UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
0-15507
Commission file number
IMMUCELL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 01-0382980
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
56 Evergreen Drive
Portland, ME 04103
(Address of principal executive office and zip code)
(207) 878-2770
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Class of Securities: Outstanding at November 13, 1996:
Common Stock, par value $.10 per share 2,329,564
<PAGE>
IMMUCELL CORPORATION
INDEX TO FORM 10-Q
SEPTEMBER 30, 1996
PART I: FINANCIAL INFORMATION Page
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets-
September 30, 1996 and December 31, 1995 3-4
Consolidated Statements of Operations for the
three and nine month periods ended
September 30, 1996 and 1995 5
Consolidated Statement of Stockholders' Equity for the
nine month period ended September 30, 1996 6
Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 1996 and 1995 7
Notes to Unaudited Consolidated Financial Statements 8-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 9-11
PART II: OTHER INFORMATION
Items 1 through 6 11-12
Signatures 12
<PAGE>
IMMUCELL CORPORATION
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 824,194 $1,550,011
Accounts receivable, net 359,955 357,533
Inventories 692,776 636,203
Prepaid expenses and
accrued interest 51,524 26,600
Total current assets 1,928,449 2,570,347
EQUIPMENT, BUILDING AND
IMPROVEMENTS, at cost:
Laboratory equipment 754,755 844,254
Building and improvements 580,448 431,114
Office furniture and equipment 56,387 77,312
Land 50,000 50,000
1,441,590 1,402,680
Less - Accumulated depreciation (601,694) (740,751)
Net equipment, building and
improvements 839,896 661,929
INVESTMENT IN JOINT VENTURES 228,797 --
OTHER ASSETS 840 2,150
TOTAL ASSETS $2,997,982 $3,234,426
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
IMMUCELL CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accrued expenses $ 274,754 $ 250,412
Accounts payable 180,140 236,471
Current portion of long term debt 224,204
168,884
Deferred income -- 65,000
Total current liabilities 679,098 720,767
LONG TERM DEBT:
Notes payable 424,897 401,055
Mortgage loan 204,118 207,288
Total long term debt 629,015 608,343
STOCKHOLDERS' EQUITY:
Common stock, Par value--$.10 per share
Authorized--8,000,000 shares
Issued--2,719,162 and 2,681,579
shares at September 30,1996 and
December 31, 1995, respectively 271,917 268,159
Capital in excess of par value 8,139,792 8,105,448
Accumulated deficit (6,135,105) (5,881,556)
Treasury stock, at cost --
389,598 shares (586,735) (586,735)
Total stockholders' equity 1,689,869 1,905,316
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,997,982 $ 3,234,426
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
========== ========== ========== ========
<S> <C> <C> <C> <C>
REVENUES:
Product sales $ 937,310 $ 989,598 $2,971,469 $3,373,193
Collaborative research
and development revenue -- -- 65,000 --
Grant income 74,000 186,053 244,961 434,682
__________ __________ __________ __________
Total revenues 1,011,310 1,175,651 3,281,430 3,807,875
__________ __________ __________ __________
COSTS AND EXPENSES:
Product costs 481,683 451,285 1,377,171 1,518,916
Research and development
expenses 301,174 379,242 1,121,782 1,235,363
Sales and marketing
expenses 163,554 190,818 506,817 586,127
General and administrative
expenses 163,137 181,057 510,130 514,697
__________ __________ __________ __________
Total costs and expenses 1,109,548 1,202,402 3,515,900 3,855,103
__________ __________ __________ __________
Interest and other income 9,419 33,323 35,329 78,527
Interest expense 17,761 16,690 54,408 52,399
__________ __________ __________ __________
Net interest and other
(expense)income (8,342) 16,633 (19,079) 26,128
__________ __________ __________ __________
NET LOSS $ (106,580) $ (10,118) $ (253,549) $ (21,100)
========== ========== ========== ========
NET LOSS PER SHARE $ (.05) $ -- $ (.11) $ (.01)
========== ========== ========== ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,329,564 2,291,981 2,314,443 2,291,981
========== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMMUCELL
CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996
(Unaudited)
Common Stock
$.10 Par Value Capital in Treasury Stock Total
------------------ Excess of Accumulated ---------------- Stockholders'
Shares Amount Par Value Deficit Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1995 2,681,579 $268,159 $8,105,448 $(5,881,556) 389,598 $(586,735) $1,905,316
Net Loss -- -- -- (253,549) -- -- (253,549)
Exercise of Stock Options 37,583 3,758 34,344 -- -- -- 38,102
BALANCE,
September 30, 1996 2,719,162 $271,917 $8,139,792 $(6,135,105) 389,598 $(586,735) $1,689,869
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
IMMUCELL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
<S> <C> <C>
Net loss $ (253,549) $ (21,100)
Adjustments to reconcile net loss to
net cash (used for) provided by
operating activities-
Depreciation and amortization 88,718 141,267
Changes in:
Accounts receivable (2,422) (31,180)
Inventories (56,573) (32,863)
Prepaid expenses and accrued interest (24,924) (36,095)
Accounts payable (56,331) (4,007)
Accrued expenses 24,342 51,346
Deferred income (65,000) --
Net cash (used for) provided by
operating activities (345,739) 67,368
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term investments -- (463,536)
(Purchases) sales of equipment, building
and improvements, net (361,355) 29,487
Transfer of net fixed assets to
joint venture 94,670 --
Investment in joint ventures (228,797) --
Decrease in other assets 1,310 8,152
Net cash used for
investing activities (494,172) (425,897)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of debt obligations (124,008) (126,779)
Stock issuance costs -- (8,018)
Proceeds from exercise of stock options 38,102 --
Proceeds from notes payable 200,000 200,000
Net cash provided by
financing activities 114,094 65,203
NET DECREASE IN CASH AND
CASH EQUIVALENTS (725,817) (293,326)
BEGINNING CASH AND CASH EQUIVALENTS 1,550,011 1,295,246
ENDING CASH AND CASH EQUIVALENTS $ 824,194 $1,001,920
CASH PAID FOR INTEREST $ 54,505 $ 53,664
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
IMMUCELL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying statements have been prepared by ImmuCell Corporation
(the "Company") without audit, and reflect the adjustments, all of which are
of a normal recurring nature, that are, in the opinion of management, necessary
for a fair statement of the results for the interim periods presented. Certain
information and footnote disclosures normally included in the annual financial
statements which are prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Accordingly, the Company believes
that although the disclosures are adequate to make the information presented
not misleading, these financial statements should be read in conjunction with
the financial statements and the notes to the financial statements as of
December 31, 1995, contained in the Company's Annual Report to shareholders on
Form 10-K as filed with the Securities and Exchange Commission.
The consolidated financial statements of the Company include the
accounts of the Company and its wholly-owned subsidiary, the Kamar Marketing
Group, Inc. All intercompany accounts and transactions have been eliminated in
consolidation.
(2) Net Loss Per Common Share
The net loss per common share has been computed by dividing the net
loss by the weighted average number of common shares outstanding during the
period. Common stock equivalents outstanding have not been included in the
computation, as the effect would be antidilutive, thereby decreasing the net
loss per common share.
(3) Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
Raw materials $ 58,179 $ 69,297
Work-in-process 535,963 513,956
Finished goods 98,634 52,950
========= =========
$692,776 $636,203
</TABLE>
(4) Investment in Joint Ventures
In the third quarter of 1996, the Company made investments in two joint
ventures, AgriCell Company, LLC ("AgriCell") and Clearwater Diagnostics
Company, LLC ("CDC"). First, the Company and Agri-Mark, Inc. of Methuen,
Massachusetts formed AgriCell to manufacture and sell lactoferrin, a specialty
milk protein derived from cheese whey. The Company invested $125,000 in new
fixed assets, contributed other fixed assets with a net book value of $95,000,
agreed to contribute one half-time equivalent employee during the twelve
month period ending August 31, 1997 and contributed certain proprietary
technology. Agri-Mark agreed to contribute approximately $650,000 for the
purchase of fixed assets and approximately $150,000 to fund the necessary
initial working capital. Agri-Mark has the right to receive 90% of the
proceeds from the joint venture until it obtains the return of its original
investment, after which all proceeds are to be split equally. Second, the
Company and Membrex, Inc., of Fairfield, New Jersey, formed CDC to manufacture
and sell Crypto-Scan{TM} water diagnostic test. This test is designed to
monitor water supplies for the presence of
<PAGE>
IMMUCELL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Cryptosporidium, a dangerous parasite for which there is no effective method of
detection. The Company invested $5,000 in cash and contributed certain
proprietary technology to the joint venture and has the right to share equally
with Membrex in all proceeds from the sale of the test for use in monitoring
drinking water.
(5) Debt Obligations
The Company has long term debt obligations, net of current maturities,
as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
<C> <C> <C>
10.27% Note payable to bank, collateralized by accounts
receivable, inventory and certain fixed assets,
due 1996 to 1998 $287,108 $375,420
9.5% Bank mortgage, collateralized by first security
interest in building, due 1996 to 2000 208,873 212,044
10.0% Note payable to bank collateralized by
accounts receivable, inventory and certain fixed
assets, due 1996 to 2000 200,000 --
9.62% Note payable to bank, collateralized by accounts
receivable, inventory and certain fixed assets,
due 1996 to 1999 157,238 189,763
853,219 777,227
Less current portion 224,204 168,884
Long term debt $629,015 $608,343
</TABLE>
Principal payments under the above debt obligations due subsequent to
September 30, 1996 areapproximately as follows: $56,000 - 1996; $231,000 -
1997; $230,000 - 1998; $103,000 - 1999 and $233,000 - 2000.
PART I. FINANCIAL INFORMATION (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTH
PERIODS ENDED SEPTEMBER 30, 1996
Total revenues equalled $1,011,000 and $3,281,000 for the three and
nine month periods ended September 30, 1996, respectively, as compared to
$1,176,000 and $3,808,000 in the comparable periods in 1995. Collaborative
research and development revenue and grant income decreased by $112,000 (60%)
and by $125,000 (29%) during the three and nine month periods ended September
30, 1996, respectively compared with the same periods in the previous year.
Grant income was recognized under two federally sponsored research grants that
support one of the Company's passive antibody development programs. This
sponsored research is expected to be completed later this year. The $65,000 in
collaborative research and
<PAGE>
IMMUCELL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
development revenue recognized during the first quarter of 1996 supported a
portion of the Company's effort to develop a process to manufacture
lactoferrin, a nutritional milk protein derived from cheese whey.
Product sales decreased by $52,000 (5%) and by $402,000 (12%) to
$937,000 and $2,971,000 during the three and nine month periods ended September
30, 1996, respectively, in comparison to the same periods in the prior year.
Sales of First Defense{R} and the Kamar Heatmount Detector increased by 20%
during the three month period ended September 30, 1996 and decreased by 5%
during the nine month period ended September 30, 1996 as compared to the same
periods of the prior year. The Company attributes the year-to-date decline in
sales primarily to a general weakness in the beef market. When the price of
beef declines, farmers are less likely to invest in products like First
Defense, which prevents an infectious disease in newborn calves. Sales of
First Defense and the Kamar Heatmount Detector aggregated 96% and 89% of total
product sales during the three and nine month periods ended September 30, 1996,
respectively. Comparatively, sales of these two products aggregated 76% and
83% of total product sales during the three and nine month periods ended
September 30, 1995. The higher percentages in 1996 were primarily the result
of less of the Company's diagnostic immunoreagents being sold during 1996.
Reagent sales comprised just 1% and 6% of total product sales during the three
and nine month periods ended September 30, 1996 as compared to 22% and 14%
during the respective periods in 1995.
The gross margin percentage on products sales was maintained between
49% to 55% of product sales for the three and nine month periods ended
September 30, 1996 and 1995. The gross margin decreased by $83,000 (15%) and
by $260,000 (14%) during the three and nine month periods ended September 30,
1996 as compared to the respective periods in 1995. These declines are
consistent with the related decreases in product sales, given the change in
product mix described above.
Research and development expenses declined by $78,000 (21%) during the
three months ended September 30, 1996 and by $114,000 (9%) during the nine
months ended September 30, 1996 as compared to the respective periods in 1995.
These expenses were incurred primarily to develop specific antibodies to
be used to prevent and/or treat gastrointestinal infections in humans.
Additionally, funds have been invested in the development of a product to
detect infectious pathogens in water and in the development of a process
to manufacture lactoferrin, a nutritional milk protein derived from cheese
whey. Research and development expenses exceeded collaborative research and
development revenue and grant income by $227,000 and by $812,000 during the
three and nine month periods ended September 30, 1996, respectively. These
figures compare to $193,000 and $801,000 during the comparable periods in 1995.
Management believes that the losses incurred resulting from the investment in
the research and development of new products is necessary to foster growth for
the Company in the future. It has been, and continues to be, the Company's
strategy to demonstrate efficacy in Phase I/II clinical trials and then
actively pursue corporate partners to fund continued development in exchange
for marketing rights.
The research and development expenses, described above, principally
caused the net operating losses of $107,000 and $254,000 during the three and
nine month periods ended September 30, 1996, respectively. These losses
compare to net operating losses of $10,000 and $21,000 during the three and
nine month periods ended September 30, 1995, respectively. In order to
aggressively develop new products, the Company expects to incur further
operating losses.
LIQUIDITY AND CAPITAL RESOURCES
Total assets decreased by approximately $236,000 to $2,998,000 at
September 30, 1996 from $3,234,000 at December 31, 1995. Cash and cash
equivalents decreased by approximately $726,000 to $824,000 at September 30,
1996 from $1,550,000 at December 31, 1995. Net working capital decreased by
$600,000 to $1,249,000 at September 30, 1996 from $1,850,000 at December 31,
1995. The Company
<PAGE>
IMMUCELL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
invested approximately an additional $361,000 in new equipment and building
improvements during the first nine months of 1996. These investments are part
of a completed investment project aggregating approximately $400,000 in new
equipment and building improvements. The Company also invested cash of
approximately $134,000 in two joint ventures described in Note #4 to these
financial statements.
In September 1996, the Company entered into a four year $200,000 note
payable to a bank that bears interest at the rate of 10.0% per year. The
proceeds from this note were used to partially fund the purchase of certain
manufacturing equipment and building improvements.
In April 1994, the Company obtained notice from the National Institute
of Allergy and Infectious Diseases ("NIAID") that it had been awarded a Phase
II Small Business Innovation Research ("SBIR") grant aggregating approximately
$446,000 over two years. This grant period has been extended through October
1996. These funds are being used to develop recombinant vaccines to
Cryptosporidium parvum. In July 1994, the Company obtained notice from the
NIAID that it had been awarded a second Phase II SBIR grant aggregating
approximately $507,000 over two years. This grant period has been extended
through December 1996. These funds are being used to develop a passive
antibody product for the prevention
and/or treatment of cryptosporidiosis in AIDS patients. In September 1996, the
Company obtained notice from the NIAID that it had been awarded a Phase I SBIR
grant aggregating approximately $100,000 over the six month period ending March
31, 1997. These funds will be used to develop a commercial prototype machine
for the Crypto-Scan{TM }water diagnostic test. As of September 30, 1996, the
aggregate of approximately
$128,000 remained available to fund future grant expenditures, of which
approximately $95,000 will be used to fund internal research and development
expenses, and the balance will fund development services performed under
contract by outside laboratories.
The Company believes that it has sufficient capital resources to meet
its working capital requirements and to finance its ongoing business operations
during the next twelve months.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
<PAGE>
IMMUCELL CORPORATION
PART II. OTHER INFORMATION
(Continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 $200,000 Commercial Note Payable to Peoples Heritage
Bank dated September 13, 1996.
10.1 Limited Liability Company Agreement of AgriCell Company,
LLC dated as of September 10, 1996 between the
Registrant and Agri-Mark, Inc. of Methuen, MA.
10.2 Limited Liability Company Agreement of Clearwater
Diagnostics Company, LLC dated as of September 17, 1996
between the Registrant and Membrex, Inc., of Fairfield,
NJ.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ImmuCell Corporation
Registrant
Date: November 13, 1996 By: /s/ Thomas C. Hatch
Thomas C. Hatch
President and Chief
Executive Officer
Date: November 13, 1996 By: /s/ Michael F. Brigham
Michael F. Brigham
Chief Financial Officer,
Treasurer and Secretary
<PAGE>
IMMUCELL CORPORATION
Exhibit Index
Page
4.1 $200,000 Commercial Note Payable to Peoples Heritage Bank
dated September 13, 1996.
10.1 Limited Liability Company Agreement of AgriCell Company, LLC
dated as of September 10, 1996 between the Registrant and Agri-
Mark, Inc., of Methuen, MA.
10.2 Limited Liability Company Agreement of Clearwater Diagnostics
Company, LLC dated as of September 17, 1996 between the
Registant and Membrex, Inc., of Fairfield, NJ.
27.1 Financial Data Schedule
<PAGE>
IMMUCELL CORPORATION
Exhibit 4.1
$200,000 Commercial Note Payable to Peoples Heritage Bank dated
September 13, 1996.
<PAGE>
Peoples Heritage Bank
Member FDIC
COMMERCIAL NOTE
$ 200,000.00 Portland , Maine
September 13, 1996
FOR VALUE RECEIVED, the undersigned (hereinafter called the
"Borrower"), jointly and severally if more than one, promise(s) to pay to the
order of PEOPLES HERITAGE SAVINGS BANK (hereinafter called the "Lender"), at
any of its banking offices or at such other place as may be designated in
writing by the Lender, the principal sum of *Two Hundred Thousand and
NO/100** Dollars ($*200,000.00*), together with interest on the principal sum
from time to time advanced at (Check one):
INTEREST RATE:
X the fixed rate of *ten* Percent (*10.00* %) per annum
/ / a variable annual rate which shall at all times be equal to
Percent ( %) per annum above the "Base Rate" which
shall mean (i) the base lending rate as determined from time to
time by The First National Bank of Boston or the successor
thereto, or (ii) if said bank shall cease to determine such
base lending rate, then the highest prime rate as published in
the Wall Street Journal, or (iii) if not so published, then the
prime rate as published in a generally recognized source
determined by Lender. Lender shall not be required to notify
Borrower of adjustments in said variable interest rate, and such
adjustments shall become effective immediately upon any change
in such Base Rate.
/ / other:
until paid in full in accordance with the following payment schedule, which the
Borrower agrees to follow (Check one).
PAYMENT SCHEDULE:
X in monthly installments of *Five Thousand Seventy Two and
52/100*Dollars $ *5,072.52**) each, including
principal and interest (which payments are based upon an
amortization schedule of Four (4) years), commencing on
October 13, 1996, and monthly thereafter until September 13,
2000 when all principal and interest remaining unpaid shall be
due and payable in a single balloon payment, notwithstanding the
foregoing amortization schedule. The Lender shall, on or
about each anniversary of the date of this Note, adjust the
amount of such installments to an amount which, based on changes
in the interest rate then applicable to this Note, will maintain
the original amortization schedule. Payment of all accrued
interest hereunder shall be due monthly even though such
interest payment may exceed the installment amount as so
determined.
/ / in one principal payment, due on , 19 with interest
only payable monthly, commencing on , 19 and monthly
thereafter until said principal balance with accrued
interest is paid in full.
/ / in one payment of principal and accrued interest due on , 19 .
/ / other:
All payments shall be applied first to unpaid interest and then
to outstanding principal, until paid in full. All interest hereunder shall be
computed on the basis of the actual number of days elapsed over a 360 day year.
If any payment is not received within fifteen (15) days of when due, then
Borrower shall pay to Lender a late payment fee of six percent (6.0%) of
the amount of such delinquent payment.
DEFAULT INTEREST RATE: Lender shall have the right to charge
interest on the unpaid principal balance hereof at an interest rate of
three percent (3.0%) per annum in excess of the rate of interest otherwise
payable as provided herein, for any period after an event of default (as
defined below) shall have occurred and until the same shall have been cured or
expressly waived by Lender in writing.
PREPAYMENT: This Note may be prepaid in full or in part (check one):
/ / without prepayment charge or premium
/ / with a prepayment charge of % of the amount prepaid
X with a prepayment charge to be calculated pursuant to the
formula set forth in Lender's Commitment Letter to Borrower
dated August 29,1996
Unless Lender expressly agrees otherwise partial prepayments will not affect
the payment schedule required above.
SECURITY:
1. This Note is secured and/or guaranteed pursuant to the terms and
conditions of the following documents which, unless otherwise
noted below, are dated on or about the date of this Note (check
as many as apply):
// a mortgage and security agreement on property located at
/ / a collateral assignment of leases and rentals relating to the
property described in said mortgage and security agreement
X a security agreement respecting personal property, namely (but
without limitation): accounts receivable, inventory, fixed
assets, and equipment .
<PAGE>
/ / a guaranty or guaranties executed by
X other: This Loan and the collateral for the Loan will be cross-
collateralized with all other Loans of Borrower with Bank.
This Note may also be secured by documents executed in the
future by Borrower or by any Guarantor. If checked here this Note is
secured as a future advance pursuant to the terms of an existing Mortgage and
Security Agreement from Borrower to Lender dated and recorded in the
County Registry of Deeds in Book , Page . This Note may also
be secured by existing security agreements, guaranties or other documents if
the provisions of such existing documents state that they shall secure all
future obligations or liabilities of Borrower to Lender. All documents which
secure or guaranty this Note, whether executed prior hereto, on even date
herewith or in the future, are hereinafter called "Security Documents."
DEFAULT:
2. The entire principal balance hereof, together with all interest
and other charges, as applicable, shall become due and payable at the option of
the Lender, upon the occurrence of any one or more of the following events,
each of which shall constitute an event of default hereunder: (a) the
insolvency of the Borrower or any Guarantor; or (b) the making of any
assignment for the benefit of creditors of the Borrower or any Guarantor, or
(c) the issuance of filing of any attachment, levy, or other judicial process
on or against any of the Borrower's or any Guarantor's assets; or (d) the
appointment of a receiver, trustee or custodian for all or any portion of the
property of the Borrower or any Guarantor; or (e) the commencement of any
proceedings under any state or federal bankruptcy or insolvency law or under
laws for relief of debtors, by or against the Borrower or any Guarantor; or
(f) the occurrence of such a change in the condition or affairs (financial or
otherwise) of the Borrower or any Guarantor as, in the opinion of the Lender,
materially impairs the Collateral (if any) or the prospect of repayment of
any amounts outstanding hereunder; or (g) the death, incompetency, dissolution,
business failure (which term includes, without limitation, the cessation of
normal business operations) or termination of existence of the Borrower or any
Guarantor; (h) the failure of the Borrower or any Guarantor to pay their
respective debts as they mature; (i) any representation or statement
made or furnished to Lender by or on behalf of any Borrower or Guarantor is
false or misleading in any material respect; (j) any default in the payment of
any sums due under this Note when due, or default by the Borrower or any
Guarantor in performance of any other obligation under this Note; (k) the
failure of Borrower or any Guarantor to timely provide to Lender the financial
statements, tax returns or other information required pursuant to the terms of
any loan commitment letter from Lender relating to the loan evidenced by this
Note or the failure of Borrower to perform any other obligations or agreements
set forth in any such commitment letter; or (1) default beyond any applicable
cure period in the payment, satisfaction or performance by the Borrower or any
Guarantor of any condition or obligation under any of the Security Documents or
under any documents executed in connection with any other Liabilities of
the Borrower or any Guarantor to the Lender.
<PAGE>
REMEDIES:
3. Upon the occurrence of any event of default under this Note the
Lender may declare due and payable at once all amounts outstanding hereunder.
The Lender shall not be required to pursue or to exhaust its remedies against
the Borrower, or its successors, or against any other party liable for payment
hereof, whether maker, Guarantor, or otherwise, or against any property or
assets mortgaged or pledged as security herefor, but upon nonpayment or
nonperformance hereof may immediately demand and enforce payment and
performance from any one or more of Borrower(s) or Guarantor(s), or may seek to
realize upon the value of any collateral, without the necessity of joining any
other Borrower(s) or Guarantor(s), and in each case without any requirement of
first seeking to collect the debt evidenced by the Note from any other source.
Each Borrower hereby irrevocably agrees that any legal action or proceeding
arising out of or relating to this Note may be brought in any state or federal
court in the State of Maine, at the election of Lender. By the execution and
delivery hereof, each Borrower hereby irrevocably submits to the nonexclusive
jurisdiction of any such court in any such action or proceeding. Borrower
irrevocably agrees that in addition to any methods of service provided for
under applicable law, all service of process in any such legal action or
proceeding may be made by certified mail, return receipt requested to the
Borrower's address pursuant to paragraph 7 below. Each Borrower and each
Guarantor shall be liable for, and hereby agrees to pay, upon demand, any and
all costs or expenses of any nature whatsoever incurred by the Lender in
endeavoring to collect or enforce this Note against any party including,
without limiting the generality of the foregoing, reasonable attorneys' fees
and expenses. The Lender shall not be deemed to have waived any of its rights
or remedies under this Note or under any of the Security Documents by any act,
delay, omission or failure or refusal to exercise any of such rights or
remedies. No waiver by Lender of any kind shall be valid unless it is in
writing and signed by an officer of the Lender, and then only to the extent
specifically stated. All of the rights and remedies of the Lender shall be
cumulative and not exclusive, and may be exercised on any one or more occasions
either singularly or concurrently.
4. Borrower hereby grants to Lender, as security for the payment
and performance of this Note, a continuing lien on and security interest in any
and all deposit accounts and funds on deposit therein (general or specific,
time or demand, regardless of maturity or the Bank branch where the deposit
accounts are held) now or hereafter held by Lender and other sums credited by
or due from Lender to Borrower or subject to withdrawal by Borrower, whether or
not any other person or persons could also withdraw money therefrom
(collectively hereinafter called the "Deposits"). After any event of default
Lender may "freeze" or place a "hold" on any Deposits by suspending Borrower's
right to withdraw the Deposits and may set off any Deposits (including those
previously frozen or placed on hold) against any amounts payable by Borrower
under this Note or any other Liabilities. Failure of the Lender to take
necessary steps to preserve rights against any parties with respect to any
property in its possession shall not be deemed a failure to exercise due care.
WAIVERS:
5. The Borrower and each Guarantor hereby (1) waive presentment,
notice of dishonor, protest, notice of protest, and any and all other notices
of any nature whatsoever in connection with the delivery, acceptance,
performance, default or enforcement of this Note and (2) consent and agree
that the Lender may at any time and from time to time without affecting the
liability of Borrower or of any Guarantor or of any other person (excepting any
person expressly released in writing) for payment of the debt evidenced by this
Note or for performance of any obligation contained herein, and without
affecting Lender's rights with respect to any security not expressly released
in writing: (a) release any person liable for all or any part of the
indebtedness or for performance of any obligation; (b) extend the time for
payment of any amounts due under this Note; (c) grant any releases, compromises
or indulgences with respect to this Note or any extensions, renewals, or
acceleration hereof or substitutions herefor or with respect to any Collateral
securing the payment of sums outstanding under this Note to any party primarily
or secondarily liable hereunder, or (d) modify the provisions of this Note all
without notice to or consent of any Borrower or any Guarantor; (3) waive all
recourse to suretyship and guarantorship defenses generally; and (4) waive
the right to direct the application of any payment hereunder. BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS, WHETHER ARISING
UNDER THE CONSTITUTIONS OF THE UNITED STATES OR OF ANY STATE, ANY RULES OF
CIVIL PROCEDURE, COMMON OR STATUTORY LAW, OR OTHERWISE, TO DEMAND A TRIAL BY
JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM INVOLVING LENDER ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THIS NOTE OR ANY OF THE SECURITY DOCUMENTS.
MISCELLANEOUS:
6. If, for any reason, any payment to Lender applied to amounts
outstanding hereunder is required to be refunded by Lender to Borrower or to
any Guarantor or turned over by Lender to any other person or entity, Borrower
and each Guarantor agree to pay to Lender on demand an amount equal to the
payment so refunded or turned over by Lender and the liability of Borrower
and each Guarantor shall not be treated as having been discharged by the
original payment to Lender giving rise to such refunded or turned over payment.
7. All notices, demands or requests provided for or permitted to be
given pursuant to this Note must be in writing and shall be given by personal
delivery or by depositing the same in the United Sates mail, post paid and
certified, return receipt requested at the addresses set forth below,
as such addresses may be changed by notice given to the other party.
Lender's Address: Borrower's Address:
Peoples Heritage Savings Bank
One Portland Square 56 Evergreen Drive
P.O. Box 9540 Portland, Maine 04103
Portland, Maine 04112-9540
Attn: Commercial Loan Dept.
8. Each borrower and each Guarantor shall be jointly and severely
liable to the Lender under this Note and each Borrower has subscribed
his/her/its name hereto without condition that any other person or entity shall
sign or become bound hereunder and without any other conditions whatever. Any
Borrower that is a corporation hereby warrants that it is validly formed, in
existence and in good standing at the present time, with all necessary
authority to enter into, execute and deliver this Note. No invalidity or
unenforceability of any portion or obligation of this Note shall affect the
validity or enforceability of the remaining portions or obligations hereof.
This Note and all actions taken pursuant hereto shall be governed by, and
interpreted and construed in accordance with, the laws of the State of Maine.
This Note evidences a loan for business and commercial purposes and not for
personal, household, or family purposes. The use of captions in this Note is
for purposes of convenience only, and no caption shall affect the meaning of
this Note. As used herein, the word: (1) Liabilities means any and all
liabilities, indebtedness, and obligations of each Borrower and Guarantor to
Lender of any nature whatsoever, now existing or hereafter arising, due
or to become due, absolute or contingent, direct or indirect and whether joint,
several, or joint and
several; (2) Guarantor shall mean and include each endorser, surety, guarantor
or other party primarily or secondarily liable to the Lender with respect to
this Note other than the Borrower; (3) Borrower shall mean each undersigned
party; and (4) Lender shall mean Peoples Heritage SavingsBank and each future
holder of this Note. This Note and the provisions hereof shall be binding upon
the heirs, executors, administrations, successors, legal representatives and
assigns of the Borrower and each Guarantor and shall inure to the benefit of
the Lender, its successors, legal representatives and assigns. This Note is
intended to take effect as a sealed instrument.
WITNESS ImmuCell Corporation, a Delaware Corporation
By: /S/: Dan Thorton By: /S/: Michael F.
Brigham
Its: Chief Financial Officer and Treasurer
Each of the above Borrower(s) is jointly and severally liable under this
Commercial Note.
02-122 9/92
White - Note File Canary - Loan Servicing
Pink - Collateral File Goldenrod - Credit
<PAGE>
IMMUCELL CORPORATION
Exhibit 10.1
Limited Liability Company Agreement of AgriCell Company, LLC dated as of
September 10, 1996 between the Registrant and Agri-Mark, Inc., of Methuen, MA.
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
AGRICELL COMPANY, LLC
Dated as of September 10, 1996
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT OF
AGRICELL COMPANY, LLC
TABLE OF CONTENTS
Page
ARTICLE I Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Formation of the Company . . . . . . . . . . . . . . . . . . . . 4
2.1. Formation and Name of Company . . . . . . . . . . . . . . . . . . . . 4
2.2. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3. Registered Office; Registered Agent . . . . . . . . . . . . . . . . . 5
2.4. Principal Place of Business . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III Rights and Obligations of Members; Voting Rights . . . . . . . . 5
3.1. Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3. Liability of Members. . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1. Management Generally. . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2. Authority of Manager. . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3. Limitations on Authority. . . . . . . . . . . . . . . . . . . . . . . 6
4.4. Reliance by Third Parties.. . . . . . . . . . . . . . . . . . . . . . 7
4.5. Activities of Manager . . . . . . . . . . . . . . . . . . . . . . . . 7
4.6. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.8. Payment of Costs and Expenses . . . . . . . . . . . . . . . . . . . . 8
4.9. Resolution of Deadlocks . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE V Capital Contributions and Capital Accounts . . . . . . . . . . . 9
5.1. Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2. Capital Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3. Determination of Certain Matters. . . . . . . . . . . . . . . . . . . 9
ARTICLE VI Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1. General Allocations . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2. Priority Income and Final Year Allocations. . . . . . . . . . . . . . 9
6.3. Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . .10
6.4. Allocations for Tax Purposes. . . . . . . . . . . . . . . . . . . . .11
ARTICLE VII Distributions and Withdrawals. . . . . . . . . . . . . . . . . .11
7.1. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
7.2. Priority Distribution . . . . . . . . . . . . . . . . . . . . . . . .11
7.3. Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
7.4. Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
7.5. Source of Distributions . . . . . . . . . . . . . . . . . . . . . . .12
7.6. Tax Withholding.. . . . . . . . . . . . . . . . . . . . . . . . . . .12
ARTICLE VIII Transfers of Members' Interests. . . . . . . . . . . . .12
8.1. Transfer of Interest. . . . . . . . . . . . . . . . . . . . . . . . .12
8.2. Conditions of Transfer. . . . . . . . . . . . . . . . . . . . . . . .12
8.3. Admission of New Members. . . . . . . . . . . . . . . . . . . . . . .13
8.4. Involuntary Assignment by a Member. . . . . . . . . . . . . . . . . .13
8.5. Withdrawal of Members . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE IX Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . .14
9.1. Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
9.2. Winding Up and Liquidation. . . . . . . . . . . . . . . . . . . . . .14
9.3. Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
9.4. Settling of Accounts. . . . . . . . . . . . . . . . . . . . . . . . .15
9.5. Distribution of Proceeds. . . . . . . . . . . . . . . . . . . . . . .15
9.6. Disposition and Use of the ISEP System. . . . . . . . . . . . . . . .16
9.7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.8. Filing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE X Tax Returns; Reports to Members. . . . . . . . . . . . . . . . .17
10.1. Filing of Tax Returns. . . . . . . . . . . . . . . . . . . . . .17
10.2. Tax Matters Member . . . . . . . . . . . . . . . . . . . . . . .17
10.3. Reports to Members . . . . . . . . . . . . . . . . . . . . . . .17
10.4. Records to be Kept. . . . . . . . . . . . . . . . . . . . . . .18
10.5. Inspection of Company Records. . . . . . . . . . . . . . . . . .18
ARTICLE XI Additional Agreements of the Members . . . . . . . . . . . . . .18
11.1. License by ImmuCell. . . . . . . . . . . . . . . . . . . . . . .18
11.2. Additional Services Provided by Members. . . . . . . . . . . . .19
11.3. Patents and Improvements . . . . . . . . . . . . . . . . . . . .19
ARTICLE XII Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . .20
ARTICLE XIII Miscellaneous. . . . . . . . . . . . . . . . . . . . . .20
13.1. Representations and Warranties of the Members. . . . . . . . . .20
13.2. Successors and Assigns . . . . . . . . . . . . . . . . . . . . .21
13.3. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . .21
13.4. Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . . .21
13.5. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
13.6. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
13.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .21
13.8. Severability.. . . . . . . . . . . . . . . . . . . . . . . . . .21
13.9. Seal. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
13.10. Gender and Number. . . . . . . . . . . . . . . . . . . . . . . .21
Exhibit I Certificate of Formation
Schedule A Names, Addresses, Capital Contributions and Percentage
Interests of Members
Schedule B ImmuCell Equipment Contributed to the Company
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
AGRICELL COMPANY, LLC
Dated as of September 10, 1996
LIMITED LIABILITY COMPANY AGREEMENT made and entered into as of the 10th day
of September, 1996, by and between IMMUCELL CORPORATION, a Delaware corporation
("ImmuCell"), and AGRI-MARK, INC., a Delaware corporation ("AMI"). ImmuCell and
AMI are hereinafter referred to collectively as the "Members."
R E C I T A L S
WHEREAS, the parties hereto wish to form a limited liability company, to be
called AgriCell Company, LLC (the "Company"), under and pursuant to the Delaware
Limited Liability Company Act codified at Del. Code tit. 6, S18-101 et seq. (the
"Act"), for the purpose of engaging in such business activities authorized under
the Act and as provided in this Agreement;
WHEREAS, the parties hereto agree that their respective rights, powers, duties
and obligations as Members, and the management, operations and activities of the
Company, shall be governed by this Agreement;
NOW, THEREFORE, in consideration of the mutual terms, covenants and conditions
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
For purposes of this Agreement, unless the context otherwise requires:
"Act" means the Delaware Limited Liability Company Act, codified at Del. Code
tit. 6, S18-101 et seq., as amended from time to time.
"Adjusted Capital Account" means, with respect to any Member, the balance in
such Member's Capital Account as of the end of the relevant Fiscal Year, after
giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such Member is
obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations SS1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in Regulations
SS1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations S1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
"Agreement" means this Limited Liability Company Agreement, as amended,
modified or supplemented from time to time.
"AMI Improvements" shall mean any and all inventions, modifications,
discoveries, ideas, developments and enhancements related to the manufacture of
the Lactoferrin Product, which inventions, etc., are conceived or first reduced
to practice by AMI after August 1, 1996 and prior to December 31, 1997.
"AST" shall mean Advanced Separation Technologies, Inc. a Florida corporation
located in Lakeland, Florida, which owns the ISEP System and which has granted
an exclusive license, with the right of sublicense, to ImmuCell to use the ISEP
System as part of the Lactoferrin Technology.
"Capital Account" means the Capital Account maintained for each Member
pursuant to Section 5.2.
"Capital Contribution(s)" means the aggregate of all contributions made by a
Member to the Company pursuant to Section 5.1 hereof.
"Certificate of Formation" means the Certificate of Formation of the Company,
as filed with the Secretary of the State, as amended from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Company" means AgriCell Company, LLC, created by the Certificate of Formation
and this Agreement pursuant to the Act.
"Company Improvements" shall mean any and all inventions, modifications,
discoveries, ideas, developments and enhancements related to the manufacture of
the Lactoferrin Product, which inventions, etc., are conceived or first reduced
to practice by the Company prior to the expiration or termination of this
Agreement.
"Company Minimum Gain" has the meaning set forth in Regulation S1.704-2(d),
but substituting the term "Company" for the term "partnership" as the context
requires.
"Confidential Information" shall mean any know-how, technology, expertise and
information, whether or not patented or patentable, copyrighted or
copyrightable, and any designs, processes, procedures, formulae, or improvements
which relate to the development, formulation, production, manufacture or
marketing of the Lactoferrin Product and which are confidential and commercially
valuable in the sense that their confidentiality affords the disclosing party
a competitive advantage over its competitors.
"Fiscal Year" means the year ended November 30th.
"Gross Income" means all items of income and gain that are included in the
definition of Income and Loss(es).
"ImmuCell Improvements" shall mean any and all inventions, modifications,
discoveries, ideas, developments and enhancements related to the manufacture of
the Lactoferrin Product, which inventions, etc., are conceived or first reduced
to practice by ImmuCell after August 1, 1996 and prior to December 31, 1997.
"ImmuCell License Agreements" has the meaning set forth in Section 11.1.
"Income and Loss(es)" means taxable income or loss plus income exempt from
federal income tax as determined in accordance with the accounting methods
followed by the Company for federal income tax purposes, adjusted to reflect
book-tax disparities as required by Regulation S1.704-1(b)(2)(iv)(g).
"Initial Working Capital" means cash contributed by AMI to fund initial
production and sales of Lactoferrin Product and is not intended to include
working capital requirements after the Company becomes self-funding.
"Interest" means the entire ownership interest of a Member in the Company at
any particular time, including, without limitation, the right of such Member to
participate in the Company's Income and Losses, distributions and any and all
benefits to which a Member may be entitled as provided in this Agreement and the
Act, together with the obligations of such Member to comply with all the terms
and provisions of this Agreement.
The "ISEP System" shall mean certain patented process and equipment technology
owned by AST relating to the design, manufacture and operation of equipment for
use in continuous chromatography described in U.S. Patent Nos. 4,522,726,
4,764,276, 4,808,317 and 5,069,883.
"Lactoferrin Product" shall mean lactoferrin which is derived from cheese whey
using the Lactoferrin Technology.
"Lactoferrin Technology" shall mean know-how, technology, information and
processes owned by and/or licensed to ImmuCell and used in deriving lactoferrin
from cheese whey using the ISEP System as of August 1, 1996.
"Manager" means, initially, Richard Langworthy, and any Person who becomes a
substitute or replacement Manager as permitted by this Agreement, in each such
Person's capacity as a Manager of the Company.
"Member(s)" means each Person named as a Member in this Agreement and any
Person who becomes an additional, substitute or replacement Member as permitted
by this Agreement, in each such Person's capacity as a Member of the Company.
"Nonrecourse Deductions" has the meaning set forth in Regulation
S1.704-2(b)(1).
"Percentage Interest" means, with respect to each Member, such Member's
Percentage Interest in the Company as set forth on Schedule A attached hereto
and made a part hereof.
"Person" means any partnership, joint venture, association, corporation,
limited liability company, trust or other entity and, where the context so
permits or requires, a natural person.
"Regulations" means the regulations (including any proposed or temporary
regulations) issued under the Code by the Department of the Treasury, as they
may be amended from time to time, or any applicable successor regulations.
Reference herein to any particular section of the Regulations shall be deemed
to refer to the corresponding provision of any applicable successor regulations.
"Secretary of State" means the Secretary of State of the State of Delaware.
"Tax Matters Member" has the meaning set forth in Section 10.2.
"WPI" means whey protein isolate, a protein found in cheese whey consisting
of alpha lactalbumin and beta lactoglobulin.
ARTICLE II
Formation of the Company
2.1. Formation and Name of Company. The undersigned parties do hereby agree
to form and do ratify the formation of a limited liability company under the
name "AgriCell Company, LLC" pursuant to the Act. Prior to or upon the
execution of this Agreement, the Members have caused or shall cause to be filed
with the Secretary of State the Certificate of Formation substantially in the
form annexed hereto as Exhibit I. The Manager shall execute and file or record
with the proper offices any other certificates or instruments required by the
Act or by any fictitious name act or similar statute in effect from time to
time.
2.2. Purpose. The purpose of the Company is (i) to manufacture, market and
sell Lactoferrin Product and to engage in all activities and transactions as the
Manager may deem necessary or advisable or incidental in connection therewith,
and (ii) to engage in such other business activities as may be authorized under
the Act and as may be approved from time to time by all of the Members.
2.3. Registered Office; Registered Agent. The registered office in the State
of Delaware shall be Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801. The name and address of the registered agent of the Company for
service of process on the Company in the State of Delaware shall be The
Corporation Trust Company.
2.4. Principal Place of Business. The principal place of business of the
Company is Milk Street Office Park, 100 Milk Street, Methuen, Massachusetts
01844, or such other place as from time to time may be designated by the
Manager.
ARTICLE III
Rights and Obligations of Members; Voting Rights
3.1. Members. Each Member who is a party to this Agreement and each Person
who may hereafter be admitted as a Member of the Company shall be a Member of
the Company until each ceases to be a Member in accordance with the Act or this
Agreement.
3.2. Voting Rights. Except as may otherwise be provided in the Act or this
Agreement, the affirmative vote, approval or consent of all of the Members shall
be required to decide any matter connected with the business or affairs of the
Company not otherwise within the decision-making authority of the Manager.
3.3. Liability of Members. No Member, in its capacity as a Member, shall have
any liability to restore any negative balance in its Capital Account or to
contribute to, or in respect of, the liabilities or the obligations of the
Company, or to restore any amounts distributed from the Company, except as may
be required under the Act or other applicable law. In no event shall any
Member, in its capacity as a Member, be personally liable for any liabilities
or obligations of the Company.
ARTICLE IV
Management
4.1. Management Generally. The management of the Company shall be vested
exclusively in a single Manager, who shall be an officer of AMI occupying a
position at least as senior as a Senior Vice President. Richard Langworthy, a
current Senior Vice President of AMI, is hereby appointed and confirmed as the
initial Manager of the Company. In the event that Mr. Langworthy shall
hereafter cease to occupy a position at AMI at least as Senior as Senior Vice
President, he shall automatically cease to be the Manager of the Company
effective on the date of his termination from his position at AMI. Mr.
Langworthy's successor shall be selected by agreement of the Members. Except
as otherwise provided herein, the Members shall have no part in the management
of the Company, and shall have no authority or right to act on behalf of the
Company in connection with any matter.
4.2. Authority of Manager. Except as otherwise provided in this Agreement,
and subject to the provisions of Section 4.3, the Manager shall have the power
on behalf and in the name of the Company to carry out any and all of the objects
and purposes of the Company set forth in Section 2.2, and to perform such acts
and enter into and perform such contracts and other undertakings on behalf of
the Company that the Manager may deem necessary, advisable, or incidental
thereto.
4.3. Limitations on Authority. The Manager shall not have the authority to
take any of the following actions without the consent of all of the Members:
(a) Merger. Merge or consolidate with any other Person.
(b) Transfer Assets. Sell, convey, transfer, mortgage, or otherwise
dispose of or encumber, or agree to sell, convey, transfer, mortgage or
otherwise dispose of any assets of the Company having an original cost in
excess of $5,000.
(c) Bankruptcy. Make an assignment for the benefit of creditors, or
admit in writing its inability to pay its debts as they mature, or generally
fail to pay its debts as they mature and become due, or petition or apply for
the appointment of a trustee or other custodian, liquidator or receiver for
the Company, or of any substantial part of its assets, or commence any case
or other proceeding relating to the Company under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law of any jurisdiction now or hereafter in effect, or
take any action in furtherance of any of the foregoing.
(d) Liquidation or Wind-Up. Dissolve, liquidate, terminate or wind-up
the Company except as otherwise provided in this Agreement.
(e) Fiscal Year. Change the Company's fiscal year end from November
30.
(f) Capital Expenditures. Excepting the $775,000 in fixed asset
purchases defined by Schedule A, make any individual capital expenditure in
excess of $5,000 subject to the aggregate maximum limit of $25,000 during any
one Fiscal Year.
(g) Distributions. Determine the amount of any distribution under
Section 7.1
(h) Tax Status. Change the tax status of the Company under the Code.
(i) Members. Admit new Members or permit the withdrawal of Members.
(j) Business. Engage in any business activity not specified in Section
2.2(i).
(k) Amendment. Amend this Agreement.
(l) Additional Capital Contributions. Permit Members to make
additional Capital Contributions.
(m) Litigation. Commence, conduct or settle any litigation or legal
proceeding.
(n) Borrowings. Borrow any money.
(o) Contracts. Enter into any contract requiring total payments by or
to the Company in excess of $5,000.
(p) Personnel. Hire any personnel.
(q) Bank Accounts. Open any bank accounts and determine authorized
signatories for such accounts.
(r) Compensation of Manager. Pay compensation to the Manager.
4.4. Reliance by Third Parties. Persons dealing with the Company are entitled
to rely conclusively upon the certificate of the Manager to the effect that the
Manager is then acting as the Manager and upon the power and authority of a
Manager as herein set forth.
4.5. Activities of Manager. The Manager shall devote so much of his time to
the affairs of the Company as in his judgment the conduct of the Company's
business shall reasonably require and the Manager shall not be obligated to do
or perform any act or thing in connection with the business of the Company not
expressly set forth herein.
4.6. Exculpation. The Manager shall not be liable to any Member or the
Company for any act or failure to act on behalf of the Company, unless such act
or failure to act resulted from the Manager's willful misfeasance or gross
negligence. The Manager may consult with counsel and accountants in respect of
Company affairs and shall be fully protected and justified in any action or
inaction which is taken in accordance with the advice or opinion of such counsel
or accountants.
4.7. Indemnification.
(a) Indemnification by the Company. The Company, out of its own assets
and not out of the assets of any Member, shall indemnify and hold harmless the
Manager from and against any loss, expense, judgment, settlement cost, fee and
related expenses (including attorneys' fees and expenses), costs or damages
suffered or sustained by reason of being or having been a Manager or arising out
of or in connection with action or failure to act unless such act or failure to
act was the result of the Manager's willful misfeasance or gross negligence.
The Company shall advance reasonable attorneys' fees and other costs and
expenses incurred by the Manager in connection with the defense of any action
or proceeding which arises out of conduct which is the subject of the
indemnification provided hereunder, subject to the agreement of the Manager to
reimburse the Company for such advance to the extent that it shall finally be
determined by a court of competent jurisdiction that the Manager was not
entitled to indemnification under this Section 4.7(a). Notwithstanding the
foregoing, the provisions of this Section 4.7(a) shall not be construed so as
to provide for the indemnification of the Manager for any liability to the
extent (but only to the extent) that such indemnification would be in violation
of applicable law.
(b) Indemnification by ImmuCell. Subject to the limitation on liability set
forth below and to the provisions of Section 11.1 regarding Improvements,
ImmuCell shall indemnify and hold harmless the Company and AMI from and against
all losses, liabilities and expenses including reasonable attorneys fees arising
out of any claim against the Company and AMI by any third party for infringement
of any patent, tradesecret, copyright or other intellectual property right
relating to the Company's and AMI's use of the Lactoferrin Technology or the
ISEP System, provided that ImmuCell is given prompt notice of such claim and has
control of the defense and settlement of such claim. ImmuCell shall defend
against any case of infringement or obtain a license for the Company and AMI to
use the Lactoferrin Technology to the full extent contemplated by this
Agreement. Such a license for AMI shall only be applicable to AMI's license to
use the ISEP System and the Lactoferrin Technology contemplated in Section 9.6.
ImmuCell's entire liability to the Company and AMI under this Section 4.7(b)
shall be limited to the aggregate amount of Income allocated to ImmuCell under
this Agreement. Any royalties, license fees or defense costs resulting from the
Company's use of the Lactoferrin Technology are to be an obligation of the
Company. The Company has the right to deduct such royalties, license fees and
defense costs from ImmuCell's portion of Income. If such estimated defense
costs, royalties or license fees exceed ImmuCell's Income, all other Members
shall share in the control of any such defense and in the settlement of any such
claim and in the negotiation of any such royalties and licenses.
4.8. Payment of Costs and Expenses. The Company shall pay all legal and
accounting fees and other costs and expenses incurred by the Company in
connection with the initial structuring and organization of the Company from and
out of the Initial Working Capital to be contributed by AMI.
4.9. Resolution of Deadlocks. In the event of a deadlock among the Members
with respect to any action, as declared in writing by any of the Members, the
deadlock may be resolved by agreement between all of the members. Failing
resolution by the Members, the Members shall enter into Arbitration as defined
in Article XII herein.
ARTICLE V
Capital Contributions and Capital Accounts
5.1. Capital Contributions. Each of the Members hereby agrees to contribute
to the Company in cash or property the amount set forth in Schedule A promptly
following the execution of this Agreement. These contributions shall constitute
the initial amount of each Member's Capital Contribution. Except as set forth
on Schedule A, no Member shall be obligated to make any additional Capital
Contribution to the Company. Members may make additional Capital Contributions
in cash or property with the consent of all of the Members. No interest shall
be paid on any Capital Contribution by any Member.
5.2. Capital Accounts. A separate Capital Account shall be established and
maintained for each Member in compliance with Regulations S1.704-1(b). The
provisions of this Agreement shall be interpreted and applied in a manner
consistent with such section of the Regulations.
5.3. Determination of Certain Matters. Except as otherwise provided in
Article X, all matters concerning the valuation of assets of the Company, and
the allocation of Income and Loss(es), items of income, deduction, gain, loss,
credit, accounting procedures and other matters among the Members not expressly
provided for by the terms of this Agreement shall be determined by the Members.
ARTICLE VI
Allocations
6.1. General Allocations. Income and Loss(es) for each Fiscal Year from
operations of the Company shall be allocated among the Members in proportion to
their Percentage Interests, except as provided in Section 6.2 below.
6.2. Priority Income and Final Year Allocations.
(a) Income shall be allocated 90% to AMI and 10% to ImmuCell until the
aggregate income allocated to AMI pursuant to this Section 6.2(a) equals the
aggregate amounts distributed and to be distributed to AMI pursuant to Section
7.2.
(b) For the Fiscal Year in which the Company terminates, or in which
substantially all of its assets are sold, allocations of Income and Loss(es),
including gross allocations of items of Income and Loss(es) shall be made so
that the Capital Accounts of the Members are proportional to the distributions
to be made to the Members under Article IX.
6.3. Special Allocations. Notwithstanding any other provisions of this
Article VI, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback. If there is a net decrease in Company
Minimum Gain during any Fiscal Year, the Members shall be specially allocated
Gross Income for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) in an amount equal to the portion of such Member's share of the net
decrease in Company Minimum Gain, determined in accordance with Regulation
S1.704-2(g)(2). Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to the
Members pursuant thereto. The items to be so allocated shall be determined
in accordance with Regulation S1.704-2(f)(6). This Section 6.3(a) is
intended to comply with the minimum gain chargeback requirement in such
section of the Regulations and shall be interpreted consistently therewith.
(b) Nonrecourse Deductions. Any Nonrecourse Deductions for any Fiscal
Year or other period shall be specially allocated to the Members in
accordance with their Percentage Interests.
(c) Member Nonrecourse Debt Chargeback. If during any Fiscal Year of
the Company there is a net decrease in Member Nonrecourse Debt Minimum Gain
(as such term is defined by Regulation S1.704-2(i) but substituting the term
"Member" for the term "partner" as the context requires) then each Member
shall be specially allocated Gross Income for such Fiscal Year (and, if
necessary, for subsequent Fiscal Years) in the manner provided in Regulation
S1.704-2(i). This Section 6.3(c) is intended to comply with the partner
nonrecourse debt chargeback provisions of Regulation S1.704-2(i).
(d) Member Nonrecourse Deductions. Member nonrecourse deductions (as
defined in Regulation S1.704-2(i)(2) but substituting the term "Member" for
the term "partner" as the context requires) shall be allocated as prescribed
in Regulation S1.704-2(i)(1).
(e) Limitations. No allocations of items of loss shall be made to a
Member if such allocation would cause or increase a deficit in such Member's
Adjusted Capital Account. Any such item shall instead be allocated to other
Members to the extent of, and in proportion to, their positive Adjusted
Capital Accounts.
(f) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations or distributions described in
Regulations SS1.704-1(b)(2)(ii)(d)(4), (5) or (6), Gross Income shall be
specially allocated to each such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of such Member as quickly as possible provided that an
allocation pursuant to this Section 6.3(f) shall be made only if and to
the extent that such Member would have an Adjusted Capital Account Deficit
after all other allocations provided for in Sections 6.1 and 6.2 have been
tentatively made as if this Section 6.3(f) were not in the Agreement.
(g) Curative Allocations. Any special allocations pursuant to Sections
6.3(e) and (f) shall be taken into account in computing subsequent
allocations pursuant to Article VI, so that the allocations of Income and
Loss(es) allocated to each Member pursuant to Article VI shall be equal to
the allocations of Income and Loss(es) that would have been allocated to each
Member pursuant to the provisions of Article VI if the adjustments,
allocations, or distributions and the resulting special allocations pursuant
to Sections 6.3(e) and (f) had not occurred.
6.4. Allocations for Tax Purposes. Taxable income, gain, loss or deduction
of the Company (as well as any credits and the basis of property to which such
credits apply) as determined for federal income tax purposes shall be allocated
in the same manner as the corresponding Income and Loss(es) is allocated for
purposes of adjusting Capital Accounts hereunder. In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss and deduction
with respect to any property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account
of any variation between the adjusted basis of such property to the Company for
Federal income tax purposes and its initial book value.
ARTICLE VII
Distributions and Withdrawals
7.1. Distributions. Upon determination by the Members and subject to the
reasonably anticipated business needs and opportunities of the Company,
including the establishment of any reserves deemed necessary, amounts available
for distribution by the Company, if any, shall be distributed to the Members not
less frequently than annually, in proportion to their respective Percentage
Interests except as provided in Section 7.2 below.
7.2. Priority Distribution AMI shall receive 90% of any and all
distributions until AMI receives the return of an amount equal to its Capital
Contributions while ImmuCell shall receive the remaining 10%. Subsequent to
this Priority Distribution in favor of AMI, distributions shall be made in
accordance with Section 7.1, above.
7.3. Withdrawals. Except as provided in this Agreement, no Member shall be
entitled to withdraw from the Company all or any part of its Capital Account.
A Member, irrespective of the nature of its Capital Contributions, shall only
have the right to receive distributions in cash, although such Member may
receive a distribution in kind upon the approval of the Members.
7.4. Conditions. No Member shall have the right to withdraw from the Company
all or any part of its Capital Account or Capital Contribution pursuant to
Section 7.3 until:
(a) all liabilities of the Company have been paid or there remains
property of the Company sufficient to pay them; or
(b) the consent of all of the Members is obtained.
7.5. Source of Distributions. Each Member shall look solely to the assets of
the Company for all distributions with respect to the Company and the Member's
Capital Contributions thereto and shall have no recourse therefor (upon
dissolution or otherwise) against the other Members. Except as provided for in
Article IX, no Member shall have any right to demand or receive property other
than cash upon dissolution and termination of the Company.
7.6. Tax Withholding. The Manager may withhold taxes from any allocation or
distribution to any Member to the extent required by the Code or any other
applicable law. For purposes of this Agreement, any taxes so withheld by the
Company shall be deemed to be a distribution or payment to such Member, and the
Manager shall reduce the amount otherwise distributable or allocable to such
Member pursuant to this Agreement and shall reduce the Capital Account of such
Member accordingly.
ARTICLE VIII
Transfers of Members' Interests
8.1. Transfer of Interest. No Member may sell, assign, transfer, pledge,
donate, alienate, hypothecate, encumber or otherwise dispose of its Interest in
the Company (hereinafter "Transfer") except with the prior written consent of
all of the nontransferring Members, which consent shall not be unreasonably
withheld. Failure to approve a proposed transfer within thirty (30) days shall
be deemed a rejection. Any Transfer of Interest made in violation of this
Section shall be deemed void. No transferee shall become a Member except as
provided in Section 8.3.
8.2. Conditions of Transfer. No Transfer of Interest shall be effective
unless:
(a) The transferee on or prior to the date of Transfer agrees in
writing to be bound by all the terms and conditions of this Agreement; and
(b) The transferee on or prior to the date of transfer agrees in
writing to assume all obligations and liabilities of the Member from whom
such transferee is receiving the transferred Interest.
8.3. Admission of New Members.
(a) No Person shall be admitted as a Member of the Company after the
date of this Agreement without the written approval of all of the Members.
(b) Upon admission of a new Member in accordance with the Act and this
Agreement, the Manager shall establish a Capital Account which shall be
credited with the Capital Contribution of the new Member, and Schedule A
shall be adjusted accordingly.
8.4. Involuntary Assignment by a Member.
(a) In the event a Member's Interest is taken by levy, foreclosure,
charging order, execution or other similar involuntary proceeding, the
Company shall not dissolve, but the statutory or other involuntary assignee
of said interest shall be entitled to no more than to receive the
distributions, subject to Section 7.1, and allocations of Income and Losses
attributable to the Member's Interest in the Company, in accordance with the
Member's Percentages Interest. In no event shall said assignee have the
right to interfere with the management or the administration of the Company's
business, assets, or affairs, or to become a Member except as provided in
Section 8.3.
(b) Upon any such event, the Company shall promptly notify the other
Members, including in such notice the name and address of the transferee or
proposed transferee and the purchase price determined pursuant to the
following paragraph. The other Members shall have an option, exercisable
within thirty (30) days of receipt of such notice, to purchase the Interest
subject to levy, foreclosure, charging order, execution or similar proceeding
in proportion to their respective Percentage Interests, or in such other
proportion as they may agree. The other Members shall give notice of
exercise of their option to purchase to the Member (or former Member), the
transferee (or proposed transferee) and the Company. If any Member fails or
declines to exercise the option to purchase in this paragraph, then that
portion of the Interest not so purchased may be acquired by the other Members
in proportion to their respective Percentage Interests or in such other
proportion as they may agree.
(c) The purchase price shall be 90% of fair market value, determined by
agreement of the transferring party and the Company (represented by the
Manager or, if the Interest of AMI is at issue, by consent of the
non-transferring Members). If agreement on fair market value cannot be
reached, then the valuation shall be referred to arbitration pursuant to
Article XII. The Company need not give notice of the right to purchase the
transferred Interest to the Members until the purchase price has been
determined hereunder.
8.5. Withdrawal of Members. Except as this Agreement otherwise expressly
provides, no Member shall have the right or the power to withdraw or resign from
the Company without the consent of all of the Members.
ARTICLE IX
Dissolution
9.1. Dissolution. The Company shall be dissolved and its affairs wound up on
the first to occur of the following and not upon the occurrence of any other
event:
(a) The allocations of income to the Members as provided in Article VI
shall fail to equal or exceed $25,000 in the aggregate in respect of any
fiscal year commencing with the fiscal year ending November 30, 1998;
(b) Except as provided for in Section 8.4(a) and (b), the death,
retirement, resignation, expulsion, bankruptcy or dissolution of any Member;
provided, however, that if an event specified in this Section 9.1(b) occurs with
respect to a Member and there are at least two Members remaining, then the
Company shall be continued upon the election of all the remaining Members; such
election to be made within ninety (90) days of receipt of notice of the event
otherwise giving rise to the dissolution of the Company;
(c) Entry of a decree of judicial dissolution of the Company;
(d) The sale or other disposition of all or substantially all of the
assets of the Company; or
(e) Vote of all of the Members.
In the event of such dissolution except as Section 9.1(b) may apply to
ImmuCell, AMI shall be prohibited from manufacturing Lactoferrin Product for a
period of 5 years, and all written documents, information, material, procedures,
processes, patents and know-how related to the Lactoferrin Technology will be
returned to ImmuCell within 30 days, and AMI shall not copy or make use of any
such document or know-how.
9.2. Winding Up and Liquidation. Upon the dissolution of the Company, the
Company shall cease to engage in any further business, except to the extent
necessary to perform existing obligations, and shall wind up its affairs and
liquidate its assets. The Manager shall appoint a liquidator who shall wind up
and liquidate the Company's business and affairs. During the course of
liquidation, the Members shall continue to share Income and Losses as provided
in Article VI of this Agreement.
9.3. Liabilities. Liquidation shall continue until the Company's affairs are
in such condition that there can be a final accounting, showing that all fixed
or liquidated obligations and liabilities of the Company are satisfied or can
be adequately provided for under this Agreement. The assumption or guarantee
in good faith by one or more financially responsible persons shall be deemed to
be an adequate means of providing for such obligations and liabilities. When
the liquidator has determined that there can be a final accounting, the
liquidator shall establish a date for the distribution of the proceeds of
liquidation of the Company (the "Distribution Date"). The net proceeds of
liquidation of the Company shall be distributed to the Members as provided in
Section 9.5 hereof not later than the Distribution Date.
9.4. Settling of Accounts. Subject to any applicable provisions of the Act,
upon the dissolution and liquidation of the Company, the proceeds of liquidation
shall be applied as follows: (i) first, to pay all expenses of liquidation and
winding up; (ii) second, to pay all debts, obligations and liabilities of the
Company in the order of priority as provided by law; and (iii) third, to
establish reasonable reserves for any remaining contingent or unforeseen
liabilities of the Company not otherwise provided for, which reserves shall be
maintained by the liquidator on behalf of the Company in a regular
interest-bearing trust account for a reasonable period of time as determined by
the liquidator. If any excess funds remain in such reserve at the end of such
reasonable time, then such remaining funds shall be distributed by the Company
to the Members pursuant to Section 9.5 hereof.
9.5. Distribution of Proceeds. Subject to any restrictions contained in the
Act, and except as otherwise provided in Section 9.6, upon final liquidation of
the Company the net proceeds of liquidation, if any, shall be distributed to the
Members as follows: (i) first, irrespective of any amounts distributed to AMI
under Section 9.5 (ii) and (iii), to return the Lactoferrin Technology, all
patent rights and the assets contributed by ImmuCell, except for the pilot ISEP
System, to ImmuCell; (ii) second, to return a portion of the value of the
Company's assets (other than those assets specifically designated under this
Section 9.5 (i) and (iii) and Section 9.6) to AMI such that the value
distributed to AMI under this provision does not exceed the amount contributed
by AMI under Schedule A, paragraph #2 and #3 minus the amounts previously
distributed to AMI under Section 7.2; (iii) third, to return the pilot ISEP
System contributed by ImmuCell to AMI; and (iv) fourth, the balance in
proportion to their Percentage Interest.
<PAGE>
9.6. Disposition and Use of ISEP System.
(a) Provided that the value distributed to AMI under this Section 9.6(a)
does not exceed the amount contributed by AMI under Schedule A, paragraph #1
minus the amounts previously distributed to AMI under Section 7.2 and provided
that the value distributed to ImmuCell under this Section 9.6(a) does not exceed
the amount contributed by ImmuCell under Schedule A, paragraph #4 minus the
amounts previously distributed to ImmuCell under Section 7.2, upon the
dissolution and liquidation of the Company pursuant to this Article IX, the
Company may sell the commercial ISEP System described in AMI's purchase order
#43810 to a third party in which case 76.19% of the proceeds shall go to AMI and
23.81% of such proceeds shall go to ImmuCell. ImmuCell shall have the right to
match the purchase price offered by any third party, or;
(b) At any time within one year of installation of the commercial ISEP
System described in AMI's purchase order #43810 in the Middlebury, Vermont plant
and provided that the value distributed to AMI under this Section 9.6(b) does
not exceed the amount contributed by AMI under Schedule A, paragraph #1 minus
the amounts previously distributed to AMI under Section 7.2, upon the
dissolution and liquidation of the Company pursuant to this Article IX, AMI has
the right to sell its 76.19% portion of such ISEP System to ImmuCell for
$200,000. AMI will be under no obligation to make such a sale but ImmuCell
will be obligated to make such a purchase within ninety (90) days of
notification by AMI of its desire to make such a sale. AMI will provide seller
financing for the purchase price with terms of three years and twelve percent
interest, payments of principal and interest to be made monthly.
9.7. Termination
(a) Any Member may terminate the Company with or without cause by giving
sixty (60) days advance written notice to all other Members. In the event of
termination of the Company, the provisions of this Article IX shall apply.
(b) If ImmuCell terminates or causes the termination of the Company, AMI
shall have the right to buy and if AMI exercises such right, ImmuCell shall have
the obligation to sell ImmuCell's 23.81% portion of the commercial ISEP System
described in AMI's purchase order #43810 to AMI for its then current market
value not to exceed $125,000 and grant an exclusive license to AMI to use the
ISEP System and the Lactoferrin Technology and all the AMI Improvements, Company
Improvements and ImmuCell Improvements to manufacture and sell Lactoferrin
Product and AMI will pay ImmuCell a royalty equal to 3% of net sales of the
Lactoferrin Product.
(c) Upon termination of the Company by AMI, AMI shall be prohibited from
manufacturing Lactoferrin Product for a period of five years, and all written
documents, material, information, procedures, processes, patents and know-how
related to Lactoferrin Technology and all the AMI Improvements, Company
Improvements and ImmuCell Improvements will be returned to ImmuCell within
thirty days, and AMI shall not copy or make use of any such document or
know-how.
9.8. Filing. Upon dissolution and liquidation of the Company, the party or
parties acting as the liquidator shall cause to be executed and filed with the
Secretary of State articles of dissolution in accordance with the Act.
ARTICLE X
Tax Returns; Reports to Members
10.1. Filing of Tax Returns. The Manager shall prepare and file, or cause
the Company's accountants to prepare and file, a federal information tax return
in compliance with Section 6031 of the Code, consistent with the Code and the
Regulations, and any required state and local income tax and information returns
for each tax year of the Company, subject to the prior approval of the Tax
Matters Member. Any provisions hereof to the contrary notwithstanding, solely
for U.S. federal income tax purposes, each Member hereby recognizes that the
Company will be subject to all provisions of Subchapter K of Chapter 1 of
Subtitle A of the Code; provided, however, that the filing of U.S. Partnership
Returns of Income shall not be construed to extend the purposes of the Company
or expand the obligations or liabilities of the Members.
10.2. Tax Matters Member. As used herein, "Tax Matters Member" shall have
the same meaning as "tax matters partner" as used in the Code. For all purposes
of Code Sections 6221 through 6232, the Tax Matters Member shall make all tax
elections available to the Company in such manner as he determines is in the
best interest of the Members and consistent with the Code and the Regulations.
In the event a tax controversy shall arise, the Tax Matters Member, shall employ
such attorneys and accountants and other experts to represent the Company as the
Tax Matters Member determines to be appropriate. The cost of pursuing any tax
controversy shall be borne exclusively by the Members affected by the matter in
controversy. The Tax Matters Member, with the approval of those Members of the
Company affected by any tax claim or controversy, shall have exclusive authority
to settle any income tax controversy or initiate any income tax proceeding
required to be conducted, maintained or settled in the name of the Company,
provided such action imposes no financial or other liability on the Company, its
property, or any Member not affected by such claim, controversy, proceeding or
settlement. The Tax Matters Member shall be a Member appointed by the Members
to serve in such capacity. The initial Tax Matters Member shall be AMI, acting
through Richard Langworthy.
10.3. Reports to Members. As soon as practicable after the end of each
quarter of each Fiscal Year, the Manager shall deliver to each Member an
unaudited balance sheet and income statement for the Company and a status report
of the Company's activities. As soon as practicable after the end of each
Fiscal Year the Manager shall deliver to each member a balance sheet, income
statement and statement of cash flows for the Company and a statement of the
Members' capital, all reviewed by the Company's independent accountants. Within
90 days after the end of each Fiscal Year, or as soon as practicable after
receipt of all necessary information by the Company, if later, the Company shall
prepare and mail to each Member and, to the extent necessary, to each former
Member (or such Member's legal representatives), a report setting forth in
sufficient detail such information as shall enable such Member or former Member
(or such Member's legal representatives) to prepare their respective federal,
state and local income tax returns in accordance with the laws, rules and
regulations then prevailing.
10.4. Records to be Kept. The Company shall keep at its principal place
of business or at such other office as shall be designated by the Manager:
(a) A current list in alphabetical order of the full name and last
known business, residence or mailing address of each Member;
(b) A current list in alphabetical order of the full name and last
known business, residence or mailing address of each Manager;
(c) A copy of the filed Certificate of Formation and all amendments
thereto, together with executed copies of any powers of attorney pursuant to
which any document has been executed;
(d) Copies of this Agreement, and all amendments hereto;
(e) Copies of the Company's federal income tax returns and reports, if
any, for the five most recent years; and
(f) Copies of any financial statements of the Company for the five most
recent years.
10.5. Inspection of Company Records. The accounting books and records set
forth in Section 10.4 shall be open to inspection upon the reasonable request
of any Member at any reasonable time during usual business hours, for a purpose
reasonably related to such Member's interest as a Member. Such inspection by
a Member may be made in person or by agent or attorney, and the right of
inspection includes the right to copy and make extracts.
ARTICLE XI
Additional Agreements of the Members
11.1. License by ImmuCell. During the term of this Agreement, ImmuCell
hereby grants to the Company the right to purchase ISEP Systems from AST and an
exclusive, non-terminable, non-transferrable, royalty free license to use the
Lactoferrin Technology to manufacture Lactoferrin Product including an exclusive
sublicense to use the ISEP System and all ImmuCell Improvements to manufacture
Lactoferrin Product. In the event that an ImmuCell Improvement requires a
royalty or license fee to be paid to a non-Member, the Company shall be
obligated to pay the full royalty or license fee arising from the Company's use
if the Company elects to use such ImmuCell Improvement. The Company shall
defend against any case of infringement relating to the Company's use of the AMI
Improvements, Company Improvements or ImmuCell Improvements or the Company shall
obtain a license for the Company to use such improvements. ImmuCell hereby
grants to AMI a right and license to purchase and use one ISEP System for the
production of WPI from the cheese whey processed at AMI's Middlebury, Vermont
facility only. This license shall bear a royalty equal to 3% of net sales of
proteins bound by chromotograpy. AMI agrees to abide by the terms and
conditions of the Agreement for Exclusivity between AST and ImmuCell dated
August 30, 1993 and all subsequent amendments thereto.
11.2. Additional Services Provided by Members.
(a) Supply of Cheese Whey. AMI agrees to supply cheese whey to the
Company at no cost for the manufacture of Lactoferrin Product at the
Middlebury, Vermont facility. If the Company endeavors to manufacture
Lactoferrin Product at other facilities, the supply of cheese whey will be
separately negotiated.
(b) Freeze Drying. ImmuCell agrees to freeze dry the Lactoferrin
Product produced by the Company at the Middlebury, Vermont facility at a
cost equal to a 30% discount to the next best quote from a commercial freeze
dryer. The Company shall be responsible for the cost of shipping the
Lactoferrin Product to ImmuCell's facility in Portland, Maine for freeze
drying. If the Company endeavors to manufacture Lactoferrin Product at other
facilities, the cost of freeze drying that product will be separately
negotiated.
11.3. Patents and Improvements. The Company shall be responsible for the
cost of seeking patent protection for any AMI Improvements, Company Improvements
or ImmuCell Improvements, if the Company intends to use any such improvements,
if deemed patentable. ImmuCell and AMI agree to cooperate in good faith in the
pursuit of such patent protection by the Company. Any such patent shall be
owned by the Company and licensed to ImmuCell and to AMI, and to no others, on
a royalty-free basis for the life of the patent with no rights to sublicense.
<PAGE>
ARTICLE XII
Dispute Resolution
Any dispute, claim or controversy under this Agreement, including any dispute
over the fair market value of a Member's Interest, shall be resolved by binding
arbitration pursuant to such rules as the disputing parties may agree, or if
they cannot agree within thirty (30) days, pursuant to the rules of commercial
arbitration of the American Arbitration Association upon written notice of
either party. Such dispute shall be settled by arbitration under the laws of
the State of Delaware, in accordance with the Commercial Arbitration Rules of
the American Arbitration Association (the "AAA"). In rendering its decision,
the arbitration tribunal shall apply the substantive laws of the State of
Delaware and interpret this Agreement in accordance with its terms. The
determination of the arbitration tribunal shall be conclusive and binding upon
the Parties hereto. The dispute will be decided by a panel of three arbitrators
to be appointed as provided in Section 13 of the AAA Commercial Arbitration
Rules.
The award of the arbitration tribunal may be, alternatively or cumulatively,
for monetary damages, an order requiring the performance of non-monetary
obligations (including specific performance) or any other appropriate order or
remedy. The arbitrators may issue interim awards and order any provisions or
measures which should be taken to preserve the respective right of either
party. The decision of the arbitrators may be enforced in any tribunal of
competent jurisdiction.
Each Member shall bear its own costs and expenses of the arbitration, and the
Members shall share equally the cost of the arbitrators; provided that any
Member instituting a claim or providing a defense under this Section which the
tribunal shall declare to be frivolous shall pay all costs and expenses,
including attorney's fees and costs, incurred in connection with such
arbitration.
The arbitration procedure herein shall be the exclusive remedy available to
the Members hereunder to resolve any dispute, claim or controversy arising
hereunder.
ARTICLE XIII
Miscellaneous
13.1. Representations and Warranties of the Members. Each of the Members
hereby represents and warrants that he has validly executed this Agreement and
the same constitutes the binding obligation of such Member. Each of the Members
has full power, authority and capacity to enter into this Agreement and to carry
out its respective obligations as described in this Agreement.
13.2. Successors and Assigns. This Agreement shall be binding on the
executors, administrators, heirs, and successors and assigns of the Members.
13.3. Amendments. The terms and provisions of this Agreement may be
modified or amended at any time and from time to time with the written consent
of all of the Members.
13.4. Choice of Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware, without regard to Delaware choice of
law provisions.
13.5. Notices. Each notice relating to this Agreement shall be in writing
and delivered in person, by facsimile or by registered or certified mail. The
receipt of any notice transmitted by facsimile must be confirmed by any means
acceptable in the preceding sentence to be effective; provided, however, that
such a confirmation does not, in turn, have to be confirmed. All notices to the
Company shall be addressed to its principal office and place of business. All
notices addressed to a Member shall be addressed to such Member at the address
listed in Schedule A attached hereto. Any Member may designate a new address
by notice to that effect given to the Company. Unless otherwise specifically
provided in this Agreement, a notice shall be deemed to have been effectively
given upon receipt.
13.6. Headings. The titles of the Articles and the headings of the
Sections of this Agreement are for convenience of reference only, and are not
to be considered in constructing the terms and provisions of this Agreement.
13.7. Counterparts. This Agreement may be executed upon an original and
one or more duplicate originals, including on a counterpart execution page, all
of which taken together shall constitute one agreement.
13.8. Severability. If any term or provision of this Agreement is for any
reason deemed illegal or invalid, such illegality or invalidity shall not affect
the validity of the remainder of this Agreement, and each such term or provision
shall be valid and enforceable to the fullest extent permitted by law.
13.9. Seal. The Managers may adopt a seal of the Company in such form as
the Manager shall decide.
13.10. Gender and Number. All nouns, pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the context may require.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
date first set forth above.
MEMBERS:
IMMUCELL CORPORATION
By: /s/: Thomas C. Hatch
Thomas C. Hatch
Its: President and CEO
AGRI-MARK, INC.
By: /s/: Richard Langworthy
Richard Langworthy
Its: Senior Vice President
<PAGE>
EXHIBIT I
CERTIFICATE OF FORMATION
OF
AGRICELL COMPANY, LLC
FIRST: The name of the limited liability company is:
AgriCell Company, LLC
SECOND: Its registered office in the State of Delaware is to be located
at Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle, 19801, and its registered agent
at such address is The Corporation Trust Company.
THIRD: The latest date upon which the Company is to dissolve is September 10,
2026.
IN WITNESS WHEREOF, the undersigned, being the individual forming the
Company, has executed, signed and acknowledged this Certificate of Formation
this 10th day of September, 1996.
/s/: Jeffrey A. Clopeck
Jeffrey A. Clopeck
<PAGE>
SCHEDULE A
NAMES, ADDRESSES, CAPITAL CONTRIBUTIONS AND
PERCENTAGE INTERESTS OF MEMBERS
<TABLE>
<CAPTION>
Member Percentage Interest
<S> <C>
Agri-Mark, Inc. 50%
P.O. Box 5800
Lawrence, Massachusetts 01842
ImmuCell Corporation 50%
56 Evergreen Drive
Portland, Maine 04103
AMI Capital Contributions:
1. AMI shall contribute to the Company all of its rights in and to that
certain AMI purchase order #43810 relating to the purchase of a $525,000
commercial ISEP System from AST, and AMI's 76.19% ownership interest in such
ISEP System. AMI shall contribute cash in the amount of $400,000 to purchase
such equipment from AST (it being understood that $6,250 of such amount has
heretofore been paid by AMI in connection with its initial deposit).
2. AMI shall contribute additional cash and property to the Company, in the
amount of approximately $250,000, to purchase additional processing equipment
and to modify and fully equip the processing facility.
3. AMI shall contribute additional cash to the Company, in the amount of
approximately $150,000, to fund the Company's Initial Working Capital
requirements.
ImmuCell Capital Contributions:
4. ImmuCell shall contribute to the Company all of its rights to its 23.81%
ownership interest in the commercial ISEP System described in AMI's purchase
order #43810, for which ImmuCell has heretofore paid AMI the amount of $125,000.
5. ImmuCell shall contribute to the Company the pilot ISEP System and the
associated pumps and hardware and the other equipment set forth in Schedule B
attached hereto. It is understood and agreed that prior to any dissolution of
the Company, ImmuCell shall have the right to use the pilot ISEP System for WPI
development at other locations. If the Company is dissolved, the pilot ISEP
System will belong to AMI.
6. ImmuCell shall contribute one half-time equivalent employee during the
twelve month period ending on August 31, 1997.
7. ImmuCell shall grant to the Company the right to purchase ISEP Systems
from AST and an exclusive, non-terminable, royalty-free license to use the
Lactoferrin Technology to manufacture Lactoferrin Product, including an
exclusive sublicense to use the ISEP System and all ImmuCell Improvements to
manufacture Lactoferrin Product. AMI and ImmuCell agree that the value of such
right and license for purposes of this Agreement shall be $555,331.
<PAGE>
SCHEDULE B
IMMUCELL EQUIPMENT CONTRIBUTED
TO THE COMPANY
</TABLE>
<TABLE>
<CAPTION>
Net
Book
Item # Quantity Value Description
<S> <C> <C> <C>
1) one $ 48,418.07 Pilot ISEP 30 x 7.85 liter = 235.5
liter bed volume
2) one 7,708.52 Pilot ISEP data acquisition equipment
(Gateway 386 computer LabTech Control
Software & Flow Cell Sensors)
3) one 26,332.89 Niro pilot UF unit - 4 stages/ 8 elements
4) four -- Hollow fiber UF modules (UFP-30-75C AG
Technology)
5) three 5,264.14 Tri-clover positive displacement pumps
(PR010, 0.75-6.0 GPM)
6) one 2,379.09 Waukashau positive displacement pump
(18U, 0.3 - 3.0 GPM)
7) three -- Centrifugal pumps
8) one 2,676.22 Shell and tube heat exchanger
9) one 1,101.64 UV liquid sterilizer
10) one 394.41 500 gallon refrigerated bulk tank
with stirrer and compressor
11) one 394.41 300 gallon refrigerated bulk tank
with stirrer and compressor
12) one -- Jacketed holding tank/reaction
vessel (45 gallon)
13) miscellaneous -- Sanitary tubing and tri-clover connectors
Total $ 94,669.39
</TABLE>
IMMUCELL CORPORATION
Exhibit 10.2
Limited Liability Company Agreetment of Clearwater Diagnostics Company, LLC
dated as of September 17, 1996 between the Registrant and Membrex, Inc., of
Fairfield, NJ .
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
CLEARWATER DIAGNOSTICS COMPANY, LLC
Dated as of September 17, 1996
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT OF
CLEARWATER DIAGNOSTICS COMPANY, LLC
TABLE OF CONTENTS
Page
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . ..1
ARTICLE II Formation of the Company. . . . . . . . . . . . . . . . . . ..4
2.1. Formation and Name of Company . . . . . . . . . . . ..4
2.2. Purpose . . . . . . . . . . . . . . . . . . . . . . ..5
2.3. Registered Office; Registered Agent . . . . . . . . ..5
2.4. Principal Place of Business . . . . . . . . . . . . ..5
ARTICLE III Rights and Obligations of Members; Voting Rights. . ..5
3.1. Members . . . . . . . . . . . . . . . . . . . . . . ..5
3.2. Voting Rights . . . . . . . . . . . . . . . . . . . ..5
3.3. Liability of Members. . . . . . . . . . . . . . . . ..5
ARTICLE IV Management. . . . . . . . . . . . . . . . . . . . . . . . . ..6
4.1. Management Generally. . . . . . . . . . . . . . . . ..6
4.2. Authority of Manager. . . . . . . . . . . . . . . . ..6
4.3. Limitations on Authority. . . . . . . . . . . . . . ..6
4.4. Activities of Manager . . . . . . . . . . . . . . . ..7
4.5. Exculpation . . . . . . . . . . . . . . . . . . . . ..8
4.6. Indemnification . . . . . . . . . . . . . . . . . . ..8
4.7. Payment of Costs and Expenses . . . . . . . . . . . ..8
4.8. Resolution of Deadlocks . . . . . . . . . . . . . . ..8
ARTICLE V Capital Contributions and Capital Accounts. . . . . . . . . ..9
5.1. Capital Contributions . . . . . . . . . . . . . . . ..9
5.2. Capital Accounts. . . . . . . . . . . . . . . . . . ..9
5.3. Determination of Certain Matters. . . . . . . . . . ..9
ARTICLE VI Allocations . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1. General Allocations . . . . . . . . . . . . . . . . ..9
6.2. Special Allocations . . . . . . . . . . . . . . . . .10
<PAGE>
6.3. Allocations for Tax Purposes. . . . . . . . . . . . .11
6.4. Allocation of Expenses Between Products . . . . . . .11
ARTICLE VII Distributions and Withdrawals . . . . . . . . . . . . . . . .12
7.1. Distributions . . . . . . . . . . . . . . . . . . . .12
7.2. Withdrawals . . . . . . . . . . . . . . . . . . . . .12
7.3. Conditions. . . . . . . . . . . . . . . . . . . . . .12
7.4. Source of Distributions . . . . . . . . . . . . . . .13
7.5. Tax Withholding . . . . . . . . . . . . . . . . . . .13
ARTICLE VIII Transfers of Members' Interests . . . . . . . . . . . . . . .13
8.1. Transfer of Interest. . . . . . . . . . . . . . . . .13
8.2. Conditions of Transfer. . . . . . . . . . . . . . . .13
8.3. Admission of New Members. . . . . . . . . . . . . . .13
8.4. Involuntary Assignment by a Member. . . . . . . . . .14
8.5. Withdrawal of Members . . . . . . . . . . . . . . . .14
ARTICLE IX Dissolution . . . . . . . . . . . . . . . . . . . . .15
9.1. Dissolution . . . . . . . . . . . . . . . . . . . . .15
9.2. Winding Up and Liquidation. . . . . . . . . . . . . .15
9.3. Liabilities . . . . . . . . . . . . . . . . . . . . .15
9.4. Settling of Accounts. . . . . . . . . . . . . . . . .16
9.5. Distribution of Proceeds. . . . . . . . . . . . . . .16
9.6. Filing. . . . . . . . . . . . . . . . . . . . . . . .16
9.7. Event . . . . . . . . . . . . . . . . . . . . . . . .16
ARTICLE X Tax Returns; Reports to Members . . . . . . . . . . .16
10.1. Filing of Tax Returns . . . . . . . . . . . . . . . .16
10.2. Tax Matters Member. . . . . . . . . . . . . . . . . .17
10.3. Reports to Members. . . . . . . . . . . . . . . . . . . . . .17
10.4. Records to be Kept. . . . . . . . . . . . . . . . . . . . . .17
10.5. Inspection of Company Records . . . . . . . . . . . . . . . .18
ARTICLE XI Additional Agreements of the Members. . . . . . . . . . . . .18
11.1. License by Membrex. . . . . . . . . . . . . . . . . . . . . .18
11.2. License by ImmuCell . . . . . . . . . . . . . . . . .18
11.3. Sale of Components. . . . . . . . . . . . . . . . . .19
11.4. Design of New VFF Device. . . . . . . . . . . . . . .19
ARTICLE XII Dispute Resolution. . . . . . . . . . . . . . . . . . . . . .19
<PAGE>
ARTICLE XIII Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . .20
13.1. Representations and Warranties of the Members . . . . . . . .20
13.2. Successors and Assigns. . . . . . . . . . . . . . . . . . . .20
13.3. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . .20
13.4. Choice of Law . . . . . . . . . . . . . . . . . . . . . . . .20
13.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .21
13.6. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . .21
13.7. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .21
13.8. Severability. . . . . . . . . . . . . . . . . . . . . . . . .21
13.9. Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
13.10. Gender and Number . . . . . . . . . . . . . . . . . . . . . .21
13.11. Force Majeure . . . . . . . . . . . . . . . . . . . .21
13.12. Confidentiality . . . . . . . . . . . . . . . . . . .21
13.13. Prior Agreement . . . . . . . . . . . . . . . . . . .22
Exhibit I Certificate of Formation
Schedule A Names, Addresses, Capital Contributions and
Percentage Interests of Members
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
CLEARWATER DIAGNOSTICS COMPANY, L.L.C.
Dated as of September 17, 1996
LIMITED LIABILITY COMPANY AGREEMENT made and entered into as of the
17th day of September, 1996, by and between IMMUCELL CORPORATION, a Delaware
corporation ("ImmuCell"), and MEMBREX, INC., a Delaware corporation
("Membrex"). ImmuCell and Membrex are hereinafter referred to collectively as
the "Members."
R E C I T A L S
WHEREAS, the parties hereto wish to form a limited liability company, to
be called Clearwater Diagnostics Company, L.L.C. (the "Company"), under and
pursuant to the Delaware Limited Liability Company Act codified at Del. Code
tit. 6, Sub. Sec. 18-101 et seq. (the "Act"), for the purpose of engaging in
such business activities authorized under the Act and as provided in this
Agreement;
WHEREAS, the parties hereto agree that their respective rights, powers,
duties and obligations as Members, and the management, operations and
activities of the Company, shall be governed by this Agreement;
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions contained herein, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
For purposes of this Agreement, unless the context otherwise requires:
"Act" means the Delaware Limited Liability Company Act, codified at Del.
Code tit. 6, Sub. Sec. 18-101 et seq., as amended from time to time.
"Adjusted Capital Account" means, with respect to any Member, the balance
in such Member's Capital Account as of the end of the relevant Fiscal Year,
after giving effect to the following adjustments:
<PAGE>
(i) Credit to such Capital Account any amounts which such Member is
obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sub. Sec. 1.704-2(g)(1) and 1.704-2(i)(5);
and
(ii) Debit to such Capital Account the items described in Regulations
Sub. Sec. 1.704- 1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Sub. Sec. 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Agreement" means this Limited Liability Company Agreement, as amended,
modified or supplemented from time to time.
"Capital Account" means the Capital Account maintained for each Member
pursuant to Section 5.2.
"Capital Contribution(s)" means the aggregate of all contributions made by
a Member to the Company pursuant to Section 5.1 hereof.
"Certificate of Formation" means the Certificate of Formation of the
Company, as filed with the Secretary of the State, as amended from time to
time.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company" means Clearwater Diagnostics Company, LLC, created by the
Certificate of Formation and this Agreement pursuant to the Act.
"Company Minimum Gain" has the meaning set forth in Regulation Sub. Sec.
1.704-2(d), but substituting the term "Company" for the term "partnership" as
the context requires.
"Company Products" means Food and Beverage Products and Water Products.
"Fiscal Year" means the calendar year.
"Food and Beverage Products" means products for use in the sample
preparation and detection of infectious disease agents in food and beverage
industrial manufacturing and processing segments.
"Gross Income" means all items of income and gain that are included in the
definition of Income or Loss.
"ImmuCell Components" means the immuno-magnetic separation reagents owned
by or licensed to ImmuCell that bind to Cryptosporidium antigens or antigens of
other waterborne infectious disease organisms.
<PAGE>
"ImmuCell License Agreement" has the meaning set forth in Section 11.2.
"Income and Loss(es)" means taxable income or loss plus income exempt from
federal income tax as determined in accordance with the accounting methods
followed by the Company for federal income tax purposes, adjusted to reflect
book-tax disparities as required by Regulation Sub. Sec.
1.704-1(b)(2)(iv)(g).
"Interest" means the entire ownership interest of a Member in the Company
at any particular time, including, without limitation, the right of such Member
to participate in the Company's Income and Losses, distributions and any and
all benefits to which a Member may be entitled as provided in this Agreement
and the Act, together with the obligations of such Member to comply with all
the terms and provisions of this Agreement.
"Licensed ImmuCell Patent Application" has the same meaning as "Licensed
Technology" as defined in Section 1.1 (i) and (ii) of the ImmuCell License
Agreement with the Company.
"Licensed ImmuCell Reagents" has the same meaning as "Product" as defined
in Section 1.3 of the ImmuCell License Agreement with the Company.
"Licensed Membrex Technology" has the same meaning as "Licensed
Technology" in Section 1.1 of the Membrex License Agreements with the Company.
"Managers" means, initially, Thomas C. Hatch and Malcolm R. Kahn, and any
Person who becomes a substitute or replacement Manager as permitted by this
Agreement, in each such Person's capacity as a Manager of the Company.
"Marketing Partner" has the meaning set forth in Section 2.2.
"Member(s)" means each Person named as a Member in this Agreement and any
Person who becomes an additional, substitute or replacement Member as permitted
by this Agreement, in each such Person's capacity as a Member of the Company.
"Membrex Components" means the rotating filter and membranes manufactured
by Membrex for use with the Licensed Technology, as set forth in the Membrex
License Agreements.
"Membrex License Agreements" has the meaning set forth in Section 11.1.
"Membrex Membranes" means membrane filters used in the Licensed Technology
as set forth in the Membrex License Agreements.
"Nonrecourse Deductions" has the meaning set forth in Regulation Sub. Sec.
1.704-2(b)(1).
"Percentage Interest" means, with respect to each Member, such Member's
Percentage Interest in the Company as set forth on Schedule A attached hereto
and made a part hereof.
<PAGE>
"Person" means any partnership, joint venture, association, corporation,
limited liability company, trust or other entity and, where the context so
requires, a natural person.
"Regulations" means the regulations (including any proposed or temporary
regulations) issued under the Code by the Department of the Treasury, as they
may be amended from time to time, or any applicable successor regulations.
Reference herein to any particular section of the Regulations shall be deemed
to refer to the corresponding provision of any applicable successor
regulations.
"Secretary of State" means the Secretary of State of the State of
Delaware.
"Tax Matters Member" has the meaning set forth in Section 10.2.
"Water Products" means products for use in the sample preparation and
detection of infectious disease agents in water sources, including ground
water, surface water, drinking water, bottled water, sanitary waste water,
cooling towers, and water and waste water in non-food and non-beverage
industrial manufacturing and processing segments. Water Products shall
specifically exclude food and beverage applications, including the testing of
any components thereof in food and beverage manufacturing plants or the testing
of fluids used in the manufacture or processing of such products.
ARTICLE II
Formation of the Company
2.1. Formation and Name of Company. The undersigned parties do
hereby agree to form and do ratify the formation of a limited liability company
under the name "Clearwater Diagnostics Company, L.L.C." pursuant to the Act.
Prior to or upon the execution of this Agreement, the Members have caused or
shall cause to be filed with the Secretary of State the Certificate of
Formation substantially in the form annexed hereto as Exhibit I. Either
Manager shall execute and file or record with the proper offices any other
certificates or instruments required by the Act or by any fictitious name act
or similar statute in effect from time to time.
2.2. Purpose. The purpose of the Company is (i) to manufacture,
market and sell Company Products directly or through a third party marketing
partner (the "Marketing Partner"), and to engage in all activities and
transactions as the Managers may jointly deem necessary or advisable or
incidental in connection therewith, and (ii) to engage in such other business
activities as may be authorized under the Act and as may be approved from time
to time by all of the Members.
2.3. Registered Office; Registered Agent. The registered office in
the State of Delaware shall be Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801. The name and address of the registered agent of
the Company for service of process on the Company in the State of Delaware
shall be The Corporation Trust Company.
<PAGE>
2.4. Principal Place of Business. The principal place of business
of the Company is 56 Evergreen Drive, Portland, Maine 04103, or such other
place as from time to time may be designated by the Managers.
ARTICLE III
Rights and Obligations of Members; Voting Rights
3.1. Members. Each Member who is a party to this Agreement and
each Person who may hereafter be admitted as a Member of the Company shall be a
Member of the Company until each ceases to be a Member in accordance with the
Act or this Agreement.
3.2. Voting Rights. Except as may otherwise be provided in the Act
or this Agreement, the affirmative vote, approval or consent of all of the
Members shall be required to decide any matter connected with the business or
affairs of the Company not otherwise within the decision-making authority of
the Managers.
3.3. Liability of Members. No Member, in its capacity as a Member,
shall have any liability to restore any negative balance in its Capital Account
or to contribute to, or in respect of, the liabilities or the obligations of
the Company, or to restore any amounts distributed from the Company, except as
may be required under the Act or other applicable law. In no event shall any
Member, in its capacity as a Member, be personally liable for any liabilities
or obligations of the Company.
ARTICLE IV
Management
4.1. Management Generally. The management of the Company shall be
vested exclusively in two Managers. Thomas C. Hatch, the current President of
ImmuCell, is hereby appointed and confirmed as one of the Managers of the
Company and Malcolm Kahn, the President of Membrex, is hereby appointed and
confirmed as the other Manager of the Company. In the event that either of
such persons shall hereafter cease to be President of ImmuCell and Membrex
respectively, he shall automatically cease to be a Manager of the Company
effective on the date of his termination as President. In such event, the
successor as President (or other highest ranking officer if a new President is
not immediately appointed) shall automatically become the successor Manager of
the Company, without any further action required by the Members, effective on
the date of his or her appointment as President. Except as otherwise provided
herein, the Members shall have no part in the management of the Company, and
shall have no authority or right to act on behalf of the Company in connection
with any matter.
<PAGE>
4.2. Authority of Managers. Except as otherwise provided in this
Agreement, and subject to the provisions of Section 4.3, the Managers, acting
together in unanimity, shall have the power on behalf and in the name of the
Company to carry out any and all of the objects and purposes of the Company set
forth in Section 2.2, and to perform such acts and enter into and perform such
contracts and other undertakings on behalf of the Company that the Managers
may deem necessary, advisable, or incidental thereto. The Managers may not act
other than in unanimity.
4.3. Limitations on Authority. The Managers shall not have the
authority to take any of the following actions without the consent of all of
the Members:
(a) Merger. Merge or consolidate with any other Person.
(b) Transfer Assets. Sell, convey, transfer, mortgage, or
otherwise dispose of or encumber, or agree to sell, convey, transfer, mortgage
or otherwise dispose of or encumber all, or substantially all the assets of the
Company.
(c) Bankruptcy. Make an assignment for the benefit of
creditors, or admit in writing its inability to pay its debts as they mature,
or generally fail to pay its debts as they mature and become due, or petition
or apply for the appointment of a trustee or other custodian, liquidator or
receiver for the Company, or of any substantial part of its assets, or
commence any case or other proceeding relating to the Company under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction now or hereafter
in effect, or take any action in furtherance of any of the foregoing.
(d) Liquidation or Wind-Up. Dissolve, liquidate, terminate
or wind-up the Company except as otherwise provided in this Agreement.
(e) Fiscal Year. Change the Company's fiscal year end from
December 31.
(f) Capital Expenditures. Make any capital expenditure in
excess of $500.00.
(g) Tax Status. Change the tax status of the Company under
the Code.
(h) Members. Admit new Members or permit the withdrawal of
Members.
(i) Business. Engage in any business activity not specified
in Section 2.2(i).
(j) Amendment. Amend this Agreement.
(k) Additional Capital Contributions. Permit Members to
make additional Capital Contributions.
<PAGE>
(l) Litigation. Commence, conduct or settle any litigation
or legal proceeding.
(m) Borrowings. Borrow any money in excess of $500.00.
(n) Contracts. Enter into any contract requiring total
payments by or to the Company in excess of $500.00.
(o) Personnel. Hire any personnel.
(p) Bank Accounts. Open any bank accounts and determine
authorized signatories for such accounts.
(q) Compensation of Manager. Pay compensation to the Managers.
4.4. Activities of Manager. The Managers shall devote so much of
their time to the affairs of the Company as in their judgment the conduct of
the Company's business shall reasonably require and the Managers shall not be
obligated to do or perform any act or thing in connection with the business of
the Company not expressly set forth herein. During the first year, the two
Managers will meet monthly in person or by phone at a mutually convenient time
and place to discuss the affairs of the Company. Thereafter, the Managers will
meet at a minimum of one time per quarter.
4.5. Exculpation. A Manager shall not be liable to any Member or the
Company for any act or failure to act on behalf of the Company, unless such act
or failure to act resulted from such Manager's willful misfeasance or gross
negligence. Such Manager may consult with counsel and accountants in respect
of Company affairs and shall be fully protected and justified in any
action or inaction which is taken in accordance with the advice or opinion of
such counsel or accountants.
4.6. Indemnification. The Company, out of its own assets and not out
of the assets of any Member, shall indemnify and hold harmless any Manager from
and against any loss, expense, judgment, settlement cost, fee and related
expenses (including attorneys' fees and expenses), costs or damages suffered or
sustained by reason of being or having been a Manager or arising out of or in
connection with action or failure to act unless such act or failure to act
was the result of the Manager's fraud, willful misfeasance or gross negligence.
The Company shall advance reasonable attorneys' fees and other costs and
expenses incurred by such Manager in connection with the defense of any action
or proceeding which arises out of conduct which is the subject of the
indemnification provided hereunder, subject to the agreement of such
Manager to reimburse the Company for such advance to the extent that it shall
finally be determined by a court of competent jurisdiction that such Manager
was not entitled to indemnification under this Section 4.6. Notwithstanding
the foregoing, the provisions of this Section 4.6 shall not be construed so as
to provide for the indemnification of such Manager for any liability to the
extent (but only to the extent) that such indemnification would be in
violation of applicable law.
<PAGE>
4.7. Payment of Costs and Expenses.
(a) Each Member shall pay its own legal and accounting fees
and other costs and expenses incurred in connection with the initial
structuring and organization of the Company.
(b) The Company shall be responsible for the payment of all
legal and accounting expenses relating to the Company's operations and
financial statements, and all insurance and other operating and general
overhead expenses of the Company.
4.8. Resolution of Deadlocks. In the event of a deadlock among the
Managers with respect to any action to be taken, as declared in writing by
either of the Managers, the deadlock may be resolved by agreement between all
of the Members. Failing resolution by the Members, the Members shall enter
into Arbitration as defined in Section 12 herein.
ARTICLE V
Capital Contributions and Capital Accounts
5.1. Capital Contributions. Each of the Members hereby agrees to
contribute to the Company the amount set forth in Schedule A promptly following
the execution of this Agreement. These contributions shall constitute the
initial amount of each Member's Capital Contribution. No Member shall be
obligated to make any additional Capital Contribution to the Company. Members
may make additional Capital Contributions in cash or property with the consent
of all of the Members. No interest shall be paid on any Capital Contribution
by any Member.
5.2. Capital Accounts. A separate Capital Account shall be
established and maintained for each Member in compliance with Regulations Sub.
Sec. 1.704-1(b). The provisions of this Agreement shall be interpreted and
applied in a manner consistent with such section of the Regulations.
5.3. Determination of Certain Matters. Except as otherwise
provided in Article X, all matters concerning the valuation of assets of the
Company, and the allocation of Income, Loss, items of income, deduction, gain,
loss, credit, accounting procedures and other matters among the Members not
expressly provided for by the terms of this Agreement shall be determined by
the Managers.
ARTICLE VI
Allocations
6.1. General Allocations. Except as provided in Section 6.2 below,
Income and Loss(es) for each Fiscal Year from operations of the Company shall
be allocated among the Members as follows:
<PAGE>
(a) Except as set forth in Section 6.1 (c), Income or Loss(es)
attributable to Water Products shall be allocated (i) 50% to each of
Membrex and ImmuCell during the period from the commencement of this
Agreement through the date of the second anniversary of the first
commercial sale of a Product (the "Second Anniversary Commercial Sale
Date") and (ii) 55% to Membrex and 45% to ImmuCell commencing on the
day following the Second Anniversary Commercial Sale Date and
thereafter during the remainder of the term of this Agreement; and
(b) Except as set forth in Section 6.1 (c), Income or Loss(es)
attributable to Food and Beverage Products shall be allocated 90% to
Membrex and 10% to ImmuCell during the entire term of this agreement.
(c) In the event the Company grants a license to any third
party to make, use and sell the Company Products, the up-front license
fees payable to the Company during the period from commencement of this
Agreement through the Second Anniversary Commercial Sale Date shall be
allocated 50% to each of Membrex and ImmuCell. Any up-front license
fees payable to the Company commencing on the day following the
Second Anniversary Commercial Sale Date and thereafter during the
remainder term of this Agreement shall be allocated as set forth in
this Section 6.1 (a) (ii) and (b) as may be applicable.
6.2. Special Allocations. Notwithstanding any other provisions of
this Article VI, the following special allocations shall be made in the
following order:
(a) Minimum Gain Chargeback. If there is a net decrease in
Company Minimum Gain during any Fiscal Year, the Members shall be
specially allocated Gross Income for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in an amount equal to the
portion of such Member's share of the net decrease in Company Minimum
Gain, determined in accordance with Regulation Sub. Sec. 1.704-2(g)(2).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to the
Members pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulation Sub. Sec. 1.704-2(f)(6). This
Section 6.2(a) is intended to comply with the minimum gain chargeback
requirement in such section of the Regulations and shall be interpreted
consistently therewith.
(b) Member Nonrecourse Debt Chargeback. If, during any Fiscal
Year of the Company, there is a net decrease in Member Nonrecourse Debt
Minimum Gain (as such term is defined by Regulation Sub. Sec.
1.704-2(i) but substituting the term "Member" for the term "partner" as
the context requires) then each Member shall be specially allocated
Gross Income for such Fiscal Year (and, if necessary, for subsequent
Fiscal Years) in the manner provided in Regulation Sub. Sec.
1.704-2(i). This Section 6.2(b) is intended to comply with the partner
nonrecourse debt chargeback provisions of Regulation Sub. Sec.
1.704-2(i).
<PAGE>
(c) Nonrecourse Deductions. Any Nonrecourse Deductions for any
Fiscal Year or other period shall be specially allocated to the Members
in proportion to the allocation of total Income and Loss(es) for such
Fiscal Year.
(d) Member Nonrecourse Deductions. Member nonrecourse
deductions (as defined in Regulation Sub. Sec. 1.704-2(i)(2) but
substituting the term "Member" for the term "partner" as the context
requires) shall be allocated as prescribed in Regulation Sub.
Sec. 1.704-2(i)(1).
(e) Limitations. No allocations of items of Loss shall be made
to a Member if such allocation would cause or increase a deficit in
such Member's Adjusted Capital Account. Any such item shall instead be
allocated to other Members to the extent of, and in proportion to,
their positive Adjusted Capital Accounts.
(f) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations or distributions
described in Regulations Sub. Sec. 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
Gross Income shall be specially allocated to each such Member in an
amount and manner sufficient to eliminate, to the extent required by
the Regulations, the Adjusted Capital Account Deficit of such Member as
quickly as possible provided that an allocation pursuant to this
Section 6.2(f) shall be made only if and to the extent that such Member
would have an Adjusted Capital Account Deficit after all other
allocations provided for in Section 6.1 have been tentatively made as
if this Section 6.2(f) were not in the Agreement.
(g) Curative Allocations. Any special allocations pursuant to
Sections 6.2(e) and (f) shall be taken into account in computing
subsequent allocations pursuant to Article VI, so that the allocations
of Income and Loss allocated to each Member pursuant to Article VI
shall be equal to the allocations of Income and Loss that would have
been allocated to each Member pursuant to the provisions of Article VI
if the adjustments, allocations, or distributions and the resulting
special allocations pursuant to Sections 6.2(e) and (f) had not
occurred.
6.3. Allocations for Tax Purposes. Taxable income, gain, loss or
deduction of the Company (as well as any credits and the basis of property to
which such credits apply) as determined for federal income tax purposes shall
be allocated in the same manner as the corresponding Income or Loss is
allocated for purposes of adjusting Capital Accounts hereunder. In accordance
with Code Section 704(c) and the Regulations thereunder, income, gain, loss and
deduction with respect to any property contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the Members so as to
take account of any variation between the adjusted basis of such property to
the Company for Federal income tax purposes and its initial book value. For
purposes of making such allocations in accordance with Code Section 704(c), the
Company shall use the so-called "traditional" method with curative allocations"
within the meaning of Regulations Section 1.704-3(c).
<PAGE>
6.4 Allocation of Expenses Between Products. Any expenses,
deductions or losses directly attributable to Water Products or Food and
Beverage Products, respectively, shall be allocated in whole to such Water
Products or Food and Beverage Products for purposes of determining Income and
Loss(es) attributable to Water Products and Food and Beverage Products pursuant
to Section 6.1 hereof.
ARTICLE VII
Distributions and Withdrawals
7.1. Distributions. Upon determination by the Managers and subject to
the reasonably anticipated business needs and opportunities of the Company,
including the establishment of any reserves deemed necessary, amounts available
for distribution by the Company, if any, shall be distributed to the Members
not less frequently than annually, as follows:
(a) except as set forth in Section 7.1(c) net amounts
resulting from the sale of Water Products shall be distributed (i) 50%
to each of Membrex and ImmuCell during the period from the commencement
of this Agreement through the Second Anniversary Commercial Sale Date
and (ii) 55% to Membrex and 45% to ImmuCell commencing on the day
following the Second Anniversary Commercial Sale Date and thereafter
during the remainder of the term of this Agreement; and
(b) except as set forth in Section 7.1(c) net amounts
resulting from the sale of Food and Beverage Products shall be
distributed 90% to Membrex and 10% to ImmuCell during the entire term
of the Agreement.
(c) net amounts resulting from any up-front license fees
payable to the Company during the period from commencement of this
Agreement through the Second Anniversary Commercial Sale Date shall be
distributed 50% to each of Membrex and ImmuCell. Any up-front license
fees payable to the Company commencing on the day following the Second
Anniversary Commercial Sale Date and thereafter during the remainder
term of this Agreement shall be distributed as set forth in Section 6.1
(a) (ii) and (b).
7.2. Withdrawals. Except as provided in this Agreement, no Member
shall be entitled to withdraw from the Company all or any part of its Capital
Account. A Member, irrespective of the nature of its Capital Contributions,
shall only have the right to receive distributions in cash, although such
Member may receive a distribution in kind upon the approval of the Members.
7.3. Conditions. Other than as provided in the Membrex and ImmuCell
License Agreements (as defined herein), including without limitation, an event
contained in Section 6 of the License Agreement, no Member shall have the right
to withdraw from the Company all or any part of its Capital Account or Capital
Contribution pursuant to Section 7.2 until:
<PAGE>
(a) all liabilities of the Company have been paid or there
remains property of the Company sufficient to pay them; or
(b) the consent of all of the Members is obtained.
7.4. Source of Distributions. Each Member shall look solely to the
assets of the Company for all distributions with respect to the Company and the
Member's Capital Contributions thereto and shall have no recourse therefor
(upon dissolution or otherwise) against the other Members. No Member shall
have any right to demand or receive property other than cash upon dissolution
and termination of the Company.
7.5. Tax Withholding. The Managers may withhold taxes from any
allocation or distribution to any Member to the extent required by the Code or
any other applicable law. For purposes of this Agreement, any taxes so
withheld by the Company shall be deemed to be a distribution or payment to such
Member, and the Managers shall reduce the amount otherwise distributable or
allocable to such Member pursuant to this Agreement and shall reduce the
Capital Account of such Member accordingly.
ARTICLE VIII
Transfers of Members' Interests
8.1. Transfer of Interest. No Member may sell, assign, transfer,
pledge, donate, alienate, hypothecate, encumber or otherwise dispose of its
Interest in the Company (hereinafter "Transfer") except with the prior written
consent of all of the nontransferring Members, which consent may be withheld in
the Members' sole discretion. Failure to approve a proposed transfer within
thirty (30) days shall be deemed a rejection. Any transfer of Interest made in
violation of this Section shall be deemed void. After the date on which final
regulations issued by the Treasury Department make these provisions unnecessary
for classification of the Company as a partnership for federal income tax
purposes, the provisions of this Article VIII shall be inapplicable to the
sale, merger or transfer of substantially all the assets of Membrex or
ImmuCell.
8.2. Conditions of Transfer. No Transfer of an Interest shall be
effective unless:
(a) The transferee on or prior to the date of Transfer agrees in
writing to be bound by all the terms and conditions of this Agreement;
and
(b) The transferee on or prior to the date of transfer agrees in
writing to assume all obligations and liabilities of the Member from
whom such transferee is receiving the transferred Interest.
<PAGE>
8.3. Admission of New Members.
(a) No Person shall be admitted as a Member of the Company after
the date of this Agreement without the written approval of all of the
Members.
(b) Upon admission of a new Member in accordance with the Act
and this Agreement, the Manager shall establish a Capital Account which
shall be credited with the Capital Contribution of the new Member, and
Schedule A shall be adjusted accordingly.
8.4. Involuntary Assignment by a Member.
(a) In the event a Member's Interest is taken by levy,
foreclosure, charging order, execution or other similar involuntary
proceeding, the Company shall not dissolve, but the statutory or other
involuntary assignee of said interest shall be entitled to no more
than to receive the distributions, in accordance with Section 7.1, and
allocations of Income and Losses attributable to the Member's Interest
in the Company, in accordance with Section 6.1. In no event shall said
assignee have the right to interfere with the management or the
administration of the Company's business, assets, or affairs, or to
become a Member except as provided in Section 8.3.
(b) Upon any such event, the Company shall promptly notify the
other Members, including in such notice the name and address of the
transferee or proposed transferee and the purchase price determined
pursuant to the following paragraph. The other Members shall have an
option, exercisable within thirty (30) days of receipt of such
notice, to purchase the Interest subject to levy, foreclosure, charging
order, execution or similar proceeding in proportion to their
respective Percentage Interests, or in such other proportion as they
may agree. The other Members shall give notice of exercise of their
option to purchase to the Member (or former Member), the transferee (or
proposed transferee) and the Company. If any Member fails or declines
to exercise the option to purchase in this paragraph, then that portion
of the Interest not so purchased may be acquired by the other Members
in proportion to their respective Percentage Interests or in such other
proportion as they may agree.
(c) The purchase price shall be 90% of fair market value,
determined by agreement of the transferring party and the Company
(represented by the Manager associated with the non-transferring
Member). If agreement on fair market value cannot be reached, then a
valuation shall be done by an independent appraiser acceptable to
both Managers. If such valuation by an independent appraiser is still
not agreeable to both Managers, the fair market value issue shall be
referred to arbitration pursuant to Article 12. The Company need not
give notice of the right to purchase the transferred Interest to the
Members until the purchase price has been determined hereunder.
<PAGE>
8.5. Withdrawal of Members. Except as this Agreement otherwise
expressly provides, no Member shall have the right or the power to withdraw or
resign from the Company without the consent of all of the Members.
ARTICLE IX
Dissolution
9.1. Dissolution. The Company shall be dissolved and its affairs
wound up on the first to occur of the following and not upon the occurrence of
any other event:
(a) The distributions to the Members as provided in Section 7.1
shall fail to equal or exceed $100,000 in the aggregate in respect of
any fiscal year commencing with the fiscal year ending December 31,
1998.
(b) Subject to Section 9.7 the death, retirement, resignation,
expulsion, bankruptcy or dissolution of any Member; provided, however,
that if an event specified in this clause (b) occurs with respect to a
Member and there are at least two Members remaining, then the Company
shall be continued upon the election, to be made within ninety (90)
days of receipt of notice of the event giving rise to the dissolution
of the Company, of all of the remaining Members;
(c) Entry of a decree of judicial dissolution of the Company;
(d) The sale or other disposition of all or substantially all
of the assets or licenses as provided herein, of the Company; or
(e) Vote of all of the Members.
9.2. Winding Up and Liquidation. Upon the dissolution of the
Company, the Company shall cease to engage in any further business, except to
the extent necessary to perform existing obligations, and shall wind up its
affairs and liquidate its assets. The Managers shall appoint a liquidator who
shall wind up and liquidate the Company's business and affairs. During the
course of liquidation, the Members shall continue to share Income and Loss(es)
as provided in Article VI of this Agreement.
9.3. Liabilities. Liquidation shall continue until the Company's
affairs are in such condition that there can be a final accounting, showing
that all fixed or liquidated obligations and liabilities of the Company are
satisfied or can be adequately provided for under this Agreement. The
assumption or guarantee in good faith by one or more financially responsible
persons shall be deemed to be an adequate means of providing for such
obligations and liabilities. When the liquidator has determined that there can
be a final accounting, the liquidator shall establish a date for the
distribution of the proceeds of liquidation of the
<PAGE>
Company (the "Distribution Date"). The net proceeds of liquidation of the
Company shall be distributed to the Members as provided in Section 9.5 hereof
not later than the Distribution Date.
9.4. Settling of Accounts. Subject to any applicable provisions of
the Act, upon the dissolution and liquidation of the Company, the proceeds of
liquidation shall be applied as follows: (i) first, to pay all expenses of
liquidation and winding up; (ii) second, to pay all debts, obligations and
liabilities of the Company in the order of priority as provided by law and
(iii) to establish reasonable reserves for any remaining contingent or
unforeseen liabilities of the Company not otherwise provided for, which
reserves shall be maintained by the liquidator on behalf of the Company in a
regular interest-bearing trust account for a reasonable period of time
as determined by the liquidator. If any excess funds remain in such reserve at
the end of such reasonable time, then such remaining funds shall be distributed
by the Company to the Members pursuant to Section 9.5 hereof.
9.5. Distribution of Proceeds. Subject to any restrictions contained
in the Act, upon final liquidation of the Company the net proceeds of
liquidation, if any, shall be distributed to the Members in proportion to the
positive balances of their Capital Accounts.
9.6. Filing. Upon dissolution and liquidation of the Company, the
party or parties acting as the liquidator shall cause to be executed and filed
with the Secretary of State articles of dissolution in accordance with the Act.
9.7 (a) Event. If the amendments to the Regulations under
Sections 301.7701-1 through 301.7701-4 thereof proposed on May 9, 1996 are
promulgated in such a form (the "Final Regulations") that the modification to
this Agreement set forth in Section 9.7(b) would not be relevant to a
determination of whether the Company would be classified for Federal
income tax purposes as either (i) a partnership (in the event that more than
one member remains) or (ii) a sole proprietorship (in the event that only one
member remains) (the "Indicated Modification"), then the Indicated Modification
will be deemed to have been adopted with respect to this Agreement from and
after the first day of the first taxable year of the Company as to which such
Final Regulations are applicable in respect of the Indicated Modification.
(b) Potential Indicated Modification. Subject to Section
9.7(a), and contrary to Section 9.1 above, the Company shall not dissolve in
the event of the death, retirement, resignation, expulsion, bankruptcy or
dissolution of any Member.
ARTICLE X
Tax Returns; Reports to Members
10.1. Filing of Tax Returns. The Manager shall prepare and file, or
cause the Company's accountants to prepare and file, a federal information tax
return in compliance with Section 6031 of the Code, consistent with the Code
and the Regulations, and any required state
<PAGE>
and local income tax and information returns for each tax year of the Company,
subject to the prior approval of the Tax Matters Member. Any provisions hereof
to the contrary notwithstanding, solely for U.S. federal income tax purposes,
each Member hereby recognizes that the Company will be subject to all
provisions of Subchapter K of Chapter 1 of Subtitle A of the Code; provided,
however, that the filing of U.S. Partnership Returns of Income shall not
be construed to extend the purposes of the Company or expand the obligations or
liabilities of the Members.
10.2. Tax Matters Member. As used herein, "Tax Matters Member" shall
have the same meaning as "tax matters partner" as used in the Code. For all
purposes of Code Sections 6221 through 6232, the Tax Matters Member shall make
all tax elections available to the Company in such manner as he determines is
in the best interest of the Members and consistent with the Code and the
Regulations. In the event a tax controversy shall arise, the Tax Matters
Member, shall employ such attorneys and accountants and other experts to
represent the Company as the Tax Matters Member determines to be appropriate.
The cost of pursuing any tax controversy shall be borne exclusively by the
Members affected by the matter in controversy. The Tax Matters Member, with
the approval of those Members of the Company affected by any tax claim or
controversy, shall have exclusive authority to settle any income tax
controversy or initiate any income tax proceeding required to be conducted,
maintained or settled in the name of the Company, provided such action imposes
no financial or other liability on the Company, its property, or any Member not
affected by such claim, controversy, proceeding or settlement. The Tax Matters
Member shall be a Member appointed by the Members to serve in such capacity.
The initial Tax Matters Member shall be ImmuCell Corporation acting through
Thomas C. Hatch.
10.3. Reports to Members. As soon as practicable after the end of
each quarter of each Fiscal Year, the Managers shall deliver to each Member an
unaudited balance sheet and income statement for the Company and a status
report of the Company's activities. As soon as practicable after the end of
each Fiscal Year the Managers shall deliver to each member a balance
sheet and income statement for the Company and a statement of the Members'
capital, all reviewed by the Company's independent accountants. Within 90 days
after the end of each Fiscal Year, or as soon as practicable after receipt of
all necessary information by the Company, if later, the Company shall prepare
and mail to each Member and, to the extent necessary, to each former Member (or
such Member's legal representatives), a report setting forth in sufficient
detail such information as shall enable such Member or former Member (or such
Member's legal representatives) to prepare their respective federal, state and
local income tax returns in accordance with the laws, rules and regulations
then prevailing.
10.4. Records to be Kept. The Company shall keep at its principal
place of business or at such other office as shall be designated by the
Managers:
(a) A current list in alphabetical order of the full name and
last known business, residence or mailing address of each Member;
<PAGE>
(b) A current list in alphabetical order of the full name and
last known business, residence or mailing address of each Manager;
(c) A copy of the filed Certificate of Formation and all
amendments thereto, together with executed copies of any powers of
attorney pursuant to which any document has been executed;
(d) Copies of this Agreement, and all amendments hereto;
(e) Copies of the Company's federal income tax returns and
reports, if any, for the five most recent years; and
(f) Copies of any financial statements of the Company for the
five most recent years.
10.5. Inspection of Company Records. The accounting books and
records set forth in Section 10.4 shall be open to inspection upon the
reasonable request of any Member at any reasonable time during usual business
hours, for a purpose reasonably related to such Member's interest as a Member.
Such inspection by a Member may be made in person or by agent or attorney, and
the right of inspection includes the right to copy and make extracts.
ARTICLE XI
Additional Agreements of the Members
11.1. License by Membrex. Membrex agrees to grant to the Company a
royalty-free right and licenses to make, have made, and sell under the Licensed
Membrex Technology the Company Product(s). The licenses related to Membrex
Membranes is restricted to the right to sell and use such membranes in the
Licensed Membrex Technology and specifically excludes any rights to manufacture
the Membrex Membranes, except as provided in the Membrex License Agreements.
The licenses to be granted to the Company and the terms thereof shall be
contained in a license agreement to be entered into between Membrex and the
Company contemporaneously upon the entering into by the Members of this
Agreement (the "Membrex License Agreement").
11.2. License by ImmuCell. ImmuCell agrees to grant to the Company a
royalty-free right and license to make, have made, and sell under the Licensed
ImmuCell Patent Application and the Licensed ImmuCell Reagents the Company
Product(s). The licenses to be granted to the Company shall be contained in
license agreements to be entered into between ImmuCell and the Company
contemporaneously upon the entering into by the Members of this Agreement (the
"ImmuCell License Agreements").
<PAGE>
11.3. Sale of Components.
(a) Membrex Components. Membrex agrees to sell to the Company,
or at the option of the Company to the Marketing Partner, such amounts
of Membrex Components as shall be ordered from time to time by the
Company or the Marketing Partner, as the case may be, at Membrex'
direct cost as determined in accordance with generally accepted
accounting principles ("GAAP") and as described under the Membrex
License Agreements. The specific terms of the Membrex License
agreements shall guide all such sales.
(b) ImmuCell Components. ImmuCell agrees to sell to the
Company, or at the option of the Company to the Marketing Partner, such
amounts of ImmuCell Components as shall be ordered from time to time by
the Company or the Marketing Partner, as the case may be, at ImmuCell's
direct cost as determined in accordance with GAAP. The specific terms
of the ImmuCell License agreement shall guide all such sales.
11.4. Design of New VFF Device. Membrex agrees to apply a portion of
the initial distributions to be received by it under Section 7.1 hereof toward
the design of a new vortex flow filtration device and Membrex further agrees to
apply up to $60,000 of such initial distribution to the manufacture of the
necessary production molds and to produce such devices in accordance with
specifications to be agreed to between the Company and Membrex. Membrex is not
obligated to spend any moneys for development and/or molds above and
beyond any initial distributions to be received by it under Section 7.1.
11.5. Confidentiality Agreement. The Parties acknowledge that they
have previously entered into Secrecy Agreements dated October 18, 1994 and
October 24, 1994, (hereinafter the "Secrecy Agreement"). The Secrecy Agreement
is hereby incorporated herein and both Membrex and ImmuCell agree to extend
that Secrecy Agreement effective through December 31, 2001. To the extent that
there is a conflict between the terms of this Agreement and the Secrecy
Agreement, the terms and conditions of this Agreement shall control.
ARTICLE XII
Dispute Resolution
Subject to the terms of this Agreement, any dispute, claim or
controversy under this Agreement, including any dispute over the fair market
value of a Member's Interest, shall, upon written notice by either party, be
resolved by binding arbitration pursuant to such rules as the disputing parties
may agree, or if they cannot agree within thirty (30) days, upon written notice
of either party of its desire to do so, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA"). In
rendering its decision, the arbitration tribunal shall apply the substantive
laws of the State of Delaware and interpret this Agreement in accordance with
its terms. The determination of the arbitration tribunal shall be conclusive
<PAGE>
and binding upon the Parties hereto. The dispute will be decided by a panel
of three arbitrators to be appointed as provided in Section 13 of the AAA
Commercial Arbitration Rules.
The award of the arbitration tribunal may be, alternatively or
cumulatively, for monetary damages, an order requiring the performance of
non-monetary obligations (including specific performance) or any other
appropriate order or remedy. The arbitrators may issue interim awards and
order any provisions or measures which should be taken to preserve the
respective right of either party. The decision of the arbitrators may be
enforced in any tribunal of competent jurisdiction.
Each Member shall bear its own costs and expenses of the arbitration,
and the Members shall share equally the cost of the arbitrators; provided that
any Member instituting a claim or providing a defense under this Section which
the tribunal shall declare to be frivolous shall pay all costs and expenses,
including attorney's fees and costs, incurred in connection with such
arbitration.
The arbitration procedure herein shall be the exclusive remedy
available to the Members hereunder to resolve any dispute, claim or controversy
arising hereunder.
ARTICLE XIII
Miscellaneous
13.1. Representations and Warranties of the Members. Each of the
Members hereby represents and warrants that he has validly executed this
Agreement and the same constitutes the binding obligation of such Member. Each
of the Members has full power, authority and capacity to enter into this
Agreement and to carry out its respective obligations as described in
this Agreement.
13.2. Successors and Assigns. This Agreement shall be binding on the
executors, administrators, heirs, and successors and assigns of the Members.
13.3. Amendments. The terms and provisions of this Agreement may be
modified or amended at any time and from time to time with the written consent
of all of the Members.
13.4. Choice of Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware, without regard to Delaware
choice of law provisions.
13.5. Notices. Each notice relating to this Agreement shall be in
writing and delivered in person, by facsimile or by registered or certified
mail. The receipt of any notice transmitted by facsimile must be confirmed by
any means acceptable in the preceding sentence to be effective; provided,
however, that such a confirmation does not, in turn, have to be confirmed.
All notices to the Company shall be addressed to its principal office and place
of business. All notices addressed to a Member shall be addressed to such
Member at the address listed in
<PAGE>
Schedule A attached hereto. Any Member may designate a new address by notice
to that effect given to the Company. Unless otherwise specifically provided in
this Agreement, a notice shall be deemed to have been effectively given upon
receipt.
13.6. Headings. The titles of the Articles and the headings of the
Sections of this Agreement are for convenience of reference only, and are not
to be considered in constructing the terms and provisions of this Agreement.
13.7. Counterparts. This Agreement may be executed upon an original
and one or more duplicate originals, including on a counterpart execution page,
all of which taken together shall constitute one agreement.
13.8. Severability. If any term or provision of this Agreement is for
any reason deemed illegal or invalid, such illegality or invalidity shall not
affect the validity of the remainder of this Agreement, and each such term or
provision shall be valid and enforceable to the fullest extent permitted by
law.
13.9. Seal. The Managers may adopt a seal of the Company in such form
as the Manager shall decide.
13.10. Gender and Number. All nouns, pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the context may require.
13.11. Force Majeure. The Members and Managers shall not be liable
for damages due to delay or failure to perform any obligation under this
Agreement (other than payment of money) if such delay or failure results
directly or indirectly from circumstances beyond the reasonable control of such
party. Such circumstances shall include but shall not be limited to
acts of God, acts of war, civil commotions, riots, strikes, lockouts or other
labor disturbances, accident, fire, water damage, flood or other natural
catastrophe. Any party affected by a condition of Force Majeure shall use
reasonable efforts to remedy such conditions to enable itself to resume
performance, except that no party shall be obligated to settle a strike,
lockout or other labor disturbance on terms other than at its complete
discretion.
13.12. Confidentiality. The Members acknowledge that during the course
of this Agreement, it may be necessary for either party to disclose its
confidential, proprietary information to the other party. Notwithstanding the
provisions of that Secrecy Agreement described in Section 11.5, each Member
shall have the obligation to identify all PROPRIETARY INFORMATION (as defined
as Information in the Secrecy Agreement) that it has disclosed to the other
Member or to the Company to date. For PROPRIETARY INFORMATION disclosed
after the date of execution of this Agreement, the parties shall have the
obligation to designate that information that is PROPRIETARY INFORMATION under
the Secrecy Agreement. If PROPRIETARY INFORMATION is disclosed orally, the
disclosing party shall have the obligation to identify the information as
PROPRIETARY INFORMATION at the time of disclosure and confirm in writing that
such information is PROPRIETARY INFORMATION within thirty (30) days after such
oral disclosure.
<PAGE>
13.13. Prior Agreement. This Agreement supersedes all prior agreements
between the Members, except for the Secrecy Agreement which will remain in
effect to the extent provided herein.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the date first set forth above.
MEMBERS:
IMMUCELL CORPORATION
By: /s/: Thomas C. Hatch 9/17/96
Its: President
MEMBREX, INC.
By: /s/: Malcolm R. Kahn 9/17/96
Its: President
<PAGE>
EXHIBIT I
CERTIFICATE OF FORMATION
OF
CLEARWATER DIAGNOSTICS COMPANY, L.L.C.
FIRST: The name of the limited liability company is:
Clearwater Diagnostics Company, L.L.C.
SECOND: Its registered office in the State of Delaware is to be located at
Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle, 19801, and its registered agent at such address
is The Corporation Trust Company.
THIRD: The latest date on which the limited liability company is to dissolve
is January 1, 2035.
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this 17th
day of September, 1996.
September 17, 1996
/s/: Jeffrey A.
Clopeck
Jeffrey A. Clopeck
<PAGE>
SCHEDULE A
NAMES, ADDRESSES, CAPITAL CONTRIBUTIONS AND
PERCENTAGE INTERESTS OF MEMBERS
Percentage
<TABLE>
<CAPTION>
Member Type Capital Contribution Interest
<S> <C> <C> <C>
ImmuCell Corporation Cash $5,000 50%
56 Evergreen Drive
Portland, Maine 04103
Membrex, Inc. Property $5,000 (Agreed-Upon Value
155 Route 46 West of 2 used Benchmark Systems) 50%
Fairfield, New Jersey 07004
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule
IMMUCELL CORPORATION
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1996 AS REPORTED ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 824,194
<SECURITIES> 0
<RECEIVABLES> 407,571
<ALLOWANCES> 47,616
<INVENTORY> 692,776
<CURRENT-ASSETS> 1,928,449
<PP&E> 1,441,590
<DEPRECIATION> 601,694
<TOTAL-ASSETS> 2,997,982
<CURRENT-LIABILITIES> 679,098
<BONDS> 629,015
0
0
<COMMON> 1,689,869
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,997,982
<SALES> 2,971,469
<TOTAL-REVENUES> 3,281,430
<CGS> 1,337,171
<TOTAL-COSTS> 3,515,900
<OTHER-EXPENSES> (35,329)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,408
<INCOME-PRETAX> (253,549)
<INCOME-TAX> 0
<INCOME-CONTINUING> (253,549)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (253,549)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
LICENSE AGREEMENT
This Agreement is made effective the 17th day of September, 1996, by
and between ImmuCell Corporation (hereinafter called "ImmuCell"), a corporation
organized and existing under the laws of Delaware, and Clearwater Diagnostic
Company LLC (hereinafter called "CDC"), a limited liability company organized
under the laws of Delaware, together hereinafter called the Parties.
WHEREAS, ImmuCell has developed certain technology as described in the
"LICENSED TECHNOLOGY" section herein, and ImmuCell is willing to grant a
license on the LICENSED TECHNOLOGY to CDC;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, the parties covenant and agree as follows:
Section 1: Definitions
1.1 "LICENSED TECHNOLOGY" shall refer to and mean (i) any patent
rights that may issue from U.S. Patent Application No. 08/502,328, filed July
13, 1995, entitled METHODS AND ARTICLES OF MANUFACTURE FOR THE DETECTION OF
CRYPTOSPORIDIUM OOCYSTS, (ii) any patent rights that may issue from foreign
equivalents thereto, and (iii) any other technology and know-how developed
previously by ImmuCell for application in the Field of Use.
1.2. "Field of Use" shall mean only the detection of infectious
disease agents such as Cryptosporidium parvum in water sources including ground
water, surface water, drinking water, sanitary waste water, cooling towers and
water and waste water in all industrial manufacturing and processing segments.
1.3"Products" as used herein shall refer to and mean reagents used in
the immunomagnetic separation and detection steps of the diagnostic
test.
1.4 "Direct Cost" shall mean direct manufacturing costs including
materials, labor,
QA and QC costs, and manufacturing overheads.
1.5 "LLC Agreements" shall mean that certain Limited Liability
Company
Agreement Between Membrex and ImmuCell dated September 17, 1996.
Section 2: Grant
2.1 License: ImmuCell hereby grants to CDC an exclusive worldwide
royalty free license to make, use, distribute, lease and sell kits, reagents,
services and products within the scope of LICENSED TECHNOLOGY in the Field of
Use.
2.2 Sub-licenses. CDC may grant sub-licenses of the LICENSED
TECHNOLOGY in the Field of Use to third parties. Any agreement granting a sub-
license
shall require that the sub-license be subject to the terms and termination of
this License Agreement and the LLC Agreement. CDC's sub-licenses to third
parties do not carry any rights to further sub-license the LICENSED TECHNOLOGY.
CDC shall have the same responsibility for the activities of any sub-licensee
as if the activities were directly those of CDC.
2.3 License Fee. CDC agrees to pay a license fee of $100 within
seven days after the date this Agreement is fully executed by both parties.
2.4 Neither CDC nor any Sub-licensee shall obtain rights of any
kind in the LICENSED TECHNOLOGY other than the rights specifically set forth
herein.
Section 3: Supply Of Product And Disposables
3.1 ImmuCell shall sell to CDC and CDC shall buy from ImmuCell all
of CDC's order requirements for Product for incorporation into its kits,
devices, reagents, parts and services at ImmuCell's Direct Cost. All sales to
CDC by ImmuCell are FOB ImmuCell plant and any shipping cost, insurance, taxes
and other fees are the responsibility of CDC. In the event ImmuCell is
unable or unwilling to sell CDC's requirements for Product, CDC shall have the
right to make or have third parties manufacture such Product.
3.2 CDC shall sell to sub-licensee such Products as may be required
by the sub-licensee for use in the Field of Use and buy such Products from
ImmuCell in accordance with the terms and conditions contained herein.
Section 4: Direct Cost Auditing
ImmuCell shall keep written records of Direct Costs for reasonable
periods of time but in no case for a period longer than two (2) fiscal years.
A maximum of two (2) audits per year can be scheduled by CDC's duly authorized
independent auditor acceptable to ImmuCell. Such records shall be available
for inspection during all reasonable business hours and are subject to the
Confidentiality Agreements signed by ImmuCell and CDC.
Section 5: Certain Warranties of ImmuCell
5.1 ImmuCell warrants that it has no knowledge that would prevent it
from granting the License contemplated by this Agreement. However, nothing in
this Agreement shall be construed as: (i) a warranty or representation by
ImmuCell as to the validity, enforceability or scope of any LICENSED TECHNOLOGY
or as to its effectiveness or as to any results or advantage to be achieved by
its use, (ii) a warranty or representation that anything made, used, sold or
otherwise disposed of or otherwise commercialized under this Agreement or the
License granted in this Agreement will or will not infringe patents or
other rights of any kind of third parties, (iii) an obligation to bring or
prosecute actions or suits against third parties for infringement of LICENSED
TECHNOLOGY, and (iv) an obligation to obtain, maintain, assert, or defend any
intellectual property rights. Notwithstanding the foregoing, CDC agrees to
assist ImmuCell, at no cost to itself, including agreeing to be named as a
party plaintiff in any legal action, in the event that ImmuCell decides to
pursue third party infringers of the LICENSED TECHNOLOGY.
5.2 IMMUCELL MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY
KIND, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES WHATSOEVER
WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY CDC, ITS SUBLICENSEES OR ITS
VENDEES OR OTHER TRANSFEREES OF PRODUCTS INCORPORATING OR MADE BY USE OF
LICENSED TECHNOLOGY UNDER THIS AGREEMENT.
5.3 Nothing contained in this Agreement shall be construed to convey
to CDC any ownership rights, proprietary interest or other rights or interest
of any kind, except for the non-transferable License and right to use the
LICENSED TECHNOLOGY in the distribution and sale of Products which is expressly
granted by this Agreement. CDC covenants and agrees that it shall not at any
time during the term of this Agreement challenge or contest the ownership of
the LICENSED TECHNOLOGY, or any trademark or tradename used by ImmuCell
('TRADEMARKS'), including the trademark and tradename "ImmuCell." CDC shall
not challenge the validity or enforceability of any of the Patents and/or
TRADEMARKS associated with this License, nor do anything that in any
way tarnishes them or otherwise impairs their value.
Section 6: Term And Termination
6.1 The term of this License shall begin on the effective date of
this Agreement and continue until the earlier of (i) twenty five (25) years
from the effective date of this Agreement or (ii) the date on which CDC is
dissolved, (iii) the inability to obtain sufficient financing within one (1)
year from the effective date of this Agreement to operate CDC's business for at
least eighteen (18) months, or iv) a petition for bankruptcy is filed by or
against CDC, (v) liquidation or other State proceedings are instituted by or
against CDC.
6.2 CDC may terminate this Agreement at any time by giving at least
thirty (30) days' written notice of such termination to ImmuCell. ImmuCell
may terminate this Agreement by giving at least thirty (30) days' written
notice if Membrex or any of Membrex's affiliates or licensees manufacture or
sell a flat membrane plate Vortex Flow Filtration System for use in the Field
of Use.
6.3 If CDC at any time defaults in the timely payment of any monies
due to
ImmuCell or commits any breach of any other covenant herein contained, and
fails to
remedy such breach within ninety (90) days after written notice thereof by
ImmuCell,
ImmuCell may, at its option, terminate this Agreement by giving written notice
of termination to CDC.
6.4 Upon the termination of this Agreement, CDC shall remain
obligated to pay any outstanding monies owed for Product and Disposables sold
by ImmuCell to CDC and the following sections shall survive termination or
expiration of this Agreement: Sections 5, 8, 9, 10, 12, 15, and 16.
6.5 Upon the termination of this Agreement, all rights to LICENSED
TECHNOLOGY will revert to ImmuCell, the license to CDC and any sub-licensees
shall immediately cease, and ImmuCell shall have no further obligations to sell
Product to CDC or any sub-licensee nor shall CDC have any further rights to
grant sub-licenses. , manufacture or have manufactured the LICENSED TECHNOLOGY.
Upon the occurrence of any of the events in this Section 6, ImmuCell shall
have the right to withdraw from CDC and have returned its Capital Account and
Capital Contribution as defined in the LLC Agreement.
Section 7: Assignability
This Agreement may not be transferred or assigned by CDC except with
the prior written consent of ImmuCell.
Section 8: Patents
8.1 The PATENT and all new patent applications to be submitted, new
patents to be granted and technology relating to the Product shall be owned
exclusively by ImmuCell except as provided herein. Improvements, if
patentable, will be owned as provided herein. The Parties will share the use
of any such Improvements to the Product. During the term of this Agreement,
the Parties hereby grant to each other a royalty-free cross license with
respect to the Improvements. With respect to Improvements that are the result
of joint efforts of CDC and ImmuCell, both parties shall have the right to use
such jointly developed Improvements in perpetuity, subject to the provisions
herein.
Notwithstanding the foregoing provision, the parties hereby acknowledge
and agree that any and all Improvements to the Product made during the term of
this Agreement and for three (3) years thereafter, that can only reasonably be
used with the Product shall be the sole and exclusive property of ImmuCell, and
all Improvements that can also be used in connection with products in addition
to the Product shall be the sole and exclusive property of the respective
inventing party or parties.
8.2. New Technology: ImmuCell and CDC may cooperate in the
development of new technology (i.e., not an Improvement to the Product). The
parties shall negotiate in good faith with respect to the funding of the
development of any such new technology. New
patentable technology which arises from such a cooperation will be owned
jointly by the Parties and for their exclusive use, subject to any mutual
written consent to the contrary.
Section 9: Confidentiality
CDC and ImmuCell acknowledge that during the course of this Agreement,
it may be necessary for either party to disclose its confidential, proprietary
information to the other party. ImmuCell and Membrex have previously entered
into Secrecy Agreements dated October 18th, 1994 and October 24, 1994
(hereinafter the "Secrecy Agreement). The terms of the Secrecy Agreement are
hereby incorporated herein and made binding to CDC as if CDC were a party to
such Secrecy Agreement. CDC and Membrex agree to extend that Secrecy Agreement
effective through December 31, 2001. Notwithstanding the provisions
of that Secrecy Agreement, each party shall have the obligation to identify all
Proprietary Information (defined as "Information" in the Secrecy Agreement)
that it has disclosed to the other party to date. For Proprietary Information
disclosed after the date of execution of this Agreement, the parties shall have
the obligation to designate that information that is Proprietary Information
under the Secrecy Agreement. If Proprietary Information is disclosed orally,
the disclosing party shall have the obligation to identify the information as
Proprietary Information at the time of disclosure and confirm that such
information is Proprietary Information within thirty (30) days after such oral
disclosure.
Section 10: Severability
In the event that any one or more provisions of this Agreement shall be
declared to be illegal or unenforceable under the law, rule or regulation of
any government having jurisdiction over the parties hereto, such illegality or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof, and the parties hereto shall agree upon the modification of
this Agreement with respect to such illegal or unenforceable provisions to
eliminate such illegality or unenforceability.
Section 11: Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, and all of which together shall be deemed to
be one and the same instrument.
<PAGE>
Section 12: Product Liability; Conduct of Business
12.1 CDC shall, at all times during the term of this Agreement and
thereafter, indemnify, defend and hold ImmuCell harmless against all claims and
expenses, including legal expenses, and reasonable attorneys fees, arising out
of the death of or injury to any person or persons or out of any damage to
property and against any other claim, proceeding, demand, expense and liability
of any kind whatsoever (other than patent infringement claims) resulting from
the production, manufacture, sale, use, lease, distribution, consumption or
advertisement of products that incorporate Products, arising from any right or
obligation of CDC or any sub-licensee hereunder.
12.2 CDC warrants that it now maintains and will continue to maintain
liability insurance coverage appropriate to the risk involved in engaging in
the activities contemplated by this Agreement, including marketing the products
subject to this Agreement, and that such insurance coverage lists and will
continue to list ImmuCell as additional insured. Upon request, CDC will
present evidence to ImmuCell that the coverage is being maintained. In
addition, CDC shall provide ImmuCell with at least 30 days prior written notice
of any change in or cancellation of the insurance coverage.
Section 13: Use of Names
13.1 CDC and its sub-licensee(s) shall not use ImmuCell's name in
sales promotion, advertising, or any other form of publicity or in any other
way without the prior written approval of ImmuCell except in CDC and sub-
licensee internal corporate documents or to indicate that CDC is a licensee of
ImmuCell. In no event shall CDC's or any sub-licensee's use of ImmuCell's name
suggest any sponsorship by, approval of, or association with ImmuCell other
than as a licensee. ImmuCell agrees that CDC can sell the Product under
its own trade mark and/or trade name. CDC also agrees that labels for its
Product will also display the appropriate ImmuCell patent numbers and the
ImmuCell trademark as mutually agreed between the parties.
Section 14: Force Majeure
Neither party shall be liable for damages due to delay or failure to
perform any obligation under this Agreement (other than payment of money) if
such delay or failure results directly or indirectly from circumstances beyond
the reasonable control of such party. Such circumstances shall include but
shall not be limited to acts of God, acts of war, civil commotions, riots,
strikes, lockouts or other labor disturbances, accident, fire, water damage,
flood or other natural catastrophe. Any party affected by a condition of Force
Majeure shall use reasonable efforts to remedy such conditions to enable itself
to resume performance,
<PAGE>
except that no party shall be obligated to settle a strike, lockout or other
labor disturbance on terms other than at its complete discretion.
Notwithstanding the foregoing, in the event that ImmuCell fails to
perform any of its obligations under this Agreement for any of the reasons set
forth in this Section, ImmuCell shall immediately notify CDC in writing of
ImmuCell's failure to perform. After such immediate written notification or
after notification by CDC to ImmuCell, whichever is sooner, ImmuCell shall be
entitled to one hundred and eighty (180) days to cure its failure to perform.
In the event that ImmuCell has not cured its failure to perform in this
one hundred and eighty (180) day period, CDC shall then be entitled to exercise
its rights pursuant to Section 3. CDC may begin to manufacture Products if
ImmuCell fails to cure any non-performance by ImmuCell to supply Products
within 180 days when such non-performance begins.
Section 15: Miscellaneous
This Agreement shall be construed in accordance with the laws of the
State of Delaware without reference to its conflicts of laws provisions. If
any provisions of this Agreement are or shall come into conflict with the laws
or regulations of any jurisdiction or any governmental entity having
jurisdiction over the parties or this Agreement, those provisions shall be
deemed automatically deleted, if such deletion is allowed by relevant law,
and the remaining terms and conditions of this Agreement shall remain in full
force and effect. If such a deletion is not so allowed or if such a deletion
leaves terms clearly illogical or inappropriate in effect, the parties agree to
substitute new terms similar in effect to the present terms of this Agreement
as may be allowed under the applicable laws and regulations.
Section 16: Notices
Any notices required to be given pursuant to the provisions of this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the time when actually received as a consequence of any effective
method of delivery, including but not limited to hand delivery, transmission by
telefax, or delivery by a professional courier service or the time when sent by
certified or registered mail addressed to the party for whom intended at the
address below or at such changed address as the party shall have specified
by written notice, provided that any notice of change of address shall be
effective only upon actual receipt.
(a) Clearwater Diagnostics Company, LLC
Attention: Manager Attention: President
56 Evergreen Drive and 155 Route 46 West
Portland, Maine 04103 Fairfield, NJ 07004
(b) ImmuCell Corporation
56 Evergreen Drive
Portland, Maine 04103
Section 17: Arbitration
In the event a dispute, claim or controversy shall arise between the
Parties with respect to any provision of this Agreement, or the interpretation
of performance hereof or thereof, and such is declared by written notice from
one party to the other, the Parties agree to negotiate in good faith toward
resolution of the dispute. If such dispute cannot be resolved within a period
of thirty (30) days after such notice is given, either party may submit the
dispute to arbitration. Such dispute shall be settled by arbitration under the
laws of the State of Delaware, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA"). In rendering its
decision, the arbitration tribunal shall apply the substantive laws of the
State of Delaware and interpret this Agreement in accordance with its terms.
The determination of the arbitration tribunal shall be conclusive and binding
upon the Parties hereto. The dispute will be decided by a panel of three
arbitrators to be appointed as provided in Section 13 of the AAA Commercial
Arbitration Rules.
The award of the arbitration tribunal may be, alternatively or cumulatively,
for monetary damages, an order requiring the performance of non-monetary
obligations (including specific performance) or any other appropriate order or
remedy. The arbitrators may issue interim awards and order any provisions or
measures which should be taken to preserve the respective right of either
party. The decision of the arbitrators may be enforced in any tribunal of
competent jurisdiction.
Each party shall bear its own costs and expenses of the arbitration, and the
Parties shall share equally the cost of the arbitrators; provided that any
party instituting a claim or providing a defense under this Section which the
tribunal shall declare to be frivolous shall pay all costs and expenses,
including attorney's fees and costs, incurred in connection with such
arbitration.
The arbitration procedure herein shall be the exclusive remedy available to the
Parties hereunder to resolve any dispute, claim or controversy arising
hereunder.
Section 18: Integration.
This Agreement constitutes the full understanding between the parties
with reference to the subject matter hereof, and no statements or agreements by
or between the parties, whether orally or in writing, except as provided for
elsewhere herein, made prior to or at the signing hereof, shall vary or modify
the written terms of this Agreement. Neither party shall claim any amendment,
modification, or release from any provisions of the Agreement by mutual
agreement, acknowledgment, or otherwise, unless such mutual agreement is in
writing, signed by the other party and specifically states that it is an
amendment to this Agreement.
IN WITNESS THEREOF, the parties hereto have duly executed this Agreement on the
dates indicated below.
Clearwater Diagnostics Company LLC
By: /s/: Thomas C. Hatch, /s/: Malcolm R. Kahn, its Managers.
Date: 9/17/96
ImmuCell Corporation
By: /s/: Thomas C. Hatch, its President
Date: 9/17/96
LICENSE AGREEMENT
This Agreement is made effective the 17th day of September, 1996, by
and between Membrex, Inc. (hereinafter called "Membrex"), a corporation
organized and existing under the laws of Delaware, and Clearwater Diagnostics
Company LLC(hereinafter called "CDC"), a limited liability company organized
under the laws of Delaware, together hereinafter called the Parties.
WHEREAS, Membrex has developed certain technology as described in the
"LICENSED TECHNOLOGY" section herein, and Membrex is willing to grant a license
on the LICENSED TECHNOLOGY to CDC;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, the parties covenant and agree as follows:
Section 1: Definitions
1.1 "LICENSED TECHNOLOGY" shall refer to and mean non-flat membrane
plate Vortex Flow Filtration systems and membrane filters used in such systems
to concentrate substances from water samples. Such LICENSED TECHNOLOGY also
shall refer to and include (i) United States Patents: 4,876,013, 4,790,942,
and any additional related patents in the U.S. owned or licensed by Membrex,
(ii) all foreign equivalents thereof.
1.2. "Field of Use" shall mean only the detection of infectious
disease agents such as Cryptosporidium parvum in water sources including ground
water, surface water, drinking water, bottled water, sanitary waste water,
cooling towers and water and waste water in non-food and non-beverage
industrial manufacturing and processing segments. The Field of Use
specifically excludes food and beverage applications, including the testing of
any components thereof in food and beverage manufacturing plants or the testing
of fluids used in the manufacture or processing of such products. Detection of
non-infectious disease agents , including but not limited to, chemicals,
carcinogenic agents, metals, and other contaminants are specifically excluded
from the Field of Use and from this License Agreement.
1.3 "Products" as used herein shall refer to and mean Vortex Flow
Filtration devices.
1..4 "Disposables" as used herein shall refer to and mean Membrane
Filter Cartridges.
1.5 "Membranes" as used herein shall refer to and mean membrane
filters used in the "Disposables"
1.6 "Direct Cost" shall mean direct manufacturing costs
including materials, labor, QA and QC costs, and manufacturing overheads.
1.7 "LLC Agreement" shall mean that certain Limited Liability
Company Agreement between Membrex and ImmuCell Corporation dated
September 17, 1996.
<PAGE>
Section 2: Grant
2.1 License: Membrex hereby grants to CDC an exclusive worldwide
royalty free license to make, use, distribute, lease and sell Products,
Disposables, spare parts and services based on the Products and Disposables,
within the scope of LICENSED TECHNOLOGY in the Field of Use but in no other
field of use. Membrex also grants to CDC an exclusive worldwide license to
use, distribute, lease and sell the Membranes within the scope of the LICENSED
TECHNOLOGY in the Field of Use but in no other field of use.
2.2 Sub-licenses. CDC may grant sub-licenses of the LICENSED
TECHNOLOGY in the Field of Use to third parties. Any agreement granting a sub-
license shall require that the sub-license be subject to the terms and
termination of this License Agreement and the LLC Agreement. CDC's sub-
licenses to third parties do not carry any rights to further sub-license the
LICENSED TECHNOLOGY. CDC shall have the same responsibility for the activities
of any sub-licensee as if the activities were directly those of CDC.
2.3 License Fee. CDC agrees to pay a license fee of $100 within
seven days after the date this Agreement is fully executed by both parties.
2.4 Neither CDC nor any Sub-licensee shall obtain rights of any
kind in the LICENSED TECHNOLOGY other than the rights specifically set forth
herein.
Section 3: Supply Of Product And Disposables
3.1 Membrex shall sell to CDC and CDC shall buy from Membrex all of
CDC's order requirements for Membranes for incorporation into its kits,
devices, reagents, parts and services at Membrex's Direct Cost. All sales to
CDC by Membrex are FOB Membrex plant and any shipping cost, insurance, taxes
and other fees are the responsibility of CDC. Membrex may sell to CDC and
CDC may buy from Membrex the order requirements for Product and Disposables for
incorporation into CDC's kits, devices, reagents, parts and services at prices
as may be agreed by the Parties. If CDC elects to buy the order requirements
for Product and Disposables from an outside third party, then CDC will
reimburse Membrex for the direct cost of its production molds.
3.2 CDC shall sell to sub-licensee such Products, Disposables and
Membranes as may be required by the sub-licensee for use in the Field of Use
and buy such Products, Disposables and Membranes from Membrex in accordance
with the terms and conditions contained herein. CDC may alternatively sub-
license the rights to manufacture Products and Disposables, for use in the
Field of Use, but not Membrex Membranes, except as provided in Section 14.
3.3 Forecasts and Orders by CDC: On or before November 15, 1996 and
on or before November 15 of each year thereafter throughout the term of the
Agreement, CDC will provide a written Blanket Purchase Order ('PO') for the
Product and Disposables for the next calendar year. In addition, CDC will
provide a monthly rolling forecast of its requirements for the Product and
Disposables for the next succeeding three month period with the first month of
such forecast representing a firm shipment call-off from the Blanket PO. CDC
will provide such monthly rolling forecast on the first day of the three month
period that it covers.
<PAGE>
Upon notification by Membrex of the date of the commencement of Year 1,
CDC will provide its Blanket PO for the balance of the calendar year 1996 and
an initial three month rolling forecast. This forecast will be provided within
one month of notification of the commencement of Year 1 or three months prior
to the commencement of Year 1, whichever is later.
Membrex will not be in default of this Agreement pursuant to Sections 2
and 6 hereof if it fails to meet increased order requirements of the Product by
CDC which exceed ten percent (10%) of the original forecast for any given month
in the three month window of the CDC forecast. Membrex will not be in default
during the first six (6) months of Year one (1) provided it supplies
against firm CDC orders the quantity of Product and Disposables ordered by CDC
or at least 100 units, whichever is less. Membrex will not be in default of
this Agreement pursuant to Sections 2 and 6 hereof if it fails to meet
increased firm orders for the Product and Disposables by CDC for any month that
exceeds one hundred and twenty five percent (125%) of one twelfth (1/12) of the
annual CDC Blanket forecast. Notwithstanding the foregoing, Membrex will make
its best faith efforts to supply sufficient Product and Disposables to meet
CDC's Blanket PO and subsequent monthly Blanket PO call-off's. Membrex will
not be in default of this Agreement if it cannot meet CDC order requirements
based on the timing and/or delays in completing the necessary molds for
the Product and Disposables. Membrex will make a good faith effort to complete
such molds in a timely fashion.
Membrex shall deliver those quantities of the Product and/or
Disposables to CDC ordered by CDC pursuant to a firm PO release no later than
sixty (60) days after the date that CDC issues the firm release, FOB Membrex,
together with an invoice for the Product(s) and/or Disposables. CDC shall pay
such invoice for the Product(s) and/or Disposables within thirty (30) days
after receipt by CDC of quantities of the Product and/or Disposables ordered by
CDC. Notwithstanding the foregoing, in the event CDC notifies Membrex within
ten (10) days of receipt of the Product and/or Disposable of their non-
conformity to the final written specifications for the Product, to be agreed
upon by the Parties, CDC shall be entitled to return such non-conforming goods
to Membrex, and CDC shall not be required to pay any invoices for such non-
conforming goods.
In the event that Membrex makes purchasing commitments to its suppliers
based on CDC Blanket PO's for volume delivery of components as a means of
achieving lower component prices for the Product and / or Disposables and CDC
falls short of purchasing the number of units
of the Product and / or Disposables in the Blanket PO by CDC and Membrex is
unable to satisfy such purchasing commitments to its suppliers for volume
delivery of components and incurs higher component costs as a direct result of
CDC's failure to meet its Blanket PO as noted above, CDC shall pay the Direct
Cost associated with the higher components cost.
Section 4: Direct Cost Auditing
Membrex shall keep written records of Direct Costs for reasonable
periods of time but in no case for a period longer than two (2) fiscal years.
A maximum of two (2) audits per year can be scheduled by CDC's duly authorized
independent auditor acceptable to Membrex. Such records shall be available for
inspection during all reasonable business hours and are subject to the
Confidentiality Agreements signed by Membrex and CDC.
Section 5: Certain Warranties of Membrex
5.1 Membrex warrants that it has no knowledge that would prevent it
from granting the License contemplated by this Agreement. However, nothing in
this Agreement shall be construed as: (i) a warranty or representation by
Membrex as to the validity, enforceability or scope of any LICENSED TECHNOLOGY
or as to its effectiveness or as to any results or advantage to be achieved by
its use, (ii) a warranty or representation that anything made, used, sold or
otherwise disposed of or otherwise commercialized under this Agreement or the
License granted in this Agreement will or will not infringe patents or other
rights of any kind of third parties, (iii) an obligation to bring or prosecute
actions or suits against third parties for infringement of LICENSED TECHNOLOGY,
and (iv) an obligation to obtain, maintain, assert, or defend any intellectual
property rights. Notwithstanding the foregoing, CDC agrees to assist Membrex,
at no cost to itself, including agreeing to be named as a party plaintiff in
any legal action, in the event that Membrex decides to pursue third party
infringers of the Licensed Patents.
5.2 MEMBREX MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES
OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES
WHATSOEVER WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY CDC, ITS
SUBLICENSEES OR ITS VENDEES OR OTHER TRANSFEREES OF PRODUCTS, DISPOSABLES OR
MEMBRANES INCORPORATING OR MADE BY USE OF LICENSED TECHNOLOGY UNDER THIS
AGREEMENT.
5.3 Nothing contained in this Agreement shall be construed to convey
to CDC any ownership rights, proprietary interest or other rights or interest
of any kind, except for the non-transferable License and right to use the
LICENSED TECHNOLOGY in the manufacture, distribution, sale and lease of
Products, Disposables and Membranes which is expressly granted by this
Agreement. CDC covenants and agrees that it shall not at any time during the
term of this Agreement challenge or contest the ownership of the LICENSED
TECHNOLOGY, or trademark or tradename used by Membrex ('TRADEMARKS'), including
the trademark and tradename "Membrex." CDC shall not challenge the validity
or enforceability of any of the Patents and/or TRADEMARKS associated with this
License, nor do anything that in any way tarnishes them or otherwise impairs
their value.
Section 6: Term And Termination
6.1 The term of this License shall begin on the effective date of
this Agreement and continue until the earlier of (i) twenty five (25) years
from the effective date of this Agreement or (ii) the date on which CDC is
dissolved, (iii) the inability to obtain sufficient financing within one
(1) year from the effective date of this Agreement to operate CDC's business
for at least eighteen (18) months, or (iv) a petition for bankruptcy is filed
by or against CDC or (v) liquidation or other State proceedings are instituted
by or against CDC.
6.2 CDC may terminate this Agreement at any time by giving at least
thirty (30) days' written notice of such termination to Membrex. In the event
that CDC terminates this Agreement, CDC shall reimburse Membrex for the cost of
any Products, Disposables and spare parts purchased or ordered by Membrex to
meet CDC's Blanket PO's or forecast requirements. In the event that
CDC terminates this Agreement, CDC shall agree to buy any molds used in the
manufacture of Product or Disposables that Membrex chooses to sell for a price
not to exceed their current book value.
6.3 If CDC at any time defaults in the timely payment of any monies
due to Membrex or commits any breach of any other covenant herein contained, and
fails to remedy such breach within ninety (90) days after written notice thereof
by Membrex, Membrex may, at its option, terminate this Agreement by giving
written notice of termination to CDC.
6.4 Upon the termination of this Agreement, CDC shall remain
obligated to pay any outstanding monies owed for Product and Disposables sold
by Membrex to CDC and the following sections shall survive termination or
expiration of this Agreement: Sections 5, 8, 9, 10, 12, 15, and 16.
6.5 Upon the termination of this Agreement, all rights to LICENSED
TECHNOLOGY will revert to Membrex, the license to CDC and any sub-licensees
shall immediately cease, and Membrex shall have no further obligations to sell
product to CDC or any sub-licensee nor shall CDC have any further rights to
grant sub-licenses, manufacture or have manufactured the LICENSED TECHNOLOGY.
Upon the occurrence of any of the events in this Section 6, Membrex shall have
the right to withdraw from CDC and have returned its Capital Account and
Capital Contribution as defined in the LLC Agreement.
Section 7: Assignability
This Agreement may not be transferred or assigned by CDC except with
the prior written consent of Membrex.
Section 8: Patents
8.1 The PATENTS and all new patent applications to be submitted, new
patents to be granted and technology relating to the Product, Disposables
and/or Membranes shall be owned exclusively by Membrex except as provided
herein. Improvements, if patentable, will be owned as provided herein. The
Parties will share the use of any such Improvements to the Product. During
the term of this Agreement, the Parties hereby grant to each other a royalty-
free cross license with respect to the Improvements. With respect to
Improvements that are the result of joint efforts of CDC and Membrex, both
parties shall have the right to use such jointly developed Improvements
in perpetuity, subject to the provisions herein.
Notwithstanding the foregoing provision, the parties hereby
acknowledge and agree that any and all Improvements to the Product made during
the term of this Agreement and for three (3) years thereafter, that can only
reasonably be used with the Product shall be the sole and exclusive property of
Membrex, and all Improvements that can also be used in connection with products
in addition to the Product shall be the sole and exclusive property of the
respective inventing party or parties.
8.2. New Technology: Membrex and CDC may cooperate in the
development of new technology (i.e., not an Improvement to the Product). The
parties shall negotiate in good faith with respect to the funding of the
development of any such new technology. New patentable technology which arises
from such a cooperation will be owned jointly by the Parties and for their
exclusive use, subject to any mutual written consent to the contrary.
Section 9: Confidentiality
CDC and Membrex acknowledge that during the course of this Agreement,
it may be necessary for either party to disclose its confidential, proprietary
information to the other party. Membrex and ImmuCell have previously entered
into Secrecy Agreements dated October 18th, 1994 and October 24, 1994
(hereinafter the "Secrecy Agreement"). The terms of the Secrecy Agreement
are hereby incorporated herein and made binding to CDC as if CDC were a party
to such Secrecy Agreement. CDC and Membrex agree to extend that Secrecy
Agreement effective through December 31, 2001. Notwithstanding the provisions
of that Secrecy Agreement, each party shall have the obligation to identify all
PROPRIETARY INFORMATION (defined as "Information" in the Secrecy Agreement)
that it has disclosed to the other party to date. For PROPRIETARY INFORMATION
disclosed after the date of execution of this Agreement, the parties shall have
the obligation to designate that information that is PROPRIETARY INFORMATION
under the Secrecy Agreement. If PROPRIETARY INFORMATION is disclosed orally,
the disclosing party shall have the obligation to identify the information as
PROPRIETARY INFORMATION at the time of disclosure and confirm that such
information is PROPRIETARY INFORMATION within thirty (30) days after such oral
disclosure.
Section 10: Severability
In the event that any one or more provisions of this Agreement shall be
declared to be illegal or unenforceable under the law, rule or regulation of
any government having jurisdiction over the parties hereto, such illegality or
unenforceability shall not affect the validity or enforceability of the
other provisions hereof, and the parties hereto shall agree upon the
modification of this Agreement with respect to such illegal or unenforceable
provisions to eliminate such illegality or unenforceability.
Section 11: Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument.
Section 12: Product Liability; Conduct of Business
12.1 CDC shall, at all times during the term of this Agreement and
thereafter, indemnify, defend and hold Membrex harmless against all claims and
expenses, including legal expenses, and reasonable attorneys fees, arising out
of the death of or injury to any person or persons or out of any damage to
property and against any other claim, proceeding, demand, expense and liability
of any kind whatsoever (other than patent infringement claims) resulting from
the production, manufacture, sale, use, lease, distribution, consumption or
advertisement of Products, Disposables, Membranes, Test Kits, Reagents, or
Services arising from any right or obligation of CDC or any sub-licensee
hereunder.
12.2 CDC warrants that it now maintains and will continue to maintain
liability insurance coverage appropriate to the risk involved in engaging in
the activities contemplated by this Agreement, including marketing the products
subject to this Agreement, and that such insurance coverage lists and will
continue to list Membrex as additional insured. Upon request, CDC will
present evidence to Membrex that the coverage is being maintained. In
addition, CDC shall provide Membrex with at least 30 days prior written notice
of any change in or cancellation of the insurance coverage.
Section 13: Use of Names
13.1 CDC and its sub-licensee(s) shall not use Membrex's name in
sales promotion, advertising, or any other form of publicity or in any other
way without the prior written approval of Membrex except in CDC and sub-
licensee internal corporate documents or to indicate that CDC is a licensee of
Membrex. In no event shall CDC's or any sub-licensee's use of Membrex's name
suggest any sponsorship by, approval of, or association with Membrex other than
as a licensee. Membrex agrees that CDC can sell the Product under its own
trade mark and/or trade name. CDC also agrees that labels for its Product will
also display the appropriate Membrex patent numbers and the Membrex trademark
as mutually agreed between the parties.
The Products, Disposables and Membranes which are manufactured,
distributed and sold by CDC in accordance with this Agreement and the LLC
Agreement shall contain such patent and trademark marking(s) as Membrex, in its
sole discretion, may determine, by written notice to CDC, are reasonable
necessary or desirable. The Products, Disposables and Membranes which are
manufactured by or for CDC and which bear, are sold under, incorporate, or
otherwise utilize any TRADEMARKS or licensed patents of Membrex shall be of
substantially the same quality as are presently being manufactured by Membrex.
The parties acknowledge that Membrex will have sufficient
control over and right to inspect the particular Products and Disposables which
will be manufactured by or for and/or sold by CDC hereunder to permit Membrex
to assure itself of the quality of the goods and that proper patent and
trademark markings are being applied. CDC shall submit for inspection and
approval by Membrex a representative sample of each type of Product and/or
Disposable which CDC desires to manufacture, have manufactured, sell or lease
and unless Membrex informs CDC of its disapproval in writing within ten (10)
business days after the receipt by Membrex of such sample, Membrex will be
deemed to have consented. Once Membrex has consented with respect to a type
of Product or Disposable, CDC shall not in any way alter the design of or
patent or trademark markings on that Product or Disposable without Membrex's
further consent.
Section 14: Force Majeure
Neither party shall be liable for damages due to delay or failure to
perform any obligation under this Agreement (other than payment of money) if
such delay or failure results directly or indirectly from circumstances beyond
the reasonable control of such party. Such circumstances shall include but
shall not be limited to acts of God, acts of war, civil commotions, riots,
strikes, lockouts or other labor disturbances, accident, fire, water damage,
flood or other natural catastrophe. Any party affected by a condition of Force
Majeure shall use reasonable efforts to remedy such conditions to enable itself
to resume performance, except that no party shall be obligated to settle a
strike, lockout or other labor disturbance on terms other than at its complete
discretion.
Notwithstanding the foregoing, in the event that Membrex fails to
perform any of its obligations under this Agreement for any of the reasons set
forth in this Section, Membrex
shall immediately notify CDC in writing of Membrex's failure to perform. After
such immediate written notification or after notification by CDC to Membrex,
whichever is sooner, Membrex shall be entitled to one hundred and eighty (180)
days to cure its failure to perform. In the event that Membrex has not cured
its failure to perform in this one hundred and eighty (180) day period, CDC
shall then be entitled to exercise its rights pursuant to Section 3. CDC may
also begin to manufacture Membranes for use in the Product and Disposables only
if Membrex fails to cure any non-performance to supply Membranes within 180
days when such non-performance begins. In the event that Membrex is again able
to supply Membrane, CDC will immediately stop manufacturing Membrane and again
purchase Membrane from Membrex.
Section 15: Miscellaneous
This Agreement shall be construed in accordance with the laws of the
State of Delaware. If any provisions of this Agreement are or shall come into
conflict with the laws or regulations of any jurisdiction or any governmental
entity having jurisdiction over the parties or this Agreement, those provisions
shall be deemed automatically deleted, if such deletion is allowed by relevant
law, and the remaining terms and conditions of this Agreement shall remain in
full force and effect. If such a deletion is not so allowed or if such a
deletion leaves terms clearly illogical or inappropriate in effect, the parties
agree to substitute new terms similar in effect to the present terms of this
Agreement as may be allowed under the applicable laws and regulations.
Section 16: Notices
Any notices required to be given pursuant to the provisions of this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the time when actually received as a consequence of any effective
method of delivery, including but not limited to hand delivery, transmission by
telefax, or delivery by a professional courier service or the time when sent by
certified or registered mail addressed to the party for whom intended at the
address below or at such changed address as the party shall have specified by
written notice, provided that any notice of change of address shall be
effective only upon actual receipt.
(a) Clearwater Diagnostics Company, LLC
Attention: Manager Attention: President
56 Evergreen Drive and 155 Route 46 West
Portland, Maine 04103 Fairfield, NJ 07004
(b) Membrex Inc.
155 Route 46 West
Fairfield, NJ 07004
Section 17: Arbitration
In the event a dispute, claim or controversy shall arise between the
Parties with respect to any provision of this Agreement, or the interpretation
of performance hereof or thereof, and such is declared by written notice from
one party to the other, the Parties agree to negotiate in good faith
toward resolution of the dispute. If such dispute cannot be resolved within a
period of thirty (30) days after such notice is given, either party may submit
the dispute to arbitration. Such dispute shall be settled by arbitration under
the laws of the State of Delaware, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA"). In
rendering its decision, the arbitration tribunal shall apply the substantive
laws of the State of Delaware and interpret this Agreement in accordance with
its terms. The determination of the arbitration tribunal shall be conclusive
and binding upon the Parties hereto. The dispute will be decided by a panel of
three arbitrators to be appointed as provided in Section 13 of the AAA
Commercial Arbitration Rules.
The award of the arbitration tribunal may be, alternatively or
cumulatively, for monetary damages, an order requiring the performance of non-
monetary obligations (including specific performance) or any other appropriate
order or remedy. The arbitrators may issue interim awards and order any
provisions or measures which should be taken to preserve the respective right
of either party. The decision of the arbitrators may be enforced in any
tribunal of competent jurisdiction.
Each party shall bear its own costs and expenses of the arbitration,
and the Parties shall share equally the cost of the arbitrators; provided that
any party instituting a claim or providing a defense under this Section which
the tribunal shall declare to be frivolous shall pay all costs and expenses,
including attorney's fees and costs, incurred in connection with such
arbitration.
The arbitration procedure herein shall be the exclusive remedy
available to the Parties hereunder to resolve any dispute, claim or controversy
arising hereunder.
Section 18: Integration.
This Agreement constitutes the full understanding between the parties
with reference to the subject matter hereof, and no statements or agreements by
or between the parties, whether orally or in writing, except as provided for
elsewhere herein, made prior to or at the signing hereof, shall vary or modify
the written terms of this Agreement. Neither party shall claim any amendment,
<PAGE>
modification, or release from any provisions of the Agreement by mutual
agreement, acknowledgment, or otherwise, unless such mutual agreement is in
writing, signed by the other party and specifically states that it is an
amendment to this Agreement.
IN WITNESS THEREOF, the parties hereto have duly executed this Agreement on the
dates indicated below.
Clearwater Diagnostics Company, LLC
By: /s/: Malcolm R. Kahn, /s/: Thomas C. Hatch , its Managers.
Date: 9/17/96 :
Membrex Corporation
By: /s/: Malcolm R. Kahn, its President.
Date: 9/17/96 :
LICENSE AGREEMENT
This Agreement is made effective the 17th day of September, 1996, by
and between Membrex, Inc. (hereinafter called "Membrex"), a corporation
organized and existing under the laws of Delaware, and Clearwater Diagnostics
Company LLC(hereinafter called "CDC"), a limited liability company organized
under the laws of Delaware, together hereinafter called the Parties.
WHEREAS, Membrex has developed certain technology as described in the
"LICENSED TECHNOLOGY" section herein, and Membrex is willing to grant a license
on the LICENSED TECHNOLOGY to CDC;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, the parties covenant and agree as follows:
Section 1: Definitions
1.1 "LICENSED TECHNOLOGY" shall refer to and mean non-flat membrane
plate Vortex Flow Filtration systems and membrane filters used in such systems
to concentrate substances from water samples. Such LICENSED TECHNOLOGY also
shall refer to and include (i) United States Patents: 4,876,013, 4,790,942,
and any additional related patents in the U.S. owned or licensed by Membrex,
(ii) all foreign equivalents thereof.
1.2. "Field of Use" shall mean only the detection of infectious
disease agents such as Cryptosporidium parvum in food and beverage industrial
manufacturing and processing segments. Detection of non-infectious disease
agents, including but not limited to, chemicals, carcinogenic agents, metals,
and other contaminants are specifically excluded from the Field of Use and from
this License Agreement.
1.3 "Products" as used herein shall refer to and mean Vortex Flow
Filtration devices.
1.4 "Disposables" as used herein shall refer to and mean Membrane
Filter Cartridges.
1.5 "Membranes" as used herein shall refer to and mean membrane
filters used in the "Disposables"
1.6 "Direct Cost" shall mean direct manufacturing costs including
materials, labor, QA and QC costs, and manufacturing overheads.
1.7 "LLC Agreement" shall mean that certain Limited Liability
Company Agreement between Membrex and ImmuCell dated
September 17, 1996.
Section 2: Grant
2.1 License: Membrex hereby grants to CDC an exclusive worldwide
royalty free license to make, use, distribute, lease and sell Products,
Disposables, spare parts and services based on the Products and Disposables,
within the scope of LICENSED TECHNOLOGY in the Field of Use but in no other
field of use. Membrex also grants to CDC an exclusive worldwide license to
use, distribute, lease and sell the Membranes within the scope of the
LICENSED TECHNOLOGY in the Field of Use but in no other field of use.
2.2 Sub-licenses. CDC may grant sub-licenses of the LICENSED
TECHNOLOGY in the Field of Use to third parties. Any agreement granting a sub-
license shall require that the sub-license be subject to the terms and
termination of this License Agreement and the LLC Agreement. CDC's sub-
licenses to third parties do not carry any rights to further sub-license the
LICENSED TECHNOLOGY. CDC shall have the same responsibility for the activities
of any sub-licensee as if the activities were directly those of CDC.
2.3 License Fee. CDC agrees to pay a license fee of $100 within
seven days after the date this Agreement is fully executed by both parties.
2.4 Neither CDC nor any Sub-licensee shall obtain rights of any
kind in the LICENSED TECHNOLOGY other than the rights specifically set forth
herein.
Section 3: Supply Of Product And Disposables
3.1 Membrex shall sell to CDC and CDC shall buy from Membrex all of
CDC's order requirements for Membranes for incorporation into its kits,
devices, reagents, parts and services at Membrex's Direct Cost. All sales to
CDC by Membrex are FOB Membrex plant and any shipping cost, insurance, taxes
and other fees are the responsibility of CDC. Membrex may sell to CDC and CDC
may buy from Membrex the order requirements for Product and Disposables for
incorporation into CDC's kits, devices, reagents, parts and services at prices
as may be agreed by the Parties. If CDC elects to buy the order requirements
for Product and Disposables from an outside third party, then CDC will
reimburse Membrex for the direct cost of its production molds.
3.2 CDC shall sell to sub-licensee such Products, Disposables and
Membranes as may be required by the sub-licensee for use in the Field of Use
and buy such Products, Disposables and Membranes from Membrex in accordance
with the terms and conditions contained herein. CDC may alternatively sub-
license the rights to manufacture Products and Disposables, for use in the
Field of Use, but not Membrex Membranes, except as provided in Section 14.
3.3 Forecasts and Orders by CDC: On or before November 15, 1996 and
on or before November 15 of each year thereafter throughout the term of the
Agreement, CDC will provide a written Blanket Purchase Order ('PO') for the
Product and Disposables for the next calendar year. In addition, CDC will
provide a monthly rolling forecast of its requirements for the Product and
Disposables for the next succeeding three month period with the first month of
such forecast representing a firm shipment call-off from the Blanket
PO. CDC will provide such monthly rolling forecast on the first day of the
three month period that it covers.
Upon notification by Membrex of the date of the commencement of Year 1,
CDC will provide its Blanket PO for the balance of the calendar year 1996 and
an initial three month rolling forecast. This forecast will be provided within
one month of notification of the commencement of Year 1 or three months prior
to the commencement of Year 1, whichever is later.
Membrex will not be in default of this Agreement pursuant to Sections 2
and 6 hereof if it fails to meet increased order requirements of the Product by
CDC which exceed ten percent (10%) of the original forecast for any given month
in the three month window of the CDC forecast. Membrex will not be in default
during the first six (6) months of Year one (1) provided it supplies against
firm CDC orders the quantity of Product and Disposables ordered by CDC or at
least 100 units, whichever is less. Membrex will not be in default of this
Agreement pursuant to Sections 2 and 6 hereof if it fails to meet increased
firm orders for the Product and Disposables by CDC for any month that exceeds
one hundred and twenty five percent (125%) of one twelfth (1/12) of the annual
CDC Blanket forecast. Notwithstanding the foregoing, Membrex will make its
best faith efforts to supply sufficient Product and Disposables to meet CDC's
Blanket PO and subsequent monthly Blanket PO call-off's. Membrex will not be
in default of this Agreement if it cannot meet CDC order requirements based on
the timing and/or delays in completing the necessary molds for the Product and
Disposables. Membrex will make a good faith effort to complete such molds in a
timely fashion.
Membrex shall deliver those quantities of the Product and/or
Disposables to CDC ordered by CDC pursuant to a firm PO release no later than
sixty (60) days after the date that CDC issues the firm release, FOB Membrex,
together with an invoice for the Product(s) and/or Disposables. CDC shall pay
such invoice for the Product(s) and/or Disposables within thirty (30) days
after receipt by CDC of quantities of the Product and/or Disposables ordered by
CDC. Notwithstanding the foregoing, in the event CDC notifies Membrex within
ten (10) days of receipt of the Product and/or Disposable of their non-
conformity to the final written specifications for the Product, to be agreed
upon by the Parties, CDC shall be entitled to return such non-conforming goods
to Membrex, and CDC shall not be required to pay any invoices for such non-
conforming goods.
In the event that Membrex makes purchasing commitments to its suppliers
based on CDC Blanket PO's for volume delivery of components as a means of
achieving lower component prices for the Product and / or Disposables and CDC
falls short of purchasing the number of units of the Product and / or
Disposables in the Blanket PO by CDC and Membrex is unable to satisfy such
purchasing commitments to its suppliers for volume delivery of components and
incurs higher component costs as a direct result of CDC's failure to meet its
Blanket PO as noted above, CDC shall pay the Direct Cost associated with the
higher components cost.
Section 4: Direct Cost Auditing
Membrex shall keep written records of Direct Costs for reasonable
periods of time but in no case for a period longer than two (2) fiscal years.
A maximum of two (2) audits per year can be scheduled by CDC's duly authorized
independent auditor acceptable to Membrex. Such records shall be available for
inspection during all reasonable business hours and are subject to the
Confidentiality Agreements signed by Membrex and CDC.
Section 5: Certain Warranties of Membrex
5.1 Membrex warrants that it has no knowledge that would prevent it
from granting the License contemplated by this Agreement. However, nothing in
this Agreement shall be construed as: (i) a warranty or representation by
Membrex as to the validity, enforceability or scope of any LICENSED TECHNOLOGY
or as to its effectiveness or as to any results or advantage to be achieved by
its use, (ii) a warranty or representation that anything made, used, sold or
otherwise disposed of or otherwise commercialized under this Agreement or the
License granted in this Agreement will or will not infringe patents or
other rights of any kind of third parties, (iii) an obligation to bring or
prosecute actions or suits against third parties for infringement of LICENSED
TECHNOLOGY, and (iv) an obligation to obtain, maintain, assert, or defend any
intellectual property rights. Notwithstanding the foregoing, CDC agrees to
assist Membrex, at no cost to itself, including agreeing to be named as a party
plaintiff in any legal action, in the event that Membrex decides to pursue
third party infringers of the Licensed Patents.
5.2 MEMBREX MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY
KIND, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES WHATSOEVER
WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY CDC, ITS SUBLICENSEES OR ITS
VENDEES OR OTHER TRANSFEREES OF PRODUCTS, DISPOSABLES OR MEMBRANES
INCORPORATING OR MADE BY USE OF LICENSED TECHNOLOGY UNDER THIS AGREEMENT.
5.3 Nothing contained in this Agreement shall be construed to convey
to CDC any ownership rights, proprietary interest or other rights or interest
of any kind, except for the non-transferable License and right to use the
LICENSED TECHNOLOGY in the manufacture, distribution, sale and lease of
Products, Disposables and Membranes which is expressly granted by this
Agreement. CDC covenants and agrees that it shall not at any time during the
term of this Agreement challenge or contest the ownership of the LICENSED
TECHNOLOGY, or trademark or tradename used by Membrex ('TRADEMARKS'), including
the trademark and tradename "Membrex." CDC shall not challenge the validity
or enforceability of any of the Patents and/or TRADEMARKS associated with this
License, nor do anything that in any way tarnishes them or otherwise
impairs their value.
Section 6: Term And Termination
6.1 The term of this License shall begin on the effective date of
this Agreement and continue until the earlier of (i) twenty five (25) years
from the effective date of this Agreement or (ii) the date on which CDC is
dissolved, (iii) the inability to obtain sufficient financing within one (1)
year from the effective date of this Agreement to operate CDC's business for at
least eighteen (18) months, or (iv) a petition for bankruptcy is filed by or
against CDC or (v) liquidation or other State proceedings are instituted by or
against CDC.
6.2 CDC may terminate this Agreement at any time by giving at least
thirty (30) days' written notice of such termination to Membrex. In the event
that CDC terminates this Agreement, CDC shall reimburse Membrex for the cost of
any Products, Disposables and spare parts purchased or ordered by Membrex to
meet CDC's Blanket PO's or forecast requirements. In the event that CDC
terminates this Agreement, CDC shall agree to buy any molds used in the
manufacture of Product or Disposables that Membrex chooses to sell for a price
not to exceed their current book value.
6.3 If CDC at any time defaults in the timely payment of any monies
due to
Membrex or commits any breach of any other covenant herein contained, and fails
to remedy such breach within ninety (90) days after written notice thereof by
Membrex, Membrex may, at its option, terminate this Agreement by giving written
notice of termination to CDC.
6.4 Upon the termination of this Agreement, CDC shall remain
obligated to pay any outstanding monies owed for Product and Disposables sold
by Membrex to CDC and the following sections shall survive termination or
expiration of this Agreement: Sections 5, 8, 9, 10, 12, 15, and 16.
6.5 Upon the termination of this Agreement, all rights to LICENSED
TECHNOLOGY will revert to Membrex, the license to CDC and any sub-licensees
shall immediately cease, and Membrex shall have no further obligations to sell
product to CDC or any sub-licensee nor shall CDC have any further rights to
grant sub-licenses, manufacture or have manufactured the LICENSED TECHNOLOGY.
Upon the occurrence of any of
<PAGE>
the events in this Section 6, Membrex shall have the right to withdraw from CDC
and have returned its Capital Account and Capital Contribution as defined in
the LLC Agreement.
Section 7: Assignability
This Agreement may not be transferred or assigned by CDC except with
the prior written consent of Membrex.
Section 8: Patents
8.1 The PATENTS and all new patent applications to be submitted, new
patents to be granted and technology relating to the Product, Disposables
and/or Membranes shall be owned exclusively by Membrex except as provided
herein. Improvements, if patentable, will be owned as provided herein. The
Parties will share the use of any such Improvements to the Product. During the
term of this Agreement, the Parties hereby grant to each other a royalty-free
cross license with respect to the Improvements. With respect to Improvements
that are the result of joint efforts of CDC and Membrex, both parties shall
have the right to use such jointly developed Improvements in perpetuity,
subject to the provisions herein.
Notwithstanding the foregoing provision, the parties hereby
acknowledge and agree that any and all Improvements to the Product made during
the term of this Agreement and for three (3) years thereafter, that can only
reasonably be used with the Product shall be the sole and exclusive property of
Membrex, and all Improvements that can also be used in connection with products
in addition to the Product shall be the sole and exclusive property of the
respective inventing party or parties.
8.2. New Technology: Membrex and CDC may cooperate in the
development of new technology (i.e., not an Improvement to the Product). The
parties shall negotiate in good faith with respect to the funding of the
development of any such new technology. New patentable technology which arises
from such a cooperation will be owned jointly by the Parties and for their
exclusive use, subject to any mutual written consent to the contrary.
Section 9: Confidentiality
CDC and Membrex acknowledge that during the course of this Agreement,
it may be necessary for either party to disclose its confidential, proprietary
information to the other party. Membrex and ImmuCell have previously entered
into Secrecy Agreements dated October 18th, 1994 and October 24, 1994
(hereinafter the "Secrecy Agreement"). The terms of the Secrecy Agreement are
hereby incorporated herein and made binding to CDC as if CDC were a party to
such Secrecy Agreement. CDC and Membrex agree to extend that Secrecy Agreement
effective through December 31, 2001. Notwithstanding the provisions of that
Secrecy Agreement, each party shall have the obligation to identify all
PROPRIETARY INFORMATION (defined as "Information" in the Secrecy Agreement)
that it has disclosed to the other party to date. For PROPRIETARY INFORMATION
disclosed after the date of execution of this Agreement, the parties shall have
the obligation to designate that information that is PROPRIETARY INFORMATION
under the Secrecy Agreement. If PROPRIETARY INFORMATION is disclosed orally,
the disclosing party shall have the obligation to identify the information as
PROPRIETARY INFORMATION at the time of disclosure and confirm that such
information is PROPRIETARY INFORMATION within thirty (30) days after such oral
disclosure.
Section 10: Severability
In the event that any one or more provisions of this Agreement shall be
declared to be illegal or unenforceable under the law, rule or regulation of
any government having jurisdiction over the parties hereto, such illegality or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof, and the parties hereto shall agree upon the modification of
this Agreement with respect to such illegal or unenforceable provisions to
eliminate such illegality or unenforceability.
Section 11: Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument.
Section 12: Product Liability; Conduct of Business
12.1 CDC shall, at all times during the term of this Agreement and
thereafter, indemnify, defend and hold Membrex harmless against all claims and
expenses, including legal expenses, and reasonable attorneys fees, arising out
of the death of or injury to any person or persons or out of any damage to
property and against any other claim, proceeding, demand, expense and liability
of any kind whatsoever (other than patent infringement claims) resulting from
the production, manufacture, sale, use, lease, distribution, consumption or
advertisement of Products, Disposables, Membranes, Test Kits, Reagents, or
Services arising from any right or obligation of CDC or any sub-licensee
hereunder.
12.2 CDC warrants that it now maintains and will continue to maintain
liability insurance coverage appropriate to the risk involved in engaging in
the activities contemplated by this Agreement, including marketing the products
subject to this Agreement, and that such insurance coverage lists and will
continue to list Membrex as additional insured. Upon request, CDC will present
evidence to Membrex that the coverage is being maintained. In addition, CDC
shall provide Membrex with at least 30 days prior written notice of any change
in or cancellation of the insurance coverage.
Section 13: Use of Names
13.1 CDC and its sub-licensee(s) shall not use Membrex's name in
sales promotion, advertising, or any other form of publicity or in any other
way without the prior written approval of Membrex except in CDC and sub-
licensee internal corporate documents or to indicate that CDC is a licensee of
Membrex. In no event shall CDC's or any sub-licensee's use of Membrex's name
suggest any sponsorship by, approval of, or association with Membrex other than
as a licensee. Membrex agrees that CDC can sell the Product under its own
trade mark and/or trade name. CDC also agrees that labels for its Product will
also display the appropriate Membrex patent numbers and the Membrex trademark
as mutually agreed between the parties.
The Products, Disposables and Membranes which are manufactured,
distributed and sold by CDC in accordance with this Agreement and the LLC
Agreement shall contain such patent and trademark marking(s) as Membrex, in its
sole discretion, may determine, by written notice to CDC, are reasonable
necessary or desirable. The Products, Disposables and Membranes which are
manufactured by or for CDC and which bear, are sold under, incorporate, or
otherwise utilize any TRADEMARKS or licensed patents of Membrex shall be of
substantially the same quality as are presently being manufactured by
Membrex.
The parties acknowledge that Membrex will have sufficient
control over and right to inspect the particular Products and Disposables which
will be manufactured by or for and/or sold by CDC hereunder to permit Membrex
to assure itself of the quality of the goods and that proper patent and
trademark markings are being applied. CDC shall submit for inspection and
approval by Membrex a representative sample of each type of Product and/or
Disposable which CDC desires to manufacture, have manufactured, sell or lease
and unless Membrex informs CDC of its disapproval in writing within ten (10)
business days after the receipt by Membrex of such sample, Membrex will be
deemed to have consented. Once Membrex has consented with respect to a type of
Product or Disposable, CDC shall not in any way alter the design of or patent
or trademark markings on that Product or Disposable without Membrex's further
consent.
Section 14: Force Majeure
Neither party shall be liable for damages due to delay or failure to
perform any obligation under this Agreement (other than payment of money) if
such delay or failure results directly or indirectly from circumstances beyond
the reasonable control of such party. Such circumstances shall include but
shall not be limited to acts of God, acts of war, civil commotions, riots,
strikes, lockouts or other labor disturbances, accident, fire, water damage,
flood or other natural catastrophe. Any party affected by a condition of Force
Majeure shall use reasonable efforts to remedy such conditions to enable itself
to resume performance, except that no party shall be obligated to settle a
strike, lockout or other labor disturbance on terms other than at its complete
discretion.
Notwithstanding the foregoing, in the event that Membrex fails to
perform any of its obligations under this Agreement for any of the reasons set
forth in this Section, Membrex shall immediately notify CDC in writing of
Membrex's failure to perform. After such immediate written notification or
after notification by CDC to Membrex, whichever is sooner, Membrex shall be
entitled to one hundred and eighty (180) days to cure its failure to perform.
In the event that Membrex has not cured its failure to perform in this one
hundred and eighty (180) day period, CDC shall then be entitled to exercise its
rights pursuant to Section 3. CDC may also begin to manufacture Membranes for
use in the Product and Disposables only if Membrex fails to cure any non-
performance to supply Membranes within 180 days when such non-performance
begins. In the event that Membrex is again able to supply Membrane, CDC will
immediately stop manufacturing Membrane and again purchase Membrane from
Membrex.
Section 15: Miscellaneous
This Agreement shall be construed in accordance with the laws of the
State of Delaware without reference to its conflicts of laws provisions. If
any provisions of this Agreement are or shall come into conflict with the laws
or regulations of any jurisdiction or any governmental entity having
jurisdiction over the parties or this Agreement, those provisions shall be
deemed automatically deleted, if such deletion is allowed by relevant law,
and the remaining terms and conditions of this Agreement shall remain in full
force and effect. If such a deletion is not so allowed or if such a deletion
leaves terms clearly illogical or inappropriate in effect, the parties agree to
substitute new terms similar in effect to the present terms of this Agreement
as may be allowed under the applicable laws and regulations.
Section 16: Notices
Any notices required to be given pursuant to the provisions of this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the time when actually received as a consequence of any effective
method of delivery, including but not limited to hand delivery, transmission by
telefax, or delivery by a professional courier service or the time when sent by
certified or registered mail addressed to the party for whom intended at the
address below or at such changed address as the party shall have specified by
written notice, provided that any notice of change of address shall be
effective only upon actual receipt.
(a) Clearwater Diagnostics Company, LLC
Attention: Manager Attention: President
56 Evergreen Drive and 155 Route 46 West
Portland, Maine 04103 Fairfield, NJ 07004
(b) Membrex, Inc.
155 Route 46 West
Fairfield, NJ 07004
Section 17: Arbitration
In the event a dispute, claim or controversy shall arise between the
Parties with respect to any provision of this Agreement, or the interpretation
of performance hereof or thereof, and such is declared by written notice from
one party to the other, the Parties agree to negotiate in good faith toward
resolution of the dispute. If such dispute cannot be resolved within a period
of thirty (30) days after such notice is given, either party may submit the
dispute to arbitration. Such dispute shall be settled by arbitration under the
laws of the State of Delaware, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA"). In rendering its
decision, the arbitration tribunal shall apply the substantive laws of the
State of Delaware and interpret this Agreement in accordance with its terms.
The determination of the arbitration tribunal shall be conclusive and binding
upon the Parties hereto. The dispute will be decided by a panel of three
arbitrators to be appointed as provided in Section 13 of the AAA Commercial
Arbitration Rules.
The award of the arbitration tribunal may be, alternatively or
cumulatively, for monetary damages, an order requiring the performance of non-
monetary obligations (including specific performance) or any other appropriate
order or remedy. The arbitrators may issue interim awards and order any
provisions or measures which should be taken to preserve the respective right
of either party. The decision of the arbitrators may be enforced in any
tribunal of competent jurisdiction.
Each party shall bear its own costs and expenses of the arbitration,
and the Parties shall share equally the cost of the arbitrators; provided that
any party instituting a claim or providing a defense under this Section which
the tribunal shall declare to be frivolous shall pay all costs and expenses,
including attorney's fees and costs, incurred in connection with such
arbitration.
The arbitration procedure herein shall be the exclusive remedy
available to the Parties hereunder to resolve any dispute, claim or controversy
arising hereunder.
Section 18: Integration.
This Agreement constitutes the full understanding between the parties
with reference to the subject matter hereof, and no statements or agreements by
or between the parties, whether orally or in writing, except as provided for
elsewhere herein, made prior to or at the signing hereof, shall vary or modify
the written terms of this Agreement. Neither party shall claim any amendment,
modification, or release from any provisions of the Agreement by mutual
agreement, acknowledgment, or otherwise, unless such mutual agreement is in
writing, signed by the other party and specifically states that it is an
amendment to this Agreement.
IN WITNESS THEREOF, the parties hereto have duly executed this Agreement on the
dates indicated below.
Clearwater Diagnostics Company, LLC
By: /s/: Malcolm R. Kahn, /s/: Thomas C. Hatch, its Managers.
Date: 9/17/96 :
Membrex Corporation
By: /s/: Malcolm R. Kahn, its President.
Date: 9/17/96 :
