any successor form to Form
S-3) or any similar short-form registration statement, or a Form S-1 (or any
successor or equivalent registration form) only if the Company is not eligible
to use Form S-3 for that transaction, the reasonably anticipated aggregate price
to the public of which, net of underwriting discounts and commissions, if any,
would be at least $2,000,000.
"ELIGIBLE HOLDER" means a Holder that beneficially owns $250,000 or
more of Series B Stock (based on the purchase price of Series B Preferred Stock
in the Purchase Agreement) or Common Stock issued upon conversion of such amount
of Series B Preferred Stock.
<PAGE>
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
"HOLDERS" or "HOLDERS OF REGISTRABLE SECURITIES" shall mean each
purchaser of Series B Preferred Stock who is a party to this Agreement and any
Person who shall have acquired Registrable Securities from such purchaser as
permitted herein in a transaction pursuant to which registration rights are
transferred pursuant to Section 10 hereof.
"INITIATING HOLDERS" means Holders that collectively beneficially own
$1,000,000 or more of Series B Preferred Stock (based on the purchase price of
Series B Preferred Stock in the Purchase Agreement) or Common Stock issued upon
conversion of such amount of Series B Preferred Stock.
"PERSON" shall mean an individual, a partnership, a company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental or quasi-governmental entity, or any department,
agency or political subdivision thereof.
"REGISTRABLE SECURITIES" means (i) any shares of Common Stock issued
or issuable upon conversion of shares of Series B Preferred Stock, and (ii) any
shares of Common Stock issued or issuable in respect of the securities referred
to in clause (i) above upon any stock split, stock dividend, recapitalization or
similar event. The term "REGISTRABLE SECURITIES" EXCLUDES in all cases, however,
(a) Common Stock issued or issuable upon conversion of Series B Preferred Stock
that may be sold under Rule 144(k) promulgated under the Securities Act or
shares held by a Person to whom registration rights are not transferred pursuant
to Section 10 hereof, and (b) shares of Common Stock issued upon conversion of
Series B Preferred Stock that have been sold either in a transaction pursuant to
an effective registration statement under the Securities Act or pursuant to any
provision of Rule 144 promulgated under the Securities Act.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act.
"REGISTRATION EXPENSES" shall mean all expenses, other than Selling
Expenses, incurred by the Company in complying with Sections 2 or 3 hereof,
including without limitation, all registration, qualification and filing fees,
exchange listing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
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<PAGE>
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and the costs and fees of any accountants, attorneys or other
experts retained by the Holders or Holder.
2. DEMAND REGISTRATION.
(a) REQUESTS FOR REGISTRATION. At any time after April 1, 2000,
the Initiating Holders may request in writing that the Company engage in two
Demand Registrations, one such registration on or after April 1, 2000 and a
second on or after April 1, 2001. Within 10 days after receipt of any such
request, the Company will give written notice of such requested registration
to all other Eligible Holders. The Company shall include in such offering the
Registrable Securities of the Initiating Holders and those Eligible Holders
who have responded affirmatively within 10 days after the receipt of the
Company's notice. If the Demand Registration is not an underwritten offering,
the Company shall file for a so-called traditional "shelf registration" on
Form S-3 (or Form S-1) pursuant to which the Initiating Holders and Eligible
Holders participating in such registration may sell their Registrable
Securities from time to time at prevailing market prices directly, through
agents they designate, or through dealers.
(b) PRIORITY ON DEMAND REGISTRATION. If a Demand Registration is
an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities requested
to be included in such offering exceeds the number of Registrable Securities
which can be sold in such offering without adversely affecting the
marketability of the offering, the Company will include in such registration
(subject to the rights of the holder(s) of the Company's Series A Convertible
Exchangeable Preferred Stock (the "SERIES A PREFERRED STOCK") and to the
rights of other Persons under agreements existing as of the date hereof such
number of Registrable Securities allocated PRO RATA among the Holders thereof
based upon the number) of Registrable Securities owned by each such Holder
and the Company will provide an additional registration within 6 months
thereafter for Registrable Securities excluded from that offering. No
securities other than Registrable Securities hereunder shall be included in
such Demand Registration without the prior written consent of Initiating and
Eligible Holders who collectively hold Registrable Securities representing at
least 50% of the Registrable Securities subject to the Demand Registration,
except for securities relating to the Company's existing obligations to third
party demand or piggyback rights on a pro rata basis with the Registrable
Securities.
(c) RESTRICTIONS ON DEMAND REGISTRATION. The Initiating Holders
in the aggregate will be entitled to request two Demand Registrations
hereunder on or after the dates specified in paragraph (a) above (subject to
paragraph (b) above). A registration will not count as a permitted Demand
Registration until it has become effective (unless such Demand Registration
has not become effective due solely to the fault of the Initiating or
Eligible Holders participating in such registration, including a request by
such Holders that such registration be
3
<PAGE>
withdrawn). The Company may postpone the filing or the effectiveness of a
registration statement for a Demand Registration for up to 30 days in connection
with any Demand Registration requested between April 1, 2000 and June 30, 2000
or up to 90 days for any other Demand Registration if the Company determines in
good faith that such Demand Registration would reasonably be expected to have a
material adverse effect on any proposal or plan by the Company to engage in any
financing, acquisition or disposition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or similar
transaction or would require disclosure of any information that the board of
directors of the Company determines in good faith the disclosure of which would
be detrimental to the Company; provided, however, that in such event, the
Holders initially requesting such Demand Registration will be entitled to
withdraw such request and, if such request is withdrawn, such Demand
Registration will not count as a permitted Demand Registration hereunder and the
Company will pay any Registration Expenses in connection with such registration.
(d) SELECTION OF UNDERWRITERS. If the Demand Registration is
underwritten, the Initiating Holders will have the right to select the
investment banker(s) and manager(s) to administer an offering pursuant to the
Demand Registration, subject to the prior written approval of the Company,
which will not be unreasonably withheld or delayed.
(e) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement, so long as any Holder owns any Registrable Securities, the Company
will not grant to any Persons the right to request the Company to register
any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, which conflicts with or
is superior to the rights granted to the Holders hereunder, without the prior
written consent of the Holders of at least 50% of the Registrable Securities,
EXCEPT (i) for securities relating to the Company's existing obligations to
third party demand or piggyback rights on a pro rata basis with the
Registrable Securities, and (ii) for securities issued (or issuable upon
conversion or exercise of options, warrants, convertible instruments and
similar securities that are currently outstanding) to vendors, licensors,
lenders, Persons involved in joint ventures with the Company or its
affiliates, and similar Persons engaged in commercial relationships with the
Company.
3. PIGGYBACK REGISTRATIONS. (a) RIGHT TO PIGGYBACK. At any time
prior to April 1, 2002 that the Company shall propose to register Common Stock
under the Securities Act (other than in a registration on Form S-3 relating to
sales of securities to participants in a Company dividend reinvestment plan,
Forms S-4 or S-8 or any successor forms, or in connection with an acquisition or
exchange offer or an offering of securities solely to the existing shareholders
or employees of the Company), the Company shall give prompt written notice to
all Holders of Registrable Securities of its intention to effect such a
registration and, subject to Section 3(b) and the other terms of this Agreement,
shall include in such registration all Registrable Securities that are permitted
under applicable securities laws to be included in the form of registration
statement selected by the Company and with respect to which the Company
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<PAGE>
has received written requests for inclusion therein by the Holders within 10
days after the receipt of the Company's notice (each, a "PIGGYBACK
REGISTRATION").
(b) PRIORITY ON PIGGYBACK REGISTRATIONS. If a Piggyback Registration
is an underwritten registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the marketability
of the offering, the Company shall include in such registration, only as may be
permitted in the reasonable business judgment of the managing underwriters for
such registration:
(i) first, up to that number of securities the Company proposes to
sell;
(ii) second, up to that number of registrable securities requested to
be included in such registration by the holders of the Series A Preferred Stock;
(iii) third, up to that number of Registrable Securities requested to
be included in such registration by the Holders, PRO RATA among the Holders of
such Registrable Securities, on the basis of the number of shares owned by each
of such Holders, subject to the rights of other Persons under agreements
existing as of the date hereof; and
(iv) fourth, up to that number of other securities requested to be
included in such registration.
The Holders of any Registrable Securities included in such a registration shall
execute an underwriting agreement in form and substance satisfactory to the
managing underwriters.
(c) RIGHT TO TERMINATE REGISTRATION. If, at any time after giving
written notice of its intention to register any of its securities as set forth
in Section 3(a) and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to register such securities, the Company may, at its election, give
written notice of such determination to each Holder of Registrable Securities
and thereupon be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith as provided herein).
(d) SELECTION OF UNDERWRITERS. The Company shall have the right to
select the investment banker(s) and manager(s) to administer an offering
pursuant to a Piggyback Registration.
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4. EXPENSES OF REGISTRATION. Except as otherwise provided herein,
all Registration Expenses incurred in connection with registrations pursuant to
Section 2 shall be borne by the Company and all Selling Expenses relating to
securities registered on behalf of the Holders of Registrable Securities shall
be borne by such Holders. All Registration Expenses incurred in connection with
registrations pursuant to Section 3 shall be borne by the Company except for
Selling Expenses which shall be borne by such Holders.
5. HOLDBACK AGREEMENTS.
(a) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, for its own account during
the seven days prior to and during the 90-day period beginning on the
effective date of any underwritten Demand Registration (except (A) as part of
such underwritten registration, (B) pursuant to registration statements on
Form S-4 or Form S-8 or any successor form, (C) pursuant to a registration
statement then in effect or (D) as required under any existing contractual
obligation of the Company), unless the underwriters managing the registered
public offering otherwise agree, and (ii) to use reasonable efforts to cause
each holder of at least 5% (on a fully-diluted basis) of its outstanding
Common Stock, or any securities convertible into or exchangeable or
exercisable for Common Stock, purchased from the Company at any time after
the date of this Agreement (other than in a registered public offering) to
agree not to effect any public sale or distribution (including sales pursuant
to Rule 144) of any such securities during such periods (except as part of
such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.
(b) Each Holder agrees, in the event of an underwritten public
offering of Common Stock under a registration statement on Form S-1, S-3 or
S-4, not to effect any offer, sale, distribution or transfer, including a
sale pursuant to Rule 144 (or any similar provision then effect) under the
Securities Act (except as part of such registration), beginning on the date
of receipt of a written notice from the Company setting forth its intention
to effect such registration and ending on the earlier of (i) 180 days from
the date of receipt of such written notice or (ii) 90 days from the effective
date of such Registration Statement.
6. REGISTRATION PROCEDURES. Whenever the Company is under the
obligation to register Registrable Securities hereunder, the Company will use
all reasonable efforts to effect the registration and the sale of such
Registrable Securities, and pursuant thereto the Company will as expeditiously
as possible:
(a) subject to Section 2(c) and 3(a) hereof, prepare and file
with the Commission a registration statement within 45 days of the receipt of
notice from the Holder on any form for which the Company qualifies with
respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective (provided that before
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filing a registration statement or prospectus or any amendments or supplements
thereto, the Company will (i) furnish to the one counsel selected by the Holders
copies of all such documents proposed to be filed, which documents will be
subject to the review of such counsel, and (ii) notify each Holder of
Registrable Securities covered by such registration of any stop order issued or
threatened by the Commission);
(b) subject to Section 2(c), 3(b) and 6(e) hereof, prepare and
file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective for a period equal to the
shorter of (i) the time at which the registered shares are freely saleable
under Rule 144(k), or (ii) the time by which all securities covered by such
registration statement have been sold, and all Holders shall comply with
Company's reasonable requests in connection with such termination, and comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof
set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller;
(d) use all reasonable efforts to register or qualify such
Registrable Securities under the securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 6(d), (ii)
subject itself to taxation in any jurisdiction, or (iii) consent to general
service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading; provided, however, that the Company shall not be
required to amend the registration statement or
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supplement the Prospectus for a period of up to 90 days if the board of
directors determines in good faith that to do so would reasonably be expected to
have a material adverse effect on any proposal or plan by the Company to engage
in any financing, acquisition or disposition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer or
similar transaction or would require the disclosure of any information that the
board of directors determines in good faith the disclosure of which would be
detrimental to the Company, it being understood that the period for which the
Company is obligated to keep the Registration Statement effective shall be
extended for a number of days equal to the number of days the Company delays
amendments or supplements pursuant to this provision. Upon receipt of any notice
pursuant to this Section 6(e), the Holders shall suspend all offers and sales of
securities of the Company and all use of any prospectus until advised by the
Company that offers and sales may resume, and shall keep confidential the fact
and content of any notice given by the Company pursuant to this Section 6(e);
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the Holders
of a majority of the Registrable Securities being sold or the underwriters,
if any, reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities;
(i) make available for inspection by a representative of the
Holders of Registrable Securities included in the registration statement, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months beginning with the first day of the
Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder;
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(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification
of any Common Stock included in such registration statement for sale in any
jurisdiction, use all reasonable efforts promptly to obtain the withdrawal of
such order; and
(l) if the registration is an underwritten offering, use all
reasonable efforts to obtain a so-called "cold comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by cold comfort letters.
7. OBLIGATIONS OF HOLDERS. Whenever the Holders of Registrable
Securities sell any Registrable Securities pursuant to a Demand Registration,
such Holders shall be obligated to comply with the applicable provisions of the
Securities Act, including the prospectus delivery requirements thereunder, and
any applicable state securities or blue sky laws.
8. INDEMNIFICATION. (a) In connection with any registration
statement for a Demand Registration in which a Holder of Registrable Securities
is participating, the Company agrees to indemnify, to the fullest extent
permitted by applicable law, each such Holder of Registrable Securities, its
officers and directors and each Person who controls such Holder (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities,
expenses or any amounts paid in settlement of any litigation, investigation or
proceeding commenced or threatened to which each such indemnified party may
become subject under the Securities Act (collectively, "CLAIMS") insofar as such
Claim arose out of (i) any untrue or alleged untrue statement of material fact
contained, on the effective date thereof, in any such registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Holder expressly for use
therein, by such Holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such Holder with a sufficient number of copies of the same
or by such Holder's failure to comply with applicable securities laws. In
connection with an underwritten offering, the Company will indemnify the
underwriters, their officers and directors and each Person who controls the
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the Holders of Registrable
Securities.
(b) In connection with any registration statements for a Demand
Registration in which a Holder of Registrable Securities is participating, each
such Holder will furnish to the Company in writing such customary information as
the Company reasonably requests for use in
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connection with any such registration statement or prospectus (the "SELLER'S
INFORMATION") and, to the fullest extent permitted by applicable law, will
indemnify the Company, its directors and officers and each Person who controls
the Company (within the meaning of the Securities Act) against any and all
Claims to which each such indemnified party may become subject under the
Securities Act insofar as such Claim arose out of (i) any untrue or alleged
untrue statement of material fact contained, on the effective date thereof, in
any such registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto, (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements regarding Seller's Information therein not misleading or
(iii) any failure on the part of the Holder to comply with applicable securities
laws; provided that with respect to a Claim arising pursuant to clause (i) or
(ii) above, the material misstatement or omission is contained in such Seller's
Information; provided, further, that the obligation to indemnify will be
individual to each Holder and will be limited to the amount of proceeds received
by such Holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (but the failure to provide such notice shall not
release the indemnifying party of its obligation under paragraphs (a) and (b),
unless and then only to the extent that, the indemnifying party has been
prejudiced by such failure to provide such notice) and (ii) unless in such
indemnified party's reasonable judgment, based on written advice of counsel, a
conflict of interest between such indemnified and indemnifying parties may exist
with respect to such claim, permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party, based on
written advice of counsel, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnifying party shall not be liable to indemnify an
indemnified party for any settlement, or consent to judgment of any such action
effected without the indemnifying party's written consent (but such consent will
not be unreasonably withheld). Furthermore, the indemnifying party shall not,
except with the prior written approval of each indemnified party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release from all liability in respect of such claim or
litigation without any payment or consideration provided by each such
indemnified party.
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(e) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under clauses (a) and (b) above in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect not only the relative benefits received by the Company
(if any), the underwriters, the sellers of Registrable Securities and any other
sellers participating in the registration statement from the sale of shares
pursuant to the registered offering of securities for which indemnity is sought
but also the relative fault of the Company, the underwriters, the sellers of
Registrable Securities and any other sellers participating in the registration
statement in connection with the statement or omission which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company (if any), the
underwriters, the sellers of Registrable Securities and any other sellers
participating in the registration statement shall be deemed to be based on the
relative relationship of the total net proceeds from the offering (before
deducting expenses) to the Company (if any), the total underwriting commissions
and fees from the offering (before deducting expenses) to the underwriters and
the total net proceeds from the offering (before deducting expenses) to the
sellers of Registrable Securities and any other sellers participating in the
registration statement. The relative fault of the Company, the underwriters, the
sellers of Registrable Securities and any other sellers participating in the
registration statement shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the sellers of Registrable Securities and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(f) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and will survive the transfer of the Registrable Securities.
9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may
participate in any registration hereunder which is underwritten unless such
Holder (a) agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holder or Holders entitled hereunder
to approve such arrangements, (b) as expeditiously as possible notifies the
Company of the occurrence of any event as a result of which any prospectus
contains an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (c) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
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10. TRANSFER OF REGISTRATION RIGHTS. The rights granted to any Holder
under this Agreement may be assigned to any permitted transferee of Registrable
Securities, in connection with any transfer or assignment of Registrable
Securities by a Holder; provided, however, that: (a) such transfer is otherwise
effected in accordance with applicable securities laws, (b) if not already a
party hereto, the assignee or transferee agrees in writing prior to such
transfer to be bound by the provisions of this Agreement applicable to the
transferor, and (c) such transferee shall own Registrable Securities
representing at least 25,000 shares of Common Stock (as adjusted for any
combinations, consolidations, stock distributions, stock dividends or other
recapitalizations with respect to such shares).
11. INFORMATION BY HOLDER. Each Holder shall furnish to the Company
such written information regarding such Holder and any distribution proposed by
such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement and shall promptly notify the Company
of any changes in such information.
12. EXCHANGE ACT COMPLIANCE. The Company shall comply with all of the
reporting requirements of the Exchange Act then applicable to it and shall
comply with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Registrable Securities. The Company shall cooperate with each Holder in
supplying such information as may be necessary for such Holder to complete and
file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
13. TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Agreement shall terminate and be of no further force and
effect, as to any particular Holder, at such time as all shares of Common Stock
issuable upon conversion of Series B Preferred Stock held by such Holder are
saleable under Rule 144(k).
14. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the Holders of Registrable Securities
in this Agreement without the prior written consent of the Initiating Holders
who hold at least 50% of the Registrable Securities collectively held by the
Initiating Holders.
(b) REMEDIES. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. The parties hereto
agree and acknowledge that money damages may not be an adequate
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remedy for any breach of the provisions of this Agreement and that any party may
in its sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce or prevent
violation of the provisions of this Agreement; provided, however, that in no
event shall any Holder have the right to enjoin, delay or interfere with any
offering of securities by the Company.
(c) AMENDMENTS AND WAIVERS. Except as otherwise provided herein,
the provisions of this Agreement may be amended or waived only with the prior
written consent of the Company and Initiating Holders who hold at least 50%
of the Registrable Securities collectively held by the Initiating Holders (in
which case, such amendment shall be binding upon all Holders, including
Holders that did not specifically consent to the amendment); provided,
however, that without the prior written consent of all the Holders, no such
amendment or waiver shall reduce the foregoing percentage required to amend
or waive any provision of this Agreement.
(d) SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto,
and shall inure to the benefit and be enforceable by each Holder of
Registrable Securities from time to time. In addition, whether or not any
express assignment has been made, the provisions of this Agreement which are
for the benefit of Holders of Registrable Securities are also for the benefit
of, and enforceable by, any permitted transferee of Registrable Securities in
accordance with Section 10 hereof.
(e) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(f) COUNTERPARTS; FAX SIGNATURES. This Agreement may be executed
in two or more counterparts, any one of which need not contain the signatures
of more than one party, but all such counterparts taken together will
constitute one and the same Agreement. This Agreement may be executed by a
signature page delivered by fax transmission, which shall have the same
effect as if the signature page was an original.
(g) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
(h) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the laws of
the State of New York without
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regard to principles of conflicts of laws, except that all issues concerning the
relative rights of the Company and its shareholders shall be governed by Nevada
State Law, without giving effect to the principles thereof relating to conflicts
of laws.
(i) NOTICES. All notices, demands and requests of any kind to be
delivered to any party in connection with this Agreement shall be in writing
and shall be deemed to have been duly given if personally delivered or if
sent by nationally-recognized overnight courier or by registered or certified
airmail, return receipt requested and postage prepaid or by facsimile
transmission, addressed as follows:
(j) if to the Company, to:
Photogen Technologies, Inc.
7327 Oak Ridge Highway, Suite B
Knoxville, Tennessee 37931
Attention: President
Facsimile: (423) 769-4013
with a copy to:
Grippo & Elden
Suite 3600
227 West Monroe Street
Chicago, Illinois 60606
Attn: Theodore Grippo, Esq.
Facsimile: (312) 558-1195
(ii) if to a Holder, to such Holder's most recent address in the stock
records of the Company.
(k) ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding understanding and agreement between the parties with
regard to the subject matter hereof.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
PHOTOGEN TECHNOLOGIES, INC.
By: /s/ Timothy Scott
-------------------------------
Name: Timothy Scott
Title: President
HOLDER
----------------------------------
By:
-------------------------------
Name:
Title:
15
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Exhibit 10.36
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR
PORTIONS OF THIS EXHIBIT PURSUANT TO RULE 24B-2
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
[Photogen Letterhead]
January 18, 2000
BY FAX (408/764-4850) AND FEDERAL EXPRESS
Coherent Laser Group
5100 Patrick Henry Drive
Santa Clara, CA 95054
Attention: Mr. Michael Armas
RE: COHERENT SOFTWARE DISTRIBUTION AGREEMENT ("DISTRIBUTION AGREEMENT")
Dear Mr. Armas:
This letter sets out the agreement between Photogen, Inc. ("Photogen")
and the Laser Group of Coherent, Inc. ("Coherent") regarding a license to
distribute certain software Photogen developed.
1. This Distribution Agreement applies to the software product described
in Exhibit A to this letter, together with the documentation Photogen
provides with that software for distribution to end users and any
maintenance modifications that correct errors resulting from incorrect
operation of the object code of that software (the "Software"). The
Software does not include any update, new version or enhancement unless
Photogen, in its sole discretion, adds that item and related fees to
Exhibit A. A "Software Copy" is an exact object code copy of the
Software in machine readable form, together with an exact copy of the
end-user documentation included in the definition of the Software, made
by or on behalf of Photogen. Software Copies may be sold in disk form
or as part of a software/interface hardware package.
2. Photogen grants to Coherent a license: (a) to license Software Copies
for use only with laser systems manufactured by Coherent or other laser
manufacturers ("Laser Systems") and only directly to end-user customers
who will use the software only for qualitative purposes; (b) to use the
Software only to test or demonstrate Laser Systems to prospective end
users; and (c) to use Photogen's service marks and trademarks
designated on Exhibit A to market the Software in accordance with
Photogen's prior written approval. Coherent may license the Software to
end users outside the United States, provided Coherent (at its own
expense) demonstrates
<PAGE>
Coherent Software Distribution Agreement
January 18, 2000
Page 2 of 6
compliance with applicable legal and regulatory requirements, such as
necessary export licensing.
3. The license granted to Coherent in paragraph 2 is exclusive; except
that (a) if Coherent fails to meet the "Minimum Performance Criteria"
in Exhibit A, the license will become non-exclusive with respect to
Coherent upon written notice by Photogen; and (b) Photogen reserves for
itself the right to use the Software for research, development and
similar activities Photogen conducts or engages third parties to
conduct and reserves all other rights not expressly granted to Coherent
in this Distribution Agreement.
4. Under all circumstances, as between the parties, Photogen retains: (a)
all title to and (except as expressly licensed herein) all rights to
the Software, all copies and derivative works thereof (by whomever
produced) and all related documentation and materials; (b) all of its
service marks, trademarks, tradenames or any other designations; (c)
all copyrights, patent rights, trade secret rights, and all other
intellectual and industrial property rights of any sort in the
Software.
5. Coherent will not distribute or license a Software Copy except pursuant
to an enforceable End User License Agreement signed by the end user in
the form set forth in Exhibit B hereto or a shrink-wrap or "click-on"
version of the same agreement that is packaged and delivered to the end
user in the manner specified by Photogen in writing. If a shrink-wrap
or click-on agreement is used, Coherent will accept returns in
accordance with the procedure specified in the packaging accompanying
the Software Copy.
6. Software Copies are delivered F.O.B. Photogen's principal office in
Knoxville, Tennessee. Coherent will pay Photogen the Unit Price for
each Software Copy as set forth in Exhibit A. Coherent will also pay
all charges, including transportation charges and insurance premiums
and shall be responsible for all taxes (except Photogen's U.S. income
taxes) in connection with the subject matter of this Distribution
Agreement, duties and other governmental assessments. Coherent will
provide Photogen with quarterly nonbinding good faith forecasts of its
anticipated requirements for Software Copies and shipping dates for the
6-month periods following those forecasts.
7. During the term of this Distribution Agreement, Photogen will: (a)
inform Coherent within a reasonable time of any substantive changes in
the Software or delivery schedules; (b) provide Coherent the most
current commercial release or version of the Software; (c) use its
reasonable efforts to fill (by full or partial shipment) Coherent's
orders for Software Copies, which are accepted by Photogen at its main
office (which acceptance will not be unreasonably withheld) within 60
days after receipt of order insofar as practicable and consistent with
Photogen's then-current lead-time schedule, shipping schedule, and
access to supplies on acceptable terms; (d) provide one standard
training program for Coherent personnel at Coherent's main office on a
schedule reasonably acceptable to the parties; and (e) use its
reasonable efforts to provide
<PAGE>
Coherent Software Distribution Agreement
January 18, 2000
Page 3 of 6
support and maintenance services relating to the Software directly to
Coherent, but not to end users, during the term of this Distribution
Agreement.
8. Coherent represents and warrants to, and agrees with Photogen, that
Coherent will:
(a) not modify, create any derivative work of, or include in any
other software or make any copies of the Software or any
portion thereof;
(b) not delete, alter, obscure, add to or fail to reproduce in and
on any Software Copy and media the name of the Software and
any copyright, trademark, patent or other notices appearing in
or on any copy, media or master or package materials provided
by Photogen or which may be required by Photogen at any time;
(c) not reverse assemble, decompile, reverse engineer or otherwise
attempt to derive source code (or the underlying ideas,
algorithms, structure or organization) from the Software or
from any other information;
(d) use its best efforts to successfully market, distribute, and
support Software Copies within the scope of the license in
paragraph 2, including through (i) Coherent affiliates (as
defined in regulations under the Securities Exchange Act of
1934), and (ii) agents and sublicensees that Photogen approves
in its sole discretion in writing prior to their appointment
by Coherent;
(e) use the designated trademarks and other names associated with
the Software, it being agreed that such use (and any related
goodwill) shall be solely for Photogen's benefit; and Coherent
will not otherwise use or register (or make any filing with
respect to) any trademark, name or other designation or
copyrightable works relevant to the subject matter of this
Distribution Agreement anywhere in the world; and will not
contest anywhere in the world the use by or authorized by
Photogen of any trademark, name or other designation or
copyright relevant to the subject matter of this Distribution
Agreement or application or registration therefore, during the
term of this Distribution Agreement;
(f) keep Photogen informed as to any problems encountered with the
Software and any resolutions arrived at for those problems,
and communicate promptly to Photogen any and all
modifications, design changes or improvements of the Software
suggested by any end user, customer, employee, sublicensee or
agent; it being agreed by Coherent that Photogen shall have
and is hereby assigned any and all right, title, and interest
in and to any such suggested modifications, design changes, or
improvements of the Software, without the payment of any
additional consideration therefore either to Coherent, or its
employees, agents or customers and that Coherent will fully
cooperate with Photogen in this regard;
<PAGE>
Coherent Software Distribution Agreement
January 18, 2000
Page 4 of 6
(g) maintain a file of the name and address of all persons and
entities to which it distributes a Software Copy, the serial
number designation of the Software Copy, the date of delivery
and the End User License Agreement, and any other information
necessary to calculate payments due Photogen under this
Distribution Agreement; and permit Photogen or its
representative to examine and audit those records, records
relevant to license fees and any related records during
reasonable business hours (and Coherent will pay Photogen's
audit expenses if the audit uncovers a 5% or more deficiency
in payments);
(h) comply with applicable U.S. and foreign laws and regulations
covering its activities under this Distribution Agreement, and
not export or re-export, or allow the export or re-export of
any product, technology or information it obtains or learns
pursuant to this Distribution Agreement (or any direct product
thereof) in violation of this Distribution Agreement and any
such laws, restrictions or regulations; and
(i) use, in addition to and without in any way limiting Coherent's
other obligations hereunder, all methods to protect Photogen's
rights with respect to the Software, Software Copies and
Proprietary Information as Coherent uses to protect its own or
any third party's software, confidential information or rights
of a similar nature.
9. It is anticipated that during the term of this Distribution Agreement
Photogen shall disclose proprietary information to Coherent. The
parties agree that the disclosure of such proprietary information shall
be governed by the terms of the Proprietary Information Agreement
attached hereto as Exhibit C.
10. This Distribution Agreement will be in effect for a term of two years
from the date of Coherent's acceptance and will automatically terminate
unless: (a) it is renewed by a written agreement executed by both
parties expressly providing for renewal; or (b) Coherent meets the
performance criteria specified in Exhibit A, Unilateral Extension
Performance Criteria. Photogen may terminate this Distribution
Agreement at any time during the term upon written notice to Coherent
if Coherent: (c) files or becomes subject to a petition under the U.S.
Bankruptcy Code or becomes insolvent; (d) sells, distributes or
otherwise disposes of all or substantially all of its assets, or any
other change occurs in Coherent's business affairs which has a material
adverse effect on its ability to perform under this Distribution
Agreement; (e) fails to pay amounts owed to Photogen in accordance with
Exhibit A; or (f) commits any material breach or default of any other
provision of this Distribution Agreement. Termination is not the sole
remedy under this Distribution Agreement and, whether or not
termination is effected, all other remedies will remain available.
<PAGE>
Coherent Software Distribution Agreement
January 18, 2000
Page 5 of 6
11. Upon termination of this Distribution Agreement: (a) all amounts owed
by Coherent to Photogen will become immediately due and payable; (b)
Coherent will cease using the trademarks, service marks and other
designations of Photogen, cease representing itself as a distributor
and/or licensee of Photogen, and return all property (including
Proprietary Information and Software Copies) belonging to Photogen; (c)
Coherent will furnish to Photogen a complete list of all of Coherent's
end users of the Software; (d) all unfilled orders for Software Copies
by Coherent will be canceled; and (e) the license in paragraph 2 will
terminate (but not the End User License Agreement) and Coherent will
cease distributing or licensing any Software or Software Copies. Except
for paragraphs 2, 7 and 8(d), the provisions of this Distribution
Agreement survive termination or expiration of this Distribution
Agreement.
12. Except for the warranty made directly to end users in the End User
License Agreement, PHOTOGEN MAKES NO WARRANTIES TO ANY PERSON WITH
RESPECT TO THE SOFTWARE OR SOFTWARE COPIES OR ANY SERVICES OR LICENSES
AND DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT. Coherent will be responsible for all warranty returns
from end users and will be entitled only to credit for amounts paid to
Photogen for properly returned Software Copies that are not replaced.
However, Photogen will indemnify, defend and hold Coherent harmless
from and against all claims, allegations, loss, liability (including
settlement payments), expenses (including reasonable attorneys' fees
and expenses) Coherent incurs that arise out of or relate to any
finding by a court of competent jurisdiction that the Software
infringes on the intellectual property rights of any third party.
13. Coherent will indemnify, defend and hold Photogen harmless from and
against all claims, allegations, loss, liability (including settlement
payments), expenses (including reasonable attorneys' fees and expenses)
Photogen incurs that arise out of or relate to any breach of this
Distribution Agreement or other wrongful act or omission by Coherent.
Coherent will maintain comprehensive general liability insurance
coverage (which will include products and completed operations hazards)
with limits of at least $2,000,000 for each occurrence and will name
Photogen as an additional insured.
14. Notwithstanding anything to the contrary, Photogen will not be liable
with respect to any subject matter of this Distribution Agreement under
any contract, negligence, strict liability or other legal theory (a)
for any amounts in excess, in the aggregate, of the amounts paid to
Photogen under this Distribution Agreement, (b) for any incidental or
consequential damages or for lost data or business interruption, (c)
for cost of procuring substitute goods, technology or services, or (d)
for loss or corruption of data or for interruption of use of a Laser
System.
<PAGE>
Coherent Software Distribution Agreement
January 18, 2000
Page 6 of 6
15. This Distribution Agreement: (a) does not render Photogen and Coherent
are partners, joint venturers or agents of the other, and neither party
will be responsible for the liabilities of the other party; (b) may not
be assigned or delegated without the prior written consent of the other
party; (c) will be governed by the internal laws of Tennessee (and not
the law of conflicts); (d) together with its Exhibits, contains the
entire agreement of the parties concerning the subject matter hereof
and supersedes all prior negotiations, representations and agreements;
and (e) together with its Exhibits, supersedes any inconsistent terms
in any purchase order or other business form of either party. Notices
under this Distribution Agreement will be legally effective only if in
writing and received by the addressee, delivered by a courier service,
or mailed by certified or registered mail, return receipt requested, or
faxed to a party at its address set forth on page one of this
Distribution Agreement. If any provision of this Distribution Agreement
is held to be illegal or unenforceable, that provision shall be limited
or eliminated to the minimum extent necessary so that this Distribution
Agreement shall otherwise remain in full force and effect and
enforceable.
Please indicate Coherent's agreement to the foregoing by returning a
countersigned copy of this letter to me.
Photogen, Inc.
By: /S/ ERIC WACHTER
---------------------------------
Its: VICE PRESIDENT AND SECRETARY
---------------------------------
Accepted and Agreed to:
Coherent, Inc.
By: /S/ SCOTT MILLER
----------------------------
Its: SR VP
----------------------------
Date: 1-19-00
---------------------------
<PAGE>
EXHIBIT A
PRODUCTS AND PRICING
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION UNIT PRICE
- ------------------- ----------
<S> <C>
PulseView (-TM-)* ver. 2.6 Software Package (CD-ROM, installation
and user guide) and PulseView (-TM-) Interface Adapter, IST/LSA Ver. 2.6 $[****]
</TABLE>
PAYMENT TERMS
During the first 90 days of this Distribution Agreement, Coherent will pay the
Unit Price to Photogen as follows: 50% on order and 50% on delivery. Thereafter,
Coherent will pay the Unit Price on terms of 30 days net.
MINIMUM PERFORMANCE CRITERIA
Coherent will order no less than 25 Product Units within 90 days of the date of
this Distribution Agreement, and no less than an additional 25 Product Units
after that 90-day period during the Term of Agreement (50 Product Units, in
total, during the Term of Agreement). All Product Units must be ordered in
multiples of 25 Units or more per order.
UNILATERAL EXTENSION PERFORMANCE CRITERIA
Coherent may, solely at its discretion, extend this Distribution Agreement for
an additional period up to the specified Term of Agreement upon placement of
orders constituting a cumulative quantity of 400% or more of that specified
under terms of the Minimum Performance Criteria.
TERM OF AGREEMENT
The term of this Distribution Agreement shall be two years.
[****] REPRESENTS MATERIALS WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED
<PAGE>
TRADEMARKS
PulseView (-TM-)* (U.S. trademark registration pending; name may be subject to
change prior to product release)
Photogen (-TM-) (U.S. trademark registration pending)
<PAGE>
EXHIBIT B
END-USER LICENSE AGREEMENT
By opening the Software, packaging, clicking on the "license accept" button
during Software installation, or installing, copying or otherwise using the
Software, you agree to be bound by the terms of this EULA. IF YOU DO NOT AGREE
TO THE TERMS OF THIS EULA, WE ARE UNWILLING TO LICENSE THE SOFTWARE TO YOU AND
YOU MUST CLICK ON THE "CANCEL" BUTTON. In that case, you are not permitted to
use or copy the Software, and you must promptly contact Coherent, Inc.
("Coherent") for instructions on return of the product(s) for a refund.
This End-User License Agreement ("EULA") is a legal agreement between you
(a single entity), a user of PulseView-TM- computer software, the associated
media, certain hardware accompanying the computer software, and any printed
materials (together, the "Software") developed by Photogen, Inc.
("Photogen," "we" or "us").
1. This EULA grants you a non-sublicensable, nonexclusive right to use the
Software only with a laser or related equipment in accordance with the
documentation accompanying the Software and only for qualitative purposes in
research, development and similar activities. This ELUA does not grant you any
license to use the Software for commercial purposes, including without
limitation, manufacturing, or any purposes for which regulatory approval is
required, for any purposes involving human research or medical treatment, or in
any other way that violates any law or regulation or this EULA. The Software is
not designed or intended for use in environments requiring fail-safe performance
or in any other critical application. The Software has not been tested or
designed for use in medical environments or for any clinical purpose. The data
exhibited by the Software is for qualitative purposes only, and we do not
warrant the accuracy of any such data.
2. Photogen owns the copyright to the Software. Accordingly, the Software
is protected by copyright laws and international copyright treaties, as well as
other intellectual property laws and treaties. The Software is licensed, not
sold.
3. Your license to the Software is subject to the following restrictions:
(a) As between the parties, Photogen retains all title to and
ownership of all copyright, patent, trade secret and other
intellectual property and proprietary rights associated with the
Software, including all documentation. You may not reverse
engineer, decompile, or disassemble the Software, or attempt to
reconstruct or discover any source code or underlying ideas or
algorithms relating to the Software.
(b) The Software is licensed as a single product. Its component parts
may not be separated or copied for use on more than one computer
at any one time.
(c) You may not rent, lease, lend or otherwise transfer the Software.
<PAGE>
(d) Without prejudice to any other rights, Photogen or Coherent may
terminate your right to use the Software under this EULA if you
fail to comply with the terms and conditions of this EULA. In that
event, you must destroy all copies of the Software and all of its
component parts.
(e) Software labeled as an upgrade replaces and/or supplements any
prior version of the Software. You may use the resulting upgraded
product only in accordance with the terms of this EULA.
4. You may copy the Software onto one or more computers but only one copy
of the Software may be used at any one time. You may also make a single back-up
copy of the Software and use that copy solely for archival purposes. Except for
the foregoing, you may not make any other copy or modify any aspect of the
Software, including the printed materials accompanying the Software. All rights
not specifically granted under this EULA are reserved by Photogen.
5. You will not, directly or indirectly, export or transmit the Software
or related documentation and technical data.
6. You may use the Software in connection with a government project on the
following terms: As defined in FAR section 2.101, DFAR section
252.227-7014(a)(1) and DFAR section 252.227-7014(a)(5) or otherwise, all
Software and accompanying documentation are "commercial items," "commercial
computer software" and/or "commercial computer-software documentation."
Consistent with DFAR section 227.7202 and FAR section 12.212, any use,
modification, reproduction, release, performance, display, disclosure or
distribution of the Software and documentation by or for the U.S. Government
will be governed solely by the terms of this EULA and will be prohibited except
to the extent expressly permitted by the terms of this EULA. You will ensure
that each copy used or possessed by or for the government is labeled to reflect
the foregoing.
7. Product support for the Software is not provided by Photogen. For
product support, please refer to your applicable Coherent support contact or
representative.
8. This EULA will be governed by the internal laws of Tennessee, United
States of America.
<PAGE>
LIMITED WARRANTY
LIMITED WARRANTY. Photogen warrants to you, the end user, that (a) the
Software will perform substantially in accordance with the accompanying written
materials for a period of one (1) year from the date of receipt, and (b) any
Photogen hardware accompanying the Software will be free from defects in
materials and workmanship under normal use and service for a period of one (1)
year from the date of receipt. You must report any problems with the Software or
hardware to Coherent. This Limited Warranty covers only problems reported to
Coherent during the warranty period.
END USER REMEDIES. Photogen's entire liability and your exclusive remedy
under this Limited Warranty shall be, at Photogen's option, either (a) return of
the price paid for the Software, or (b) repair or replacement of the Software or
hardware that does not meet this Limited Warranty and which is returned to
Coherent with appropriate documents verifying the delivery date. This Limited
Warranty is void if failure of the Software or hardware has resulted from
accident, abuse, misuse or misapplication. Any replacement Software or hardware
will be warranted for the remainder of the original warranty period or thirty
(30) days, whichever is longer.
NO OTHER WARRANTIES. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
PHOTOGEN DISCLAIMS ALL OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING,
BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NON-INFRINGEMENT AND/OR ACCURACY OF DATA, WITH REGARD TO THE
SOFTWARE, THE ACCOMPANYING WRITTEN MATERIALS, AND ANY ACCOMPANYING HARDWARE.
THIS LIMITED WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS. YOU MAY HAVE OTHER RIGHTS
WHICH VARY FROM STATE TO STATE.
NO LIABILITY FOR CONSEQUENTIAL OR PUNITIVE DAMAGES. To the maximum
extent permitted by applicable law, Photogen will not be liable for any
consequential or punitive damages whatsoever (including, without limitation,
special, incidental, consequential, or indirect damages for personal injury,
loss of profits, business interruption, loss of information, or any other
pecuniary loss) arising out of the use or inability to use the Software, even if
Photogen has been advised of the possibility of such damages. Photogen's entire
monetary liability under any provision of this EULA or otherwise shall be
limited to the amount actually paid by you for the Software and/or Photogen
hardware. Because some states or other local jurisdictions do not allow the
exclusion or limitation of liability for consequential, incidental or punitive
damages, the above limitation may not apply to you.
<PAGE>
EXHIBIT C
PROPRIETARY INFORMATION AGREEMENT
WHEREAS, COHERENT, INC., a Delaware corporation, hereinafter referred to
as COHERENT, makes and sells lasers, laser accessories, and laser systems and
medical instrumentation;
WHEREAS, PHOTOGEN, INC. (hereinafter referred to as PARTY) believes it has
information or ideas relating to its PulseView-TM- software product, including,
without limitation, the computer code, algorithms, know-how related thereto
(hereinafter referred to as Confidential Information), which may assist COHERENT
in connection with the Coherent Software Distribution Agreement between COHERENT
and PARTY dated January 18, 2000 (hereinafter referred to as Distribution
Agreement), and desires to disclose said Confidential Information to COHERENT;
WHEREAS, COHERENT is willing to receive said Confidential Information
under certain conditions;
NOW, THEREFORE, in consideration of the promises exchanged herein,
COHERENT and PARTY agree as follows:
(1) COHERENT will not use said Confidential Information except for
purposes of the Distribution Agreement as set forth hereinabove. COHERENT will
not disclose said Confidential Information and shall restrict access to
Confidential Information to only such authorized employees and other agents who
have a need for access to the Confidential Information in connection with their
activities as contemplated by the Distribution Agreement, and will take all
steps necessary to ensure that such employees and agents comply with the terms
hereof.
(2) All Confidential Information disclosed hereunder shall be in writing,
marked with the word CONFIDENTIAL, SECRET, or PROPRIETARY and dated in the first
instance or, if oral, shall be promptly confirmed in writing, marked with the
word CONFIDENTIAL and dated. This Agreement shall not apply to Confidential
Information disclosed after the date hereof in writing, not marked as set forth
herein or to Confidential Information disclosed after the date hereof orally and
not confirmed in writing and marked within thirty (30) days of the initial oral
disclosure. This Agreement shall also apply to Confidential Infomration
disclosed after February 25, 1999 which otherwise falls within the definition as
set forth herein and which is marked CONFIDENTIAL or confirmed in writing and so
marked within thirty (30) days after the date hereof.
(3) The commitments set forth in (1) above shall not extend to any
disclosure of Confidential Information:
(a) Which is generally available to the public prior to its
disclosure; or
(b) Which is known to COHERENT prior to the disclosure thereof as
evidenced by written
<PAGE>
and dated material in its possession; or
(c) Which, through no fault of COHERENT (including its agents,
representatives, and / or employees), becomes available to the public after the
disclosure hereof; or
(d) Which is disclosed to COHERENT by a third party having a bona fide
right to do so; or
(e) Which is approved for release by the written authorization of
PARTY; or
(f) Which is disclosed pursuant to the requirement of a government
agency or by operation of law, provided COHERENT notifies PART of such
requirement and provides reasonable cooperation with PARTY'S efforts to restrict
such disclosure; or
(g) Which is developed by COHERENT completely independent of
Confidential Information provided under this Agreement as evidenced by
COHERENT's written records or other competent written evidence;
(h) Which becomes available to the public despite COHERENT having taken
the same level of care to safeguard said Confidential Information as it would
its own proprietary information; or
(i) Which is more than five years after the date of initial disclosure.
(4) This Agreement covers only information disclosed during the term of
the Distribution Agreement. In the event of any inconsistency between the terms
of this Agreement and the Distribution Agreement, the provisions of the
Distribution Agreement shall control.
(5) COHERENT acknowledges that unauthorized disclosure or use of
Confidential Information could cause irreparable harm and significant injury to
PARTY, the amounts of which would be difficult to ascertain. Accordingly,
COHERENT agrees that PARTY shall have the right to seek and obtain immediate
injunctive relief from breaches of this Agreement, in addition to any other
rights and remedies it may have.
(6) PARTY represents that it has the legal right to make disclosures of
Confidential Information under this Agreement.
(7) No representation or warranty is made as to the accuracy, completeness
or technical or scientific quality of the Confidential Information disclosed
hereunder.
(8) This Agreement shall be deemed to have been entered into and shall be
construed in accordance with the laws of the State of California.
(9) Any materials or documents of PARTY which have been furnished to
COHERENT will be promptly returned to PARTY upon PARTY's request. Historical
information copies may be kept by the Party's attorney for purposes of file
continuity. COHERENT's attorney shall provide PARTY written confirmation of the
receipt of such information.
<PAGE>
(10) The undersigned represent and warrant that they are legal
representatives of, and have the authority to execute this Agreement on behalf
of their respective parties. In the case of COHERENT, this Agreement shall be
valid and binding only if it is signed by an Officer of COHERENT.
PHOTOGEN, INC. COHERENT, INC.
By: /S/ ERIC WACHTER By: /S/ SCOTT MILLER
--------------------------------- ---------------------------
Title: VICE PRESIDENT AND SECRETARY Title: SR VP
------------------------------- ------------------------
Date: 18 JAN 2000 Date: 1-19-00
-------------------------------- -------------------------
<PAGE>
Exhibit 10.37
EQUIPMENT LEASE (WITH ALL SCHEDULES)
This Equipment Lease, No. 8520 (this Equipment Lease and all Equipment
Schedules collectively be referred to herein as "Agreement") made this 25th day
of October, 1999, between Picker Financial Group, L.L.C., a Limited Liability
Company, 585 Miner Road, Cleveland, Ohio 44143 ("Lessor"), and Photogen, Inc., a
Corporation, 7327 Oak Ridge Highway, Knoxville, TN 37931 ("Lessee").
In consideration of the mutual covenants and promises hereinafter set
forth, the parties hereto agree as follows:
1. UPGRADES: LESSOR SHALL, DURING THE TERM OF ANY EQUIPMENT SCHEDULE,
MAKE AVAILABLE TO LESSEE, AT LESSOR'S THEN CURRENT RATES AND TERMS, UPGRADES TO
THE EQUIPMENT THEN BEING OFFERED BY PICKER INTERNATIONAL, INC., AND AVAILABLE TO
LESSOR.
2. PROPERTY LEASED: Lessor hereby rents and leases to Lessee and Lessee
hereby rents and leases from Lessor each unit of Equipment described on one or
more Schedules executed pursuant to the terms hereof. Each Schedule shall be
deemed an independently assignment and separate lease contract incorporating the
terms and conditions of this Lease. The word "Equipment" as used herein shall
mean the medical diagnostic equipment, upgrades, optional equipment, software
license, fixtures or other personal property more specifically described on a
Schedule, together with all parts, replacements, additions, repairs, accessions
and accessories incorporated therein or affixed thereto. Options and/or
accessories, including but not limited to developmental options, which are
subject to backorder may be described in separate Schedules at the option of
Lessor. To the extent that the terms of any Schedule conflict with the terms of
this Lease, the terms of such Schedule shall prevail. To the extent that Article
2A of the Uniform Commercial Code ("Code") applies, by executing this Agreement
Lessee agrees that this Agreement shall constitute a "finance lease" as defined
by the Code; and Lessee represents and warrants that Lessee has been informed or
advised in writing by Lessor (i) of the identity of the supplier (by reflection
in the applicable Schedule) ("Supplier"), (ii) that Lessee may have rights under
the related supply contract and (iii) that Lessee may contact the Supplier for a
description of such rights. Lessee shall be deemed to have irrevocably accepted
the Equipment on the earlier of (1) the date reflected in a complete and
properly executed Certificate of Acceptance which is delivered to Lessor or (2)
first clinical use of the Equipment by Lessee ("Rental Commencement Date").
Acceptance pursuant to subsection (1) or (2) of this Section shall constitute
Lessee's warranty and representation that it has unconditionally accepted the
Equipment. If Lessee properly rejects the Equipment by providing Lessor with
written notice of non-acceptance specifying the reasons therefor within ten (10)
days after completion of installation and first clinical usage, (a) Lessor and
Lessee shall be relieved of all obligations under such Schedule; (b)
-1-
<PAGE>
Lessor shall retain any Advance Lease payments as liquidated damages for loss of
a bargain and not as a penalty, and (c) Lessee shall retain all rights and
obligations under any purchase order respecting the Equipment.
3. SELECTION OF EQUIPMENT: LESSEE ACKNOWLEDGES AND AGREES THAT THE
EQUIPMENT LEASED UNDER EACH SCHEDULE WAS SELECTED BY LESSEE AND PURCHASED BY
LESSOR FOR LEASE TO LESSEE, AND THAT LESSEE IS SATISFIED THAT THE EQUIPMENT IS
SUITABLE FOR LESSEE'S PURPOSES.
4. LEASE TERM: This Agreement will become effective as of the date
shown above upon its execution by both Lessee and Lessor. The Schedule term will
commence on the first day of the month or quarter, as applicable ("Commencement
Date"), following the Rental Commencement Date, and shall continue for the term
stated on the Applicable Schedule ("Initial Term"). If Lessee does not, prior to
the expiration of the Initial Term, select any of the end-of-term options set
forth in the Schedule, Lessor may either terminate the applicable Schedule and
remove the Equipment, or extend the term as provided in Section 14.
5. RENT: The aggregate rent payable with respect to the Equipment shall
be in the amount shown on the applicable Schedule. Lessee shall pay to Lessor
the aggregate rental for the Equipment for the Initial Term, such rental to be
payable in the number and in the amount of successive monthly or quarterly
installments indicated on the applicable Schedule. Each installment is due and
payable in advance on the first day of each calendar month or quarter until the
aggregate rent is fully paid. If the Rental Commencement Date of any Schedule
shall be other than the first day of the month or quarter, as the case may be,
Lessee shall make rental payments ("Interim Rent") equal to one-thirtieth (1/30)
of the monthly rent or one-ninetieth (1/90) of the quarterly rent set forth in
the Schedule for each day from and including the Rental Commencement Date,
through and including the last day of the month or quarter prior to the
beginning of the Initial Term. Interim Rent is due and payable concurrently with
the first rental payment of the Initial Term. All rent shall be paid at Lessor's
place of business shown above, or such other place as Lessor may designate in
writing to Lessee. Delinquent installments of rent, as well as all other monies
due but unpaid, shall be subject to a late charge of five percent (5%) of the
unpaid installment if not prohibited by law, or otherwise at the highest amount
lawfully payable by Lessee.
6. TITLE AND ASSIGNMENT: Nothing contained in any Schedule shall give
or convey to Lessee any right, title or interest in or to the Equipment, except
as a Lessee as set forth therein, and Lessee represents and agrees that Lessee
shall hold the Equipment subject and subordinate to the rights of the owner.
Lessor, any assignee and any secured party (as described in Section 17), and
Lessee shall furnish Lessor with such documentation as Lessor shall reasonably
require with respect thereto. Lessor is hereby authorized by Lessee to cause
this Lease, any Schedule or any statement or other instrument in respect of any
Schedule as may be required by law showing the interest of Lessor, any assignee
and any secured party in the Equipment to be filed, and Lessee agrees to execute
and deliver Uniform Commercial Code financing statements, certificates of
-2-
<PAGE>
title and fixture filings reasonably requested by Lessor for such purpose.
Lessee shall, at its expense, protect and defend Lessor's title as well as the
interest of any assignee and any secured party against all persons claiming
against or through Lessee and shall at all times keep the Equipment free and
clear from any legal process, liens, claims or encumbrances whatsoever (except
any placed thereon by Lessor) and shall give Lessor immediate written notice
thereof and shall indemnify and hold Lessor, any assignee and any secured party
harmless from and against any loss caused thereby. It is expressly understood
that all of the Equipment shall be and remain personal property notwithstanding
the manner in which the Equipment may be attached or affixed to realty. LESSEE
AGREES THAT WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, LESSEE WILL NOT ASSIGN,
TRANSFER OR SUBLEASE ITS RIGHTS UNDER THIS LEASE OR ANY SCHEDULE, OR REMOVE OR
SUFFER THE EQUIPMENT OR ANY PARTS THEREOF TO BE REMOVED FROM THE EQUIPMENT
LOCATION SPECIFIED IN THE APPLICABLE SCHEDULE OR PERMIT THE EQUIPMENT TO BE USED
BY ANYONE OTHER THAN LESSEE AND LESSEE'S EMPLOYEES AND AUTHORIZED AGENTS. Lessor
shall have the right from time to time during reasonable business hours to enter
upon Lessee's premises or elsewhere for the purpose of confirming the existence
and condition of the Equipment and, at Lessor's request, Lessee will securely
affix conspicuous tags or plates thereon containing a notation that the same is
owned by and is the property of Lessor or its assignee, if any. Lessor shall
also have the right to demonstrate and show the Equipment to others at times
agreeable to Lessee.
7. MAINTENANCE:
a. If Lessee selects the "FullService" option under any
Schedule, the following provisions shall apply only to Equipment
supplied by Picker International; Lessee understands that Lessor is
acting as an administrator for maintenance, repair and warranty work
provided by Picker International ("Provider") with respect to the
billing and collecting of maintenance and repair charges and is not a
supplier of any maintenance or repair work. Lessee will look solely to
Provider for the same, and Lessee's obligation to make Lease Payments
shall remain unconditional.
b. The following provisions shall apply to Equipment not
covered by a "FullService" option: Lessee shall, at its sole expense,
at all times during the term of each Schedule, maintain the Equipment
in good operating order, repair, condition and appearance and protect
the Equipment from deterioration, other than normal wear and tear.
Lessee shall not use the Equipment for any purpose other than that for
which it was designed. Lessee's obligation regarding the maintenance of
the Equipment shall include, without limitation, all maintenance and
repair recommended or advised either by the manufacturer, government
agencies, or regulatory bodies and those commonly performed in prudent
business and/or professional practice. Upon return of the Equipment,
Lessee shall provide Lessor with a letter from the manufacturer
certifying that the Equipment meets all current specifications of the
manufacturer, is in compliance with any and all pertinent governmental
or regulatory rules, laws or guidelines for its operation or use, is
-3-
<PAGE>
qualified for the manufacturer's maintenance contract and is at then
current release, revision and engineering change levels. If Lessee has
the Equipment maintained by a party other than the manufacturer, Lessee
hereby assumes and agrees to pay any costs necessary to have the
manufacturer re-certify the Equipment at the scheduled expiration of
the Schedule term, which Schedule term shall continue upon the same
terms and conditions until such re-certification has been obtained.
8. NO WARRANTY: EXCEPT AS OTHERWISE PROVIDED HEREIN, LESSOR MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT
LIMITATION THE DESIGN OR CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR ITS
FITNESS FOR A PARTICULAR PURPOSE, AND, AS TO LESSOR, LESSEE LEASES THE EQUIPMENT
"AS IS." Lessor hereby appoints Lessee as Lessor's agent to assert, during the
term of the applicable Schedule, any right Lessor may have to enforce the
manufacturer's warranties, if any; provided, however, that Lessee shall
indemnify and hold Lessor or its assignee harmless from and against any and all
claims, costs, expenses, damages, losses and liabilities, including without
limitation attorneys' fees and costs, incurred or suffered by Lessor as a result
of or incident to any action by Lessee in connection therewith.
9. LIMITATION OF LIABILITY: LESSOR SHALL HAVE NO LIABILITY FOR ANY
CONSEQUENTIAL, INCIDENTAL, OR SPECIAL DAMAGES BY REASON OF ANY ACT OR OMISSION
OR ARISING OUT OF OR IN CONNECTION WITH THE EQUIPMENT OR ITS LEASE, DELIVERY,
INSTALLATION, MAINTENANCE, OPERATION, PERFORMANCE, OR USE, INCLUDING WITHOUT
LIMITATION ANY LOSS OF USE, LOST REVENUE, LOST PROFITS, OR COST ASSOCIATED WITH
DOWNTIME. TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE HEREBY WAIVES ANY
AND ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE UNDER THE CODE, ARTICLE 2A.
10. FEES AND TAXES: Lessee agrees to pay promptly when due all
registration, title and license fees, assessments and sales, use, gross
receipts, property, stamp, recordation, personal property and other taxes of
whatsoever nature and by whomsoever payable (except Federal or state taxes
levied on Lessor's net income), now or hereafter imposed by any state, Federal,
local or foreign government upon the use, ownership, rental, shipment,
transportation, delivery or operation of the Equipment nor upon or measured by
any payments due hereunder. In the event any such registration, title and
license fees, assessments, taxes, and penalties, or interest thereon, shall be
paid by Lessor or if Lessor shall be so assessed or be required to collect or
pay any thereof, Lessee shall reimburse Lessor therefor promptly upon demand as
additional rent hereunder. Lessee agrees, at Lessee's sole expense, to procure
and maintain in effect all licenses, certificates, permits and other approvals
and consents required by municipal, state, Federal or foreign laws and
regulations in connection with the possession, use and operation of the
Equipment. Lessee identifies and agrees to hold Lessor harmless from and against
any loss or damage arising from the loss, disallowance or recapture of any tax
benefits anticipated to be
-4-
<PAGE>
realized by Lessor from the ownership of the Equipment, to the extent the same
are caused by any act or omission of Lessee. This provision shall survive the
expiration of the Lease and all Schedules.
11. RISK OF LOSS, INDEMNITY AND LIABILITY INSURANCE: Lessee indemnifies
and agrees to hold Lessor, its agents, any assignee and any secured party
harmless from and against any and all claims, costs, expenses, damages and
liabilities (including without limitation such claims, costs, expenses, damages
and liabilities based on liability in tort including without limitation strict
liability in tort), including reasonable attorneys' fees, arising out of the
ownership, selection, possession, leasing, renting, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment.
Notwithstanding the foregoing, Lessee shall not be responsible under the terms
of this section to a party indemnified hereunder for any claims, costs,
expenses, damages and liabilities occasioned by the gross negligence or willful
misconduct of such indemnified party. Lessor shall give Lessee prompt notice of
any claim or liability hereby indemnified against. Lessee shall be entitled to
control the defense thereof, so long as Lessee is not in default hereunder;
provided, however, that Lessor shall have the right to approve defense counsel
selected by Lessee. The obligations contained in this paragraph continue beyond
the termination of this Lease and all Schedules if the liability relates to an
event occurring during the term of the Lease or any Schedule. Effective upon
delivery of the Equipment to Lessee under the applicable Schedule and during the
Initial Term and any extended term, Lessee shall, at its own expense, cause to
be carried and maintain comprehensive general liability insurance with regard to
risks customarily insured against in the medical field. Such risks shall
include, without limitation, the risks of death, bodily injury and property
damage associated with the Equipment. The amount of such general liability
insurance shall not be less than $3,000,000 per occurrence. Such insurance shall
survive the expiration or other termination of the applicable Schedule with
regard to claims which relate to events occurring during the term of the
applicable Schedule. Each insurance policy will name Lessee as an insured and
Lessor, and Lessor's successor assignee, if any, as additional insureds thereto
as their interests may appear, and shall contain a clause requiring the insurer
to give Lessor and Lessor's successor assignee, if any, at least thirty (30)
days prior written notice of any alteration in the terms of such policy or of
the cancellation thereof. Lessee shall furnish to Lessor a certificate of
insurance or other evidence satisfactory to Lessor that such insurance coverage
is in effect; provided, however, that Lessor shall be under no duty either to
ascertain the existence of or to examine such insurance policy or to advise
Lessee in the event such insurance coverage shall not comply with the
requirements hereof. Lessee or its sub-lessee user, if applicable, is covered by
professional liability insurance in amounts customarily carried against risks
customarily insured against in the medical field.
12. PROPERTY INSURANCE: During the term of this Lease and while any
obligation is owed to Lessor by Lessee under any Schedule issued pursuant
hereto, Lessee agrees and acknowledges that all risks of loss, theft, damage or
destruction of the Equipment subsequent to delivery and from any cause
whatsoever shall be borne by Lessee. In the event that any item of Equipment
shall become lost, stolen, destroyed or damaged beyond repair for any reason, or
in the event of any condemnation, confiscation, theft, or seizure or acquisition
of title to or use of
-5-
<PAGE>
such item, Lessee shall promptly pay to lessor all rent then due, plus the
Casualty Value. As used herein, "Casualty Value" of any Equipment means, as of
the date of determination, the sum of (a) the aggregate of all rentals for the
remaining term of the Schedule relating to such Equipment, discounted to present
value at such date at the rate of five percent (5%) per annum, plus (b) the
estimated fair market value of such Equipment at the end of such term, as
determined by Lessor in its sole discretion. Lessee, at its own expense, shall
obtain and maintain for the Initial Term of any Schedule and any extended term
property damage insurance against all risk of loss or damage to the Equipment,
including loss by electrical injury and mechanical breakdown (boiler and
machinery endorsement), earthquake and flood, in such form and with such
insurers as shall be acceptable to Lessor; provided, however, that the amount of
insurance against loss or damage to the Equipment shall not be less than the
Casualty Value. The proceeds of such insurance, at the option of Lessor, shall
be applied toward (a) the replacement, restoration or repair of the lost or
damaged Equipment, in which case the related Schedule shall remain in full force
and effect with respect to the replacement Equipment or the restored or repaired
Equipment, or (b) the payment to Lessor of the Casualty Value, in which case the
related Schedule shall terminate. Each insurance policy will name Lessee as an
insured and Lessor, and Lessor's successor or assignee, if any, as loss payees
thereof as their interests may appear, and shall contain a clause requiring the
insurer to give Lessor and Lessor's successor assignee, if any, at least thirty
(30) days prior written notice of any alteration in the terms of such policy or
of the cancellation thereof. Lessee shall furnish to Lessor a certificate of
insurance or other evidence satisfactory to Lessor that such insurance coverage
is in effect; provided, however, that Lessor shall be under no duty either to
ascertain the existence of or to examine such insurance policy or to advise
Lessee in the event such insurance coverage shall not comply with the
requirements hereof. Lessee further agrees to give Lessor prompt notice of any
damage to, or loss of, the Equipment or any part thereof, and at Lessor's
request, to appoint Lessor as Lessee's attorney-in-fact to make claim for,
receive payment of, and execute and endorse all documents, checks or drafts with
respect to any loss or damage under any insurance policy maintained hereunder.
13. USE OF EQUIPMENT: LESSEE REPRESENTS TO LESSOR THAT THE EQUIPMENT
WILL BE USED BY LESSEE SOLELY FOR BUSINESS OR COMMERCIAL PURPOSES. The operation
and use of the Equipment shall be solely at the risk of Lessee and not of
Lessor. Lessee warrants that the Equipment will at all times be used and
operated in compliance with the conditions of any applicable insurance, by
competent and trained operators in accordance with the vendor's or
manufacturer's instructions and under and in compliance with the laws of the
jurisdiction in which such Equipment may be operated; which operators are
covered by professional liability insurance in amounts customarily carried
against risks customarily insured against in the medical field, and in
compliance with all lawful acts, rules, regulations and orders of any judicial,
legislative or regulatory body having power to regulate or supervise the use of
such property; provided, however, that Lessee may in good faith contest in any
reasonable manner the application of any such rules, regulations or orders to
the extent that such contest does not adversely affect the title of Lessor to
any unit of Equipment, create any lien or encumbrance against the Equipment or
result in the forfeiture or sale of any of the Equipment. Lessee shall not
alter, modify or make additions or improvements to the Equipment without
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<PAGE>
Lessor's prior written consent. Unless otherwise agreed in writing, any such
alterations, modifications, additions or improvements shall forthwith upon the
making thereof become the property of Lessor and shall be subject to the terms
of this Lease.
14. RETURN OF EQUIPMENT: Upon the expiration or other termination of
the Initial Term of the related Schedule or any extension thereof in respect to
any of the Equipment, and unless the Equipment is purchased by Lessee, Lessee
will surrender and return possession of such Equipment to Lessor in good order
and repair, ordinary wear and tear excepted. Upon expiration of the applicable
Schedule and surrender of the Equipment to Lessor, Lessor shall arrange for its
removal and return at Lessor's expense (with the exception of magnetic resonance
imaging equipment, the removal and return of which shall be at Lessee's
expense). The cost of Equipment removal prior to expiration of the Schedule
shall be at Lessee's expense. In the event Lessee makes structural modifications
to the premises after the Equipment has been placed at the Equipment location,
and such modification impedes the removal of the Equipment, the cost of removing
and restoring the impediments shall be assumed by Lessee. If Lessee shall fail
to return the Equipment as provided herein, then, at Lessor's exclusive option,
this Lease and the applicable Schedule may be continued on a month-to-month (or
quarter-to-quarter) basis until Lessee returns the Equipment to Lessor, on not
less than thirty (30) days notice. In the event this Lease and applicable
Schedule are so continued, Lessee shall pay to Lessor rent in the highest
periodic amounts as provided in the applicable Schedule for the Equipment not
returned.
15. EVENTS OF DEFAULT: The occurrence of any of the following shall
constitute an Event of Default hereunder:
a. Lessee fails to pay any installment of rent or other
amount when due;
b. Lessee breaches any representation or warranty made
herein, or in the applicable Schedule;
c. Lessee fails to observe or perform any of its
obligations required to be observed or performed by Lessee
under this Lease and the applicable Schedule, or relating to
any other obligation or indebtedness of Lessee to Lessor
otherwise owing or due by Lessee to Lessor in any other
agreement now or hereafter executed between the parties hereto
and such failure shall continue uncured for twenty (20) days
after written notice thereof to Lessee by Lessor;
d. Lessee ceases doing business as a going concern,
makes an assignment for the benefit of creditors, admits in
writing its inability to pay its debts as they become due,
files a voluntary petition in bankruptcy, is adjudicated a
bankrupt or an insolvent, files a petition seeking for itself
any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar arrangement under any
present or future statute, law or regulation or files an
answer admitting the material allegations of a petition filed
against it in any such proceeding, consents to or acquiesces
in the appointment of a trustee,
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<PAGE>
custodian, receiver ore liquidator of it or of all or any
substantial part of its assets or properties; or its
shareholders take any action looking to its dissolution or
liquidation, or an order for relief is entered under the
United States Bankruptcy Code against Lessee;
e. Within thirty (30) days after the commencement of any
proceedings against Lessee seeking reorganization,
arrangement, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation,
such proceedings shall not have been dismissed; or within
thirty (30) days after the appointment without Lessee's
consent or acquiescence of any trustee, custodian, receiver or
liquidator of it or of all or any substantial part of its
assets and properties, such appointment shall not be vacated;
f. Lessee defaults under any Schedule or any other
agreement executed at any time with Lessor or its assignee.
16. REMEDIES: Upon the occurrence of any Event of Default, Lessor may
at its option do any or all of the following: (i) by notice to Lessee, terminate
this Lease as to any or all Schedules; (ii) whether or not this Lease and/or any
Schedule(s) are so terminated, take possession of any or all of the Equipment
listed on such Schedules, wherever situated, and for such purpose, enter upon
any premises without liability for so doing, or Lessor may cause Lessee and
Lessee hereby agrees, to return said Equipment to Lessor as provided in this
Lease; (iii) declare all sums due and to become due hereunder for the full term
of the applicable Schedule(s) immediately due and payable; (iv) recover from
Lessee, as liquidated damages for loss of a bargain and not as a penalty, an
amount equal to the Casualty Value (as such term is defined in Section 12) due
under any Schedule, which amount shall become immediately due and payable; (v)
sell, dispose of, hold, use or lease any Equipment as Lessor, in its sole
discretion may determine; and (vi) exercise any other right or remedy which may
be available to it under the Uniform Commercial Code or applicable law including
without limitation the right to recover damages for breach hereof. Except as to
items or Schedules with respect to which Lessor has elected to terminate, this
Lease and all Schedules shall remain in full force and effect and Lessee shall
be obligated to perform all acts, obligations and to pay all rent and other
amounts required under this Lease and such Schedules. In the event that Lessee
shall have paid to Lessor the liquidated damages referred to in (iv) above,
Lessor hereby agrees to pay to Lessee, promptly after receipt thereof, all
rentals or proceeds received from the reletting or sale of the Equipment during
the balance of the term of the Schedule for such Equipment (after deduction of
all expenses incurred by Lessor), said amount never to exceed the amount of the
liquidated damages paid by Lessee. Lessee shall in any event remain fully liable
for reasonable damages as provided by law and for all costs and expenses
incurred by Lessor on account of such default, including but not limited to all
court costs and reasonable attorney fees. Lessee hereby agrees that, in any
event, it will remain liable for any deficiency after any sale, lease or other
disposition by Lessor. The rights afforded Lessor hereunder shall not be deemed
to be exclusive, but shall be in addition to any rights or remedies provided by
law.
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<PAGE>
17. ASSIGNMENT: Lessor may assign a Schedule and/or grant a security
interest in the related Equipment in whole or in part, without notice to Lessee,
and any such assignee or secured party may reassign the Schedule and such
interest without notice to Lessee. Lessee agrees to execute and deliver such
documents as any such assignee or secured party may reasonably request in
connection with such assignment or loan. Each assignee or secured party shall
have all the rights but none of the obligations of Lessor under the applicable
Schedule, and Lessee shall, upon receipt of proper notice thereof, recognize
each such assignment or grant of security interest and shall comply with the
directions or demand given in writing by any such assignee or secured party.
Lessee shall not assert against the assignee or secured party any defense,
counterclaim or set-off that Lessee may have against Lessor. It is further
acknowledged and agreed that the assignee shall be entitled to all of Lessor's
rights, privileges and powers, but none of Lessor's obligations, under this
Agreement and that any assignment by Lessor shall not materially change Lessee's
obligations or increase Lessee's burdens hereunder.
18. NO AGENCY: No person except a duly authorized officer of Lessor
shall have any power to modify, amend or waive any of the provisions hereunder,
and all sums to be paid hereunder shall be paid only in the name of and to
Lessor or to its assignee. Neither the manufacturer or other vendor of the
Equipment nor any salesman or agent thereof is an agent of Lessor, and no such
person is authorized to waive, alter or amend any term or condition hereof or to
make any representation on behalf of Lessor.
19. FINANCIAL STATEMENTS: Lessee agrees to provide Lessor as soon as
available and in any event within ninety (90) days after the end of each fiscal
year of Lessee a copy of its audited statement of income and surplus for such
year and its balance sheet as at the end of such year, all in reasonable detail
and certified by an independent certified public accountant, without material
qualification and in form consistent with statements of previous years, and
promptly upon Lessor's request, a copy of its interim statement of income and
balance sheet for the most recent quarter, and such other financial information
as is reasonably requested by Lessor. Lessor shall have the right, without
liability, to decline to enter into any Schedule (whether or not submitted to
Lessee for signature by Lessee) if, in Lessor's sole opinion, any material
adverse change in the business, condition (financial or otherwise) or prospects
of Lessee shall have occurred prior to the Rental Commencement Date for such
Schedule.
20. ABSOLUTE LEASE: THIS LEASE IS IRREVOCABLE FOR THE FULL TERM AND FOR
THE AGGREGATE RENTALS AS SET FORTH IN EACH SCHEDULE. LESSOR AND LESSEE
ACKNOWLEDGE AND AGREE THAT SUCH SCHEDULE CONSTITUTES A NET LEASE AND THAT
LESSEE'S OBLIGATION TO PAY ALL RENT AND ANY AND ALL AMOUNTS PAYABLE BY LESSEE
UNDER ANY SCHEDULE SHALL BE ABSOLUTE AND UNCONDITIONAL AND SHALL NOT BE SUBJECT
TO ANY ABATEMENT, REDUCTION, SETOFF, DEFENSE, COUNTERCLAIM, INTERRUPTION,
DEFERMENT OR RECOUPMENT FOR ANY REASON WHATSOEVER, AND THAT SUCH PAYMENTS SHALL
BE AND CONTINUE TO BE PAYABLE IN ALL EVENTS. LESSEE ACKNOWLEDGES AND AGREES THAT
LESSOR IS NOT THE
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<PAGE>
MANUFACTURER OR SUPPLIER OF ANY EQUIPMENT, NOR IS LESSOR THE MAINTENANCE, REPAIR
OR EQUIPMENT WARRANTY WORK PROVIDER AND THAT LESSEE WILL NOT OFFSET, WITHHOLD OR
FAIL TO MAKE ANY PAYMENT TO LESSOR BY REASON OF ANY CLAIM RELATED TO THE
MANUFACTURE OF THE EQUIPMENT OR A DEFECT IN THE EQUIPMENT OR TO MAINTENANCE,
REPAIR, OR WARRANTY WORK.
21. SEVERABILITY: In the event any section or paragraph is invalidated
for any reason whatsoever, the parties agree that this Lease and all Schedules
shall remain binding between them and in full force and effect except for such
invalidated section or paragraph.
22. REPRESENTATIONS AND WARRANTIES: Each party hereby represents,
warrants and covenants that, with respect to this Lease and each Schedule
executed hereunder, (a) the execution, delivery and performance thereof have
been duly authorized, (b) the individual executing such was duly authorized to
do so, and (c) this Lease and each Schedule constitute legal, valid and binding
agreements enforceable in accordance with their respective terms.
23. GOVERNING LAW AND JURISDICTION: THIS LEASE AND ANY SCHEDULES
ENTERED INTO INCORPORATING THE TERMS OF THIS LEASE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF OHIO WITHOUT
REGARD TO ITS CHOICE OF LAW RULES. LESSEE EXPRESSLY WAIVES ANY RIGHT TO A TRIAL
BY JURY. The parties hereto hereby agree that actions arising out of this Lease
and/or any Schedule, may be litigated under the laws of the State of Ohio, and
that service of process by certified mail, return receipt requested, will be
sufficient to confer personal jurisdiction over the parties hereto. Each of the
parties hereto submits to the jurisdiction of the courts of the State of Ohio.
24. GENERAL PROVISIONS: It is understood and agreed that, so long as
Lessee is not in default thereunder, Lessee shall peacefully and quietly hold
the Equipment during the term hereof without interference from Lessor. Any
obligation of Lessor shall be excused to the extent Lessor is delayed or
hindered or prevented from complying therewith because of any matter beyond its
control. All of Lessee's covenants herein shall survive the termination of this
Lease and the return of the Equipment. Notices hereunder shall be given in
writing and mailed to the other party at the address specified for each herein.
Notices cannot be waived except by the written consent of the party entitled to
receive such notice. Forbearance or indulgence by Lessor in any regard
whatsoever shall not constitute a waiver of the covenant or condition to be
performed by Lessee to which the same may apply, and until complete performance
by Lessee of said covenant or condition. Lessor shall be entitled to invoke any
remedy available to Lessor under this Lease or by law or in equity despite said
forbearance or indulgence. Section headings are for convenience and are not a
part of this Lease. This Lease (including the Lease, each Schedule, and any
addendum to either or both thereof) embodies the entire agreement between Lessor
and Lessee with respect to the subject matter hereof, and nothing is to be
construed as conveying to Lessee any rights in the Equipment except as Lessee
thereof and on the terms and
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<PAGE>
conditions herein provided. THERE ARE NO ORAL COVENANTS OR AGREEMENTS MADE BY
EITHER PARTY HERETO EXCEPT AS REDUCED TO WRITING HEREIN. NEITHER THIS LEASE NOR
ANY SCHEDULE MAY BE TERMINATED, MODIFIED OR AMENDED, AND NO WAIVER OF ANY
PROVISION HEREIN OR THEREIN SHALL BE DEEMED TO HAVE OCCURRED REGARDLESS OF THE
ACTION OR INACTION OF LESSOR IN CONNECTION THEREWITH EXCEPT ON THE WRITTEN
AGREEMENT OF THE PARTIES HERETO. NEITHER THIS LEASE NOR ANY SCHEDULE SHALL BE
BINDING UPON LESSOR UNLESS EXECUTED ON BEHALF OF LESSOR BY ITS DULY AUTHORIZED
OFFICER. LESSEE CERTIFIES THAT IT HAS READ AND RECEIVED A COPY OF THIS
AGREEMENT. LESSEE UNDERSTANDS AND AGREES THAT NEITHER THE SUPPLIER OF THE
EQUIPMENT NOR ANY SALESPERSON OR OTHER AGENT OR EMPLOYEE OF THE SUPPLIER IS AN
AGENT OF THE LESSOR OR HAS ANY AUTHORITY TO SPEAK FOR OR TO BIND LESSOR IN ANY
WAY. LESSOR IS NOT AN AGENT OR REPRESENTATIVE OF THE SUPPLIER. LESSEE HEREBY
AUTHORIZES LESSOR TO RELY ON FACSIMILE SIGNATURES OF LESSEE AND AGREES TO
PROVIDE THE ORIGINAL OF THE PERTINENT DOCUMENT TO LESSOR WITHIN FIVE BUSINESS
DAYS AFTER FACSIMILE TRANSMISSION.
LESSOR: LESSEE:
PICKER FINANCIAL GROUP, PHOTOGEN, INC..
L.L.C.
By: /s/ Karen L. Sawonik /s/ John Smolik
---------------------------------- ----------------------------
By: John Smolik
Title: Karen L. Sawonik, Dir. of Ops. Title: President
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<PAGE>
EQUIPMENT SCHEDULE NO. 0001 / / TRUELEASE-TM-
- --------------------------- Lease Type /X/ FULLSERVICE-TM-
/ / LEASEPURCHASE-TM-
- --------------------------------------------------------------------------------
This Schedule is entered into October 25, 1999, and constitutes an independent
lease incorporating the terms and conditions of the Equipment Lease NO. 8520
("Lease") dated October 25, 1999 by and between PICKER FINANCIAL GROUP, L.L.C.
("Lessor") and Photogen, Inc. ("Lessee"). All capitalized terms in this Schedule
shall have the meanings ascribed to them in the Lease. To the extent that the
terms of this Schedule conflict with the terms of the Lease, the terms of this
Schedule shall control.
<TABLE>
<CAPTION>
Description of Equipment Term of Lease Aggregate Rental
In Months (including service for FullService only)
<S> <C> <C>
One (1) Picker PQ5000 A CT 60 $1,858,656.00
w/AcQsim, together with all
accessories. Reference Picker Quote
No. 500-8396.
TOTAL $1,858,656.00
</TABLE>
Supplier Name & Address:________________________________________________________
(If no name is shown above, the Supplier is Picker International, Inc., 595
Miner Road, Cleveland, OH 44143)
Equipment Location: Tufts University School of Veterinary Medicine, 200 Westboro
Rd., North Grafton, MA 01536
Advance Rental: $28,748.00 (plus all applicable taxes)
/ / 1st Payment /X/ Last Payment / / Other ___________________
Other Payments (if applicable) Describe:
The Aggregate rent of $1,858,565.00 (including service for FullService only)
shall be paid in 12 monthly payments of $17,146.00 each, and followed by 48
monthly payments of $28,748.00, each commencing upon the Commencement Date.
Rate Adjustments: Lessee authorizes Lessor to increase the rental payment
amounts by not more than 1% for each 1% (or prorata for any fraction of 1%)
change in the average yield of similar term Treasury Notes from the date of
Lessor's proposal to the Rental Commencement Date.
End of Term Options: Upon no more than one hundred eighty (180) days but no less
than ninety (90) days prior to the end of the Initial Term of this Schedule or
any subsequent extension term thereof, Lessee may select any of the following
end-of-term options: (i) renewal of the Schedule
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(ii) purchase of Equipment for its then fair market value (iii) return the
Equipment. If the Equipment is returned, dismantlement and shipping cost will be
borne by Lessor.
THE EQUIPMENT SHALL BE SOLD TO LESSEE AND LESSEE SHALL TAKE POSSESSION OF THE
EQUIPMENT "AS IS" AND "WHERE IS" AND WITHOUT WARRANTY OF ANY KIND, INCLUDING THE
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND OF MERCHANTABILITY. ALL TAXES
ATTRIBUTABLE TO THE TRANSACTION HEREIN CONTEMPLATED SHALL BE BORNE EXCLUSIVELY
BY LESSEE.
/X/LESSEE HEREBY ELECTS TO OBTAIN MAINTENANCE FROM PICKER
INTERNATIONAL, INC. (CHECK IF APPLICABLE). IF BOX IS CHECKED,
DESCRIPTION OF APPLICABLE MAINTENANCE PROVISIONS BETWEEN LESSEE
AND PICKER INTERNATIONAL, INC. IS SHOWN ON REVERSE SIDE.
- --------------------------------------------------------------------------------
Accepted (Date): October 26, 1999 Executed on: 10/25/99
PICKER FINANCIAL GROUP, L.L.C. PHOTOGEN, INC.
(Lessor) (Lessee)
By: /s/ Karen L. Sawonik By: /s/ John Smolik
Director of Operations President
Y N
Insurance Provided by Lessor / / /X/
This is counterpart #3 of 3 serially numbered, manually executed counterparts.
To the extent that this document constitutes chattel paper, no security interest
in this document may be created through the transfer and possession of any
counterpart other than counterpart #1.
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<PAGE>
Lessee: Photogen, Inc.
Address:
Equipment Lease No. 8520 dated as of October 25, 1999
ADDENDUM
WHEREAS, Picker Financial Group, L.L.C. ("Lessor") and the above
described Lessee ("Lessee") have determined that it is to their mutual benefit
to make certain amendments to the above described Equipment Lease ("Lease").
NOW, THEREFORE, for good and valuable consideration, intending to be
legally bound and pursuant to the Terms and Conditions of the Lease, it is
hereby agreed as follows:
1. The second sentence of Section 11 is hereby amended by the deletion
of "gross." The sixth sentence of Section 11 is hereby amended by the insertion
of "veterinary" immediately prior to "medical."
2. The eighth sentence of Section 12 is hereby amended by the insertion
of "following an Event of Default," immediately prior to "to appoint Lessor."
3. The second sentence of Section 14 is hereby amended by the deletion
of "(with the exception of magnetic resonance imaging equipment, the removal and
return of which shall be at Lessee's expense)."
4. The second line of Section 15 is hereby amended by the insertion of
"within five (5) days of" immediately prior to "when due."
5. Section 16 is hereby amended by the insertion of the following
sentence at the end thereof "Notwithstanding any provision contained herein to
the contrary Lessor shall only be entitled to exercise such remedies provided
herein to obtain one full and complete recovery from Lessee or any other party
liable hereunder."
6. Lessee covenants that upon the occurrence of any Event of Default
and until all payments of rent, taxes and other amounts due and payable by
Lessee under the Lease have been paid in full, Lessee shall not make any
distribution to holders of its outstanding stock, its officers or directors, of
cash dividends, redemption payments, return of capital or similar transactions
(provided, that Lessee will nonetheless be entitled to pay normal salaries,
benefits, expense reimbursement and scheduled payments on Lessee's $1,000,000
debt described below)."
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<PAGE>
7. Lessee covenants that on or prior to December 31, 1999 Lessee shall
obtain an additional equity contribution of not less than $4,000,000 and debt
financing of not less than $1,000,000.
8. It is expressly agreed by the parties that this Addendum is
supplemental to the Lease which is by reference made a part hereof and all the
Terms and Conditions and provisions thereof unless specifically modified herein,
are to apply to this Addendum and are made a part of this Addendum as though
they were expressly rewritten, incorporated and included herein. In the event of
any conflict, inconsistency or incongruity between the provisions of this
Addendum and any of the provisions of the Lease, the provision of this Addendum
shall in all respects govern and control.
IN WITNESS WHEREOF, the parties have caused this Addendum to be
executed on the dates set forth below.
Lessee: Photogen, Inc. Picker Financial Group, L.L.C.
By: /s/ John Smolik By: /s/ Karen L. Sawonik
Print Name: John Smolik Print Name: Karen L. Sawonik
Title: President Title: Director of Operations
Date: 10/25/99 Date: October 26, 1999
-2-
<PAGE>
COLLATERAL SECURITY AGREEMENT
This COLLATERAL SECURITY AGREEMENT ("Agreement") is entered into as of
___________, 1999 by and between Photogen, inc., a corporation having offices
located at 7327 Oak Ridge Highway, Suite B, Knoxville, Tennessee 37931
("Lessee") and Picker Financial Group, L.L.C., a limited liability company
having offices located at 600 Beta Drive, Mayfield Village, Ohio 44143
("Lessor").
WITNESSETH
WHEREAS, Lessee has requested Lessor to lease various items of software
and equipment pursuant to Master Lease Schedules (each a "Lease" and
collectively "Leases") issued under that certain Master Lease Agreement dated as
of by and between Lessee and Lessor ("Master Lease"); and
WHEREAS, Lessor is willing to enter into the Leases, but only upon
Lessee's agreement with the terms hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. ADDITIONAL COLLATERAL. As additional security for the performance
when due of all of Lessee's obligations under the Leases, Lessee shall provide
Lessor with a cash security deposit in the amount of $500,000 ("Security
Deposit). The Security Deposit shall be due prior to the Commencement Date of
the first Lease. Upon the occurrence of an Event of Default, as defined in any
Lease, Lessor may without notice to lessee and at Lessor's sole discretion,
apply all or a portion of the amounts then comprising the Security Deposit to
the cure of such Event of Default. As collateral for the performance when due of
all of Lessee obligations under the Master Lease, Lessee hereby grants Lessor a
first priority security interest in the Security Deposit, all Gains, as defined
herein, and all proceeds of the foregoing.
2. INVESTMENT OF SECURITY DEPOSIT. The Security Deposit shall be
invested by Lessor for the benefit of Lessee and according to Lessee's written
instructions. It is agreed that the investment of the Security Deposit shall be
conservative in nature with a primary objective of maintaining the principal
balance. All investment directions requested by Lessee shall be subject to
Lessor's prior written approval, such approval not to be unreasonably withheld.
Initially, the Security Deposit shall be invested in an account ("Initial
Account") established in the name of Lessor at an FDIC insured nationally
recognized financial institution offering interest bearing money market accounts
("Financial Institution"). The Initial Account, and any subsequent investment of
the Security Deposit shall be made in the name of Lessor and Lessor shall have
exclusive control over such accounts. Lessee shall be responsible for any and
all taxes that may accrue based upon dividends, distributions, interest and/or
any other gains arising as a result of
-1-
<PAGE>
the investment of the Security Deposit (collectively, "Gains"). For the purposes
hereof, Gains shall constitute part of the Security Deposit. If, at any time,
Lessor is required to pay any taxes related to the Security Deposit and/or any
Gain, Lessor shall have the right to set off the amount of such tax from the
funds then constituting the Security Deposit.
3. PERIODIC REDUCTION OF SECURITY DEPOSIT. Provided no Event of Default
has occurred and remains uncured under any Lease, Lessor shall release to Lessee
a portion of the Security Deposit in accordance with the following schedule:
upon Lessor's receipt of the first eighteen (18) monthly payments under Lease
#8520, Lessor shall release $100,000 of the Security Deposit to Lessee; upon
Lessor's receipt of the first thirty (30) monthly payments under Lease #8520,
Lessor shall release $100,000 of the Security Deposit to Lessee; upon Lessor's
receipt of the first forty-two (42) monthly payments under Lease #8520, Lessor
shall release $100,000 of the Security Deposit to Lessee; upon Lessor's receipt
of the first fifty-one monthly payments under Lease #8520, Lessor shall release
$100,000 of the Security Deposit to Lessee; and upon Lessor's receipt of the
first sixty (60) monthly payments under Lease #8520, Lessor shall release the
balance of the Security Deposit to lessee. All releases of the Security Deposit
as set forth above are contingent upon sufficient funds being then available for
release.
4. NOTICES. Any notice, demand or request required hereunder shall be
given in writing to the addresses set forth below via personal service,
facsimile or overnight courier.
If to Lessor
Picker Financial Group, L.L.C.
600 Beta Drive
Mayfield Village, Ohio 44143
Attention: Director of Operations
If to Lessee:
Photogen, Inc.
7327 Oak Ridge Highway, Suite B
Knoxville, Tennessee 37931
Attention: President
Such addresses may be changed by notice to the other party given in the
same manner as provided above.
5. FEES AND EXPENSES. Lessee shall reimburse Lessor for all costs
relating to the establishment of the Initial Account and subsequent accounts
according to the directions of Lessee. Lessee shall be responsible for all costs
associated with the investment of the Security Deposit and the opening of the
accounts. It is anticipated that the Initial Account will be maintained without
change for the entire term of Lease #8520 and that Lessor shall not be
-2-
<PAGE>
required to contact the Financial Institution to establish new accounts and/or
convey investment instructions. If Lessor is required to contact the Financial
Institution for such reasons more than one (1) time, Lessor reserves the right
to charge Lessee $50.00 for each subsequent contact with Financial Institution
requested by Lessee. Lessor shall be entitled to deduct such fees and expenses
from the Security Deposit.
6. INVESTMENT INFORMATION. Lessor shall provide Lessee with a copy of
all investment information received from the Financial institution and shall
consent to Lessee obtaining such information directly from the Financial
Institution. However, under no circumstances shall Lessee be entitled to make
withdrawals or direct the Financial Institution to invest the Security Deposit
in any way, such rights being specifically reserved for Lessor.
7. DEFAULT. In the event that Lessee shall breach any of the terms
hereof and such breach is not cured to Lessor's satisfaction within five (5)
days, such breach shall be an Event of Default under the Leases. In the event of
a conflict between the terms of this Agreement and the terms of the Master
Lease, the terms hereof shall take priority.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date set forth
above.
LESSOR: Picker Financial Group, L.L.C. LESSEE: Photogen, Inc.
By: /s/ Karen L. Sawonik By: /s/ John Smolik
PRINT NAME: Karen L. Sawonik PRINT NAME: John Smolik
TITLE: Director of Ops. TITLE: President
-3-
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
NAME STATE OF INCORPORATION OR OTHER NAMES UNDER WHICH
ORGANIZATION SUBSIDIARY DOES BUSINESS
Photogen, Inc. Tennessee None
Sentigen Ltd.* Bermuda None
*80.1% of equity owned by Registrant.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-KSB
FOR THE YEAR ENDED DECEMBER 31,1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,681,773
<SECURITIES> 5,472,564
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,929,374
<PP&E> 1,673,133
<DEPRECIATION> (393,692)
<TOTAL-ASSETS> 21,719,254
<CURRENT-LIABILITIES> 854,311
<BONDS> 0
0
120
<COMMON> 37,384
<OTHER-SE> 20,809,083
<TOTAL-LIABILITY-AND-EQUITY> 21,719,254
<SALES> 0
<TOTAL-REVENUES> 179,795
<CGS> 0
<TOTAL-COSTS> 6,232,636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,052,841)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,052,841)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,052,841)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
</TABLE>
