UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
0-15507
(Commission file number)
IMMUCELL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 01-0382980
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
56 EVERGREEN DRIVE, PORTLAND, MAINE 04103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (207) 878-2770
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act: Common Stock par
value $.10 per share
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the Common Stock held by non-affiliates of the
Registrant at March 20, 2000 was approximately $14,300,000.
The number of shares of the Registrant's Common Stock outstanding at March 20,
2000 was 2,616,684.
Documents incorporated by reference: Portions of the Registrant's 2000 Proxy
Statement to be filed in connection with the Annual Meeting of shareholders are
Incorporated by reference to Part iii hereof.
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. Business .............................................1
ITEM 2. Properties............................................7
ITEM 3. Legal Proceedings.....................................7
ITEM 4. Submission of Matters to a Vote of Security Holders...7
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters...............................................7
ITEM 6. Selected Financial Data...............................7
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................8
ITEM 8. Financial Statements and Supplementary Data..........12
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.............................12
PART III
ITEM 10. Directors and Executive Officers of the Registrant 12
ITEM 11. Executive Compensation 13
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 13
ITEM 13. Certain Relationships and Related Transactions.......13
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K 13
SIGNATURES
<PAGE>
PART I
ITEM 1 - BUSINESS
General
ImmuCell Corporation (the "Company") is a biotechnology company striving
to build shareholder value by commercializing proprietary technologies and
helping dairy and beef producers and their veterinarians manage disease and
reproduction in their herds. Engaged principally in the development of
animal health products to expand its commercialized line of products for use
by dairy and beef producers, the Company is also conducting a Phase I/II
clinical trial of DiffGAM bovine anti-Clostridium difficile immunoglobulins,
a human application of its milk-derived passive antibody technology, for use
as an alternative to antibiotics in the treatment of a gastrointestinal
infection. In addition, the Company is marketing Crypto-Scan , a diagnostic
test that detects Cryptosporidium in drinking-water supplies world-wide.
From its inception in 1982, the Company has engaged in the research and
development of both infectious disease diagnostic tests and products for
therapeutic and preventive uses against certain infectious diseases in
animals and humans. Beginning in 1996, the Company diversified its product
development pipeline in two significant ways. First, the Company utilized
the knowledge gained developing a product to treat a gastrointestinal
infection caused by Cryptosporidium parvum to develop a method to detect the
presence of this dangerous parasite in drinking-water supplies. Secondly,
the Company utilized both its expertise in purifying proteins from cows' milk
and its exclusive world-wide license to certain purification technology to
develop a process to purify milk proteins derived from cheese whey for
nutritional applications. Since 1998, the Company has focused the majority of
its product development efforts on the animal health industry.
Research and development expenditures amounted to 17% and 23% of total
revenues in 1999 and 1998, respectively. Internally funded research and
development expenditures (those expenditures not supported by outside sources
of funding such as grant income) amounted to 13% and 17% of product sales in
1999 and 1998, respectively. Going forward in 2000 and beyond, the Company
intends to maintain internally funded research and development expenditures
near to 13% of product sales, which should result in continued profitability
provided that product sales do not decline. The Company intends to actively
pursue external financing for its research and development efforts through
licensing arrangements with corporate partners and funding from government
grants. As product sales increase, the Company can both reduce this ratio
and increase the absolute dollar value of the investment in product
development without jeopardizing the objective of recording continuing and
increasing net operating profits.
Animal Health Products for the Dairy and Beef Industry
On December 30, 1999, the Company acquired rights to the product, Wipe
Out<TM> Dairy Wipes, and certain other related rights from AMBI Inc. of
Purchase, New York. The transaction included the purchase of certain
equipment, trademarks and a license of intellectual property for an aggregate
of $359,000. The Company also acquired approximately $173,000 of product
inventory. The Wipe Out product consists of pre-moistened towelettes that
are impregnated with nisin to clean, sanitize and dry the teat area of a cow
in advance of milking. Nisin is a natural antibacterial protein that has
been demonstrated in clinical studies to be an effective aid in the reduction
of disease-causing organisms in dairy cows. The use of nisin for such
applications is covered by five issued patents that were licensed by AMBI to
the Company.
In December 1999, the Company obtained approval from the U.S. Department
of Agriculture ("USDA") to sell Tip-Test<TM> Johne's, which is a rapid
immunodiagnostic test for the detection of Johne's disease, a chronic
intestinal infection of cattle caused by Mycobacterium paratuberculosis.
This highly sensitive product delivers on-site results from a blood or serum
sample in about twenty minutes, which is a significant advantage to the dairy
producer in comparison to the existing diagnostic technology that is
performed only in certified veterinary diagnostic laboratories (which is a
more time consuming and expensive process). Before sales can be initiated in
any state, the USDA approval is subject to the further approval of each state
veterinarian. The Company has obtained the necessary state approval in many
states and is proceeding with obtaining the necessary approvals throughout
the U.S. market. The test format used for this test is the subject of an
exclusive, world-wide license from a third party, which license also covers
the format's use by the Company for five additional bovine applications.
In 1991, the Company obtained approval from the USDA to sell First
Defense
, which is manufactured by the Company from cows' colostrum using
the Company's proprietary vaccine and milk protein purification technologies.
Currently, First Defense is the only USDA-licensed, bivalent (effective in
combating two different infectious agents) scours preventive product on the
market. The target disease, "calf scours", is seasonal, with the highest
incidence in the winter calving months. This diarrheal disease causes
dehydration in newborn calves and often leads to serious sickness and even
death.
In 1988, the Company obtained an exclusive world-wide license to
purchase from Kamar, Inc. of Steamboat Springs, Colorado and to market and
sell an animal health care product known as the Kamar
Heatmount
Detector. This product is used to detect the physical mounting of bovines
for the determination of standing heat, and is sold primarily to dairy farmers.
In June 1998, the Company entered into a renewal of its service and license
agreement effective through December 31, 2003 with Kamar whereby Kamar will
continue to provide the Company warehousing, distribution and certain other
services and the Company will continue to market the Kamar Heatmount Detector
under the exclusive world-wide license. The renewal agreement continues to
be cancelable by either party upon twelve months written notice.
The Company also markets the following two animal health products: 1)
RPT
and Accufirm
, trade names for a milk progesterone test used by
dairy farmers to monitor the reproductive status of their cows and 2) RJT<TM>,
used in the detection of Mycobacterium paratuberculosis infections (Johne's
Disease) in cattle. Sales of these products have been limited since their
commercial introductions. The sales and sales growth potential for these
products in the future are not expected to be significant.
Commercialization of Milk Protein Purification Technology for Nutritional
Applications
Underlying the Company's milk antibody products for human and animal
health applications is a certain expertise developed by the Company to
process and purify milk proteins. To capitalize on this expertise, in 1996
the Company formed a joint venture with Agri-Mark Inc. of Methuen,
Massachusetts known as AgriCell Company, LLC to produce and sell a
nutritional protein derived from cheese whey, known as lactoferrin.
Lactoferrin is an iron-binding protein that, among several applications, can
be used in infant formula, nutritional applications and certain cosmetics.
The Company licensed certain rights to a patented purification system, to
which the Company holds an exclusive world-wide license from Advanced
Separations Technologies, Inc. ("AST") for all milk and whey protein
applications, to AgriCell for use in the production of lactoferrin. In 1997,
AgriCell commissioned a 6,800 square foot production facility at Agri-Mark's
cheese plant in Middlebury, Vermont which was subsequently approved by the
USDA, allowing the commercial production of lactoferrin to be initiated.
Initial sales of lactoferrin have been extremely limited. The primary
markets for this product at this time are in Asia, and sales have been
negatively impacted by reduced demand from Asian customers.
The Company has a 50% ownership interest in this joint venture and is
entitled to 50% of the joint venture's profits from the sale of lactoferrin
after Agri-Mark has obtained the return of an amount equal to its invested
capital. Agri-Mark has funded a capital investment by AgriCell in excess of
$1,000,000 principally in working capital, fixed assets and production
facility modifications, and Agri-Mark is entitled to a 90% priority return
until it obtains the return of an amount equal to this invested capital.
Additionally, Agri-Mark has the right to utilize the Company's technology to
produce and sell whey protein isolate from Agri-Mark's Vermont cheese whey
source. The Company is entitled to a royalty on any such sales.
In November 1997, the Company licensed certain rights to the same
patented protein purification system described above to Murray Goulburn Co-
operative Co., Limited of Australia for the production of whey protein
isolate and certain other milk proteins (excluding high purity lactoferrin).
In consideration for the license, the Company received a $250,000 payment in
1997 and is entitled to a royalty on the sales of whey protein isolate and
any other milk proteins manufactured under this license. Murray Goulburn has
launched commercial sales of whey protein isolate, and royalties are expected
to begin to be earned by the Company in 2000.
To extend the term of the exclusive license covering the patented milk
and whey protein purification system from AST to June 30, 2002, the Company
and its partners must purchase another purification system from AST by
December 31, 2000. The license from AST can then be extended by up to three
more one year periods to as far as June 30, 2005. The purchase of an
additional purification system before the license expires is required to
extend the license for each of these additional one year terms. The purchase
of one additional purification system by June 30, 2005 would further extend
the license term by an additional six month term to December 31, 2005.
Product to Detect Pathogens in Drinking Water
The Crypto-Scan
water diagnostic test has been developed to capitalize
on certain scientific knowledge gained under the Company's CryptoGAM research
program described below. In 1996, the Company formed a joint venture with
Membrex, Inc. to commercialize the combination of certain immunomagnetic
separation ("IMS") technology developed by the Company with certain
concentration technology owned by Membrex into a diagnostic test to detect
Cryptosporidium parvum oocysts and other microorganisms in water. In 1998,
Membrex was acquired by Osmonics, Inc., and subsequently the joint venture
was dissolved. Simultaneously with the dissolution of the joint venture, the
relevant technology (that had been previously licensed to the joint venture)
was licensed directly to the Company, subject to a royalty obligation payable
to Osmonics. The license agreement covering the Osmonics concentration
technology was terminated in March 2000. The Company is continuing to market
its IMS technology under the Crypto-Scan
brand name.
Initial and limited sales of Crypto-Scan began in 1997. During 1997,
the Company entered into a distribution agreement with Adreck Marketing
Limited covering sales in the United Kingdom. Initial sales in the U.K. have
been limited as the Company is working to gain access to the market through
the applicable U.K. regulatory authorities. Sales of Crypto-Scan are not
expected to be significant until and unless the product is approved by the
applicable U.K. regulatory authority. The Company currently expects to
complete the required validation study by April 30, 2000. Sales in the U.S.
market would be influenced significantly by the U.S. Environmental Protection
Agency.
Milk Antibody Product Under Development For Humans
DiffGAM{ }bovine anti-Clostridium difficile immunoglobulins is a bovine-
derived specific polyclonal antibody product under clinical development,
which is subject to approval by the U.S. Food and Drug Administration ("FDA")
before sales can be initiated. DiffGAM is intended to prevent and/or treat
Clostridium difficile-associated diarrhea ("CDAD") that is caused by toxin-
producing Clostridium difficile. DiffGAM is intended to neutralize the
toxins produced by Clostridium difficile in the colons of affected patients.
CDAD is caused most frequently by the use of broad spectrum oral antibiotics,
which kill bacteria in the colon that normally inhibit the proliferation of
Clostridium difficile. When Clostridium difficile then proliferates,
producing toxins that cause disease, the standard treatment is to use oral
antibiotics specific for Clostridium difficile. This multi-antibiotic
treatment approach can lead to high rates of relapse and the development of
antibiotic resistance. The Company believes that DiffGAM may provide a safe
alternative to the current methods used to treat CDAD.
The Company has developed a proprietary formulation to deliver active
antibodies to the lower gastrointestinal tract, the site of Clostridium
difficile infections. The Company believes that this formulation is central
to the effectiveness of DiffGAM. Using its proprietary milk protein
purification technology, the Company has developed methods for the production
of commercial quantities of pathogen specific antibodies from cows' milk.
The Company's milk protein purification technology, which is directed toward
the efficient production and formulation of antibodies used to prevent and/or
treat gastrointestinal infections, is used to manufacture DiffGAM and the
Company's commercialized animal health product, First Defense
.
Unlike First Defense which is produced from the colostrum (or "first
milk") of hyper-immunized cows, DiffGAM is produced from the milk of hyper-
immunized cows. Although antibody concentrations are much higher in
colostrum, more total antibodies are available from the balance of the
lactation cycle. Specifically, colostrum contains less than 20% of the total
antibodies produced by a cow during the entire lactation cycle. For this
reason, the Company has developed a purification process that allows the
Company to harvest antibodies from a cow's entire lactation cycle, as opposed
to only from the colostrum. The Company believes this milk purification
process may create a significant product cost advantage.
Under an Investigational New Drug ("IND") application filed with the FDA
in March 1997, a clinical trial was conducted in mid-1997 demonstrating the
safety of DiffGAM and the colonic bioavailability of the current oral
formulation of the product. The Company expects to complete a multi-site
Phase I/II clinical trial of this product in the first quarter of 2000. The
principal objective of this trial is to assess the safety and preliminary
effectiveness of DiffGAM in the treatment of established CDAD. Contingent
upon positive clinical trial results, the Company intends to seek a partner
to fund further development activities in exchange for marketing rights to
the product. The Company would expect to benefit from a manufacturing and
supply arrangement with such a partner. The Company does not intend to
internally fund this product development.
Clinical development of a second product, TravelGAM bovine anti-E. coli
immunoglobulins, was discontinued in 1998. TravelGAM was intended to prevent
diarrhea caused by enterotoxigenic E. coli (commonly known as Travelers'
Diarrhea). Further development of this product was discontinued principally
due to the lack of a detectible treatment effect in field trials despite the
more positive results from earlier hospital-based trials.
Clinical development of a third product, CryptoGAM bovine anti-
Cryptosporidium immunoglobulins, was discontinued in 1997. CryptoGAM was
intended to treat chronic, life-threatening diarrhea (known as
cryptosporidiosis) in AIDS patients. The decision to discontinue development
was made principally because the targeted patient population for the product
had materially decreased due to the positive impact of new drug therapies on
AIDS patients.
The Company has obtained four Phase I and three Phase II Small Business
Innovation Research grants from the National Institutes of Health to support
the development of milk antibody products to prevent gastrointestinal
infections in humans. The value of these grants has aggregated approximately
$1,891,000 since 1990, $162,000 of which was recognized in 1999 and $66,000
of which is expected to be recognized in 2000.
Other Products
As an extension of its expertise with infectious diseases and subject to
a royalty bearing license payable to a third party, the Company manufactures
and sells specific antibody-based reagents used for the diagnosis of Group A
streptococcal infections, a bacterial infection which causes "strep throat".
Sales of these reagents have declined significantly in recent years and are
not expected to be a primary focus of the Company's commercial business going
forward.
While the Company continues its efforts with internally and externally
funded product development programs, the Company is also actively seeking to
acquire new products and technologies.
Marketing and Sales
The Company engages in the direct marketing and sales of its products
principally through its wholly-owned marketing subsidiary, the Kamar
Marketing Group, Inc. The manner in which the Company's products are
marketed and distributed depends in large measure upon the nature of the
particular product, its intended users and the country where it is sold. The
distribution channel selected is intended to address the particular
characteristics of the marketplace for a given product. First Defense
is
primarily sold through major veterinarian distributors, and the Kamar
Heatmount
Detector is sold through bovine semen distributors and farm supply
retailers. Separate agreements have been entered into for sales through
these distribution channels. The Company sells Tip-Test<TM>: Johne's to bovine
veterinarians, and Wipe Out<TM> Dairy Wipes are sold directly to the dairy
producer.
Foreign Sales
Foreign product sales represented approximately 24%, 25% and 28% of the
Company's total product sales for the years ended December 31, 1999, 1998 and
1997, respectively. The majority of these foreign sales were to European
countries, Australia, New Zealand and Canada. It is anticipated that a
significant amount of the Company's future sales will continue to be made
outside of the United States.
The Company currently prices most of its products in United States
dollars. An increase in the value of the dollar in any foreign country in
which the Company's products are sold may have the effect of increasing the
local price of such products, thereby leading to a reduction in demand.
Price adjustments have been made on occasion to mitigate these effects. Such
a negative impact of the strong U.S. dollar was experienced in sales to
Pacific rim countries in 1998 and 1999. On the other hand, to the extent
that the value of the dollar may decline with respect to a foreign currency,
the Company's competitive position may be enhanced.
Research and Development
Beginning in 1998, the Company shifted the primary focus of its research
and development efforts to products for the animal health industry. This
focus continued in 1999 and is expected to continue in 2000. To expand its
commercialized line of products for use by dairy and beef producers, the
Company has invested in the development of new diagnostic products leveraging
the Company's experience with infectious diseases. The Company has also
initiated early stage development programs of certain vaccine and disease
preventive products. The Company maintains relationships with several
scientific advisors that have particular expertise in the areas targeted by
the Company.
The Company's research and development activities are conducted
internally and through contracts with third parties depending upon the
availability of staff, the technical skills required, the nature of the
particular project and other considerations. As additional opportunities to
commercialize the Company's technology become apparent, the Company may begin
new research and development projects. The Company spent approximately
$813,000, $1,013,000 and $1,068,000 on research and development activities
during the years ended December 31, 1999, 1998 and 1997, respectively. These
expenditures were in part supported by grant income totaling approximately
$187,000, $282,000 and $249,000 during the years ended December 31, 1999,
1998 and 1997, respectively.
Competition
The Company's competition in the animal and human health care markets
includes other biotechnology companies, major pharmaceutical firms and food
and chemical companies. Many of these competitors have substantially greater
financial, marketing, manufacturing and human resources and more extensive
research and development facilities than the Company. Many of these
competitors may develop technologies and/or products which are superior to
those of the Company, or may be more successful in developing production
capability or in obtaining certain regulatory approvals. The Company
believes that First Defense
offers two significant competitive advantages
over other products in the market: 1) its capsule form, which does not
require refrigeration and provides ease of administration and 2) competitive
products currently on the market provide protection only against the leading
cause of calf scours, while First Defense provides this protection and
additional protection against the second leading cause of the disease.
Recently, competitive companies have introduced products similar to the
Kamar
Heatmount
Detector. The success of these products could reduce
sales of the Company's product. GelTex Pharmaceuticals Inc.,
Ophidian Pharmaceuticals Inc., Peptide Therapeutics Group plc and Synsorb
Biotech Inc. are developing products to prevent and/or treat Clostridium
difficile-associated diarrhea. Dynal, Inc., Genera Technologies, Ltd and Hach
Company market competitive immunomagnetic separation products for use in
the detection of Cryptosporidum in drinking water.
The Company believes that its competitive position will be highly
influenced by its ability to attract and retain key scientific and managerial
personnel, to develop proprietary technologies and products, to obtain USDA
or FDA approval for new products, to continue to profitably sell its current
products and to raise adequate levels of capital to fund its activities.
The Company believes that supplies and raw materials for the production
of its products are readily available from a number of vendors and farms. It
is the Company's policy to maintain several sources of supply for the
components used in the Company's products.
The Company currently competes on the basis of product performance,
price and distribution capability. The Company continues to monitor its
network of independent distributors to maintain its competitive position.
Patents and Proprietary Information
In 1998, the Company was issued two patents from the U.S. Patent and
Trademark Office. The first, which issued under U.S. Patent No. 5,747,031,
covers certain aspects of the Company's proprietary manufacturing process to
separate antibodies from cows' milk used in the production of DiffGAM. The
second, which issued under U.S. Patent No. 5,789,190, covers certain aspects
of the method used to detect Cryptosporidium parvum in drinking-water
supplies. In March 1999, the Company was issued U.S. Patent No. 5,888,748
covering a different aspect of this water test. In January 2000, the Company
received notice of allowance for a patent application covering the method of
formulation responsible for colonic delivery in DiffGAM and for other
proteins. Going forward, the Company may file additional patent applications
for certain products under development. There can be no assurance that
patents will be issued with respect to any pending or future applications.
The Company has licensed the right to use certain milk purification
technology for the processing of immunoglobulins, which technology is the
subject matter of one or more patents owned or controlled by the Wisconsin
Alumni Research Foundation. The Company has also licensed exclusively the
right to use a purification system to manufacture proteins from cows' milk,
which is the subject matter of one or more patents owned or controlled by
Advanced Separations Technologies, Inc., which company was acquired by Calgon
Carbon Corporation in 1997. In connection with the acquisition of the
product, Wipe Out<TM>, the Company licensed rights to several patents covering
the use of nisin as a teat wipe to prevent bovine infections as well as
certain proprietary know-how used in the production of nisin from AMBI Inc.
The format used in the Tip-Test<TM> on-site diagnostic product line is the
subject of at least one issued patent to Hydros Inc. to which the Company has
licensed rights. The Company has also licensed exclusively rights to certain
cloned antigens of Cryptosporidium parvum from the Regents of the University
of California, for which two U.S. patents have been issued to the Regents.
This license covers vaccine product applications for animals and was
sublicensed by the Company exclusively to AgriVax Inc. in 1999 in return for
a royalty on any product sales.
In 1999, the Company obtained an exclusive license for pharmaceutical
applications to U.S. Patent No. 5,773,000 entitled "Therapeutic Treatment of
Clostridium difficile Associated Diseases" from GalaGen, Inc. In connection
with this license, the Company agreed to pay GalaGen a royalty on any related
product sales. The Company also granted GalaGen an option to exclusively
license the Company's milk protein purification technology for the
purification of immunoglobulins. To exercise this option, GalaGen is
required to purchase a certain milk purification system from AST by December
1, 2000 to extend the Company's exclusive license from AST. The Company
would receive a royalty on any related product sales achieved by GalaGen.
In some cases, the Company has chosen and may choose in the future not
to seek patent protection for certain products or processes. Instead, the
Company has sought and may seek in the future to maintain the confidentiality
of any relevant proprietary technology. Reliance upon trade secret, rather
than patent protection, may cause the Company to be vulnerable to competitors
who successfully replicate the Company's manufacturing techniques and
processes. Additionally, there can be no assurance that others may not
independently develop similar trade secrets or technology or obtain access to
the Company's unpatented trade secrets or proprietary technology. All of the
Company's employees are required to execute nondisclosure and invention
assignment agreements designed to protect the Company's rights in its
proprietary products.
Other companies may have filed patent applications and may have been
issued patents involving products or technologies potentially useful to the
Company or necessary for the Company to commercialize its products or achieve
its business goals. There can be no assurance that the Company will be able
to obtain licenses to such patents on terms acceptable to the Company.
Trademarks
The Company has registered certain trademarks with the U.S. Patent and
Trademark Office in connection with the marketing of its products. The
Company has obtained registration of the following trademarks: First
Defense
, for one of its animal health products, Crypto-Scan
for its
water diagnostic test and RPT
and Accufirm
, for its progesterone
test. The Company has applied for federal trademark registration for the
Tip-Test<TM> on-site diagnostic product line and for RJT<TM> Mycobacterium
paratuberculosis diagnostic product. In December 1999, the Company purchased
the federal trademark application for Wipe Out<TM> and related design and
the registered trademark, the "One Step Cow Prep
". The Company has
received notice of allowance for the Wipe Out mark.
Government Regulation
The manufacture and sale of some of the Company's animal health care
products within the United States is regulated by the USDA. The manufacture
and marketing of disease treatment and prevention products for human medical
applications and certain animal health products within the United States is
subject to regulation by the FDA. Comparable agencies exist in foreign
countries and foreign sales of the Company's products will be subject to
regulation by such agencies. Many states (including Maine where the Company's
facilities are located) have laws regulating the production, sale,
distribution or use of biological products, and the Company may have to
obtain approvals from regulatory authorities in states in which it proposes
to sell its products. Depending upon the product and its applications,
obtaining USDA and other regulatory approvals may be a relatively brief and
inexpensive procedure or it may involve extensive clinical tests, incurring
significant expenses and an approval process of several years' duration.
The Company has received USDA approval for Tip-Test: Johne's (its on-
site Johne's disease diagnostic test), First Defense (its scours preventive
product) and RJT (its Johne's disease diagnostic test). DiffGAM (to prevent
Clostridium difficile-associated diarrhea) is in an FDA Phase I/II clinical
trial under an approved Investigational New Drug application. Regulatory
approval from the Drinking Water Inspectorate in the United Kingdom is
required before the Company can expect to realize significant sales of
Crypto-Scan in that country. The Company believes that it is in compliance
with current regulatory requirements relating to the Company's business and
products.
Product Liability
The manufacture and marketing of certain of the Company's products
entails a risk of product liability. The Company's current exposure to
product liability is mitigated to some extent by the fact that the Company's
current products have heretofore been principally directed towards the animal
health care market. The Company has maintained product liability insurance
in an amount which it believes is adequate to cover its potential exposure in
this area.
Employees
The Company and its wholly-owned subsidiary, the Kamar Marketing Group,
Inc., currently employ approximately twenty-two employees, including two
part-time employees. The full-time equivalent of approximately nine and one-
half employees are engaged in manufacturing operations, five in research and
development activities, three in finance and administration and three and
one-half in marketing and sales. The manufacturing personnel is utilized, as
needed, in the production of clinical material for use in research and
development. The Company is not a party to any collective bargaining
agreement and considers its employee relations to be excellent.
ITEM 2 - PROPERTIES
The Company owns a 10,000 square foot building at 56 Evergreen Drive in
Portland, Maine. The Company currently uses this space for substantially all
of its office, laboratory and manufacturing needs. Given the increased
demands on the Company's manufacturing facility resulting from increased
sales of First Defense
and the introduction of a new product, Tip-Test<TM>:
Johne's, the Company is planning an expansion of approximately 6,000 square
feet to its building in 2000, which expansion is estimated to cost
approximately $400,000.
The Company also maintains access to certain animals, primarily cows,
through contractual relationships with several farms.
ITEM 3 - LEGAL PROCEEDINGS
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock trades on The Nasdaq SmallCap Market tier of
The Nasdaq Stock Market under the symbol: ICCC. No dividends have been
declared or paid on the common stock since its inception, and the Company
does not contemplate the payment of cash dividends in the foreseeable future.
The following table sets forth the high and low sales price information
for the Company's common stock as reported by The Nasdaq Stock Market during
the period January 1, 1998 through December 31, 1999:
<TABLE>
<CAPTION>
1999 1998
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High $1.75 $1.63 $2.00 $2.63 $2.75 $2.50 $2.63 $2.13
Low $1.06 $1.00 $1.25 $1.50 $1.94 $1.75 $1.00 $1.25
</TABLE>
Such market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission. As of March 20, 2000, the Company had
8,000,000 common shares authorized and 2,616,684 common shares outstanding,
and there were approximately 1,400 shareholders of record. The last sales
price of the Company's common stock on March 20, 2000 was $5.75 as quoted on
The Nasdaq Stock Market.
ITEM 6 - SELECTED FINANCIAL DATA
The selected financial data set forth below has been derived from the
audited financial statements of the Company. The information should be read
in conjunction with the audited financial statements and related notes
appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total Revenues $4,909,245 $4,481,867 $4,556,678 $4,440,188 $4,937,529
Product Sales 4,722,374 4,199,851 3,982,798 4,054,191 4,350,340
Research & Development
Expenses 812,892 1,012,813 1,068,069 1,291,043 1,578,145
Net Profit (Loss) 550,843 (102,518) 263,852 (66,202) 29,811
Per Common Share:
Basic Net Profit (Loss) 0.23 (0.04) 0.11 (0.03) 0.01
Diluted Net Profit (Loss) 0.22 (0.04) 0.10 (0.03) 0.01
Stockholders' Equity 1.15 0.93 0.96 0.81 0.83
Cash Dividend -- -- -- -- --
Balance Sheet Data:
Total Assets 3,855,979 3,144,847 3,231,050 3,131,399 3,234,426
Cash, Cash Equivalents
and Short term
Investments 1,823,689 1,538,905 1,021,324 1,044,441 1,550,011
Current Liabilities 605,923 443,902 561,795 684,163 720,767
Net Working Capital 2,219,386 1,866,222 1,642,363 1,405,099 1,849,580
Long-Term Debt
Obligations 434,658 453,349 339,747 570,022 608,343
Stockholders' Equity $2,815,398 $2,247,596 $2,329,508 $1,877,214 $1,905,316
</TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Fiscal 1999 Compared to Fiscal 1998
Total revenues for the year ended December 31, 1999 of $4,909,000
increased by $427,000 (10%) from $4,482,000 in 1998. Product sales for the
year ended December 31, 1999 of $4,722,000 were $523,000 (12%) more than the
product sales recorded in 1998. Product selling prices have generally
increased in line with inflation. Grant income decreased by $95,000 (34%) to
$187,000 in 1999.
Aggregate sales of First Defense
and the Kamar
Heatmount
Detector totaled approximately $4,517,000 (96% of total product sales) for
the year ended December 31, 1999 as compared to approximately $3,984,000 (95% of
total product sales) for the year ended December 31, 1998. The sales of
First Defense are seasonal with highest sales expected in the winter months.
Sales of First Defense increased by 25% in the fourth quarter of 1999 as
compared to the fourth quarter of 1998. While this significant increase in
sales is a positive indication for the product in the long term, the
resulting unexpected reduction in product inventory levels caused by the
sudden increase in sales volume has created a backlog during the first quarter
of 2000. The Company estimates that such backlog may amount to approximately
$250,000.
Grant income decreased to approximately $187,000 (4% of total revenues)
in 1999 as compared to $282,000 (6% of total revenues) in 1998. In October
1997, the Company was awarded approximately $710,000 under a two-year federal
research grant to partially fund the Company's efforts to develop a product
to prevent Travelers' Diarrhea. In 1998, the remaining funding then
available under this grant was reallocated to the development of DiffGAM.
During 1999, the term of this grant was extended by one year. Approximately
$162,000 and $282,000 in grant income was recognized under this grant in 1999
and 1998, respectively. Grant income in 1999 also included approximately
$25,000 from the State of Maine partially funding early stage research of a
bovine vaccine technology.
Interest income exceeded interest expense by approximately $33,000 and
$20,000 in 1999 and 1998, respectively. Interest expense was incurred in both
years on the Company's outstanding bank debt. The Company's share of the
loss in the equity of its joint venture (AgriCell Company, LLC) aggregated
$97,000 and $123,000 in 1999 and 1998, respectively. The Company's joint
venture loss was principally caused by the limited sales of lactoferrin due
to the financial crisis in Asia, the primary market for this product. As of
December 31, 1999, the investment in this joint venture asset was completely
written off. While the operations of the joint venture are ongoing, any
further losses incurred by the joint venture will have no impact on the
Company's financial statements. Such losses could be carried forward to
reduce any future taxable income distributed to the Company by the joint
venture.
Product costs amounted to 46% of product sales in 1999 as compared to
48% in 1998. Internally developed products tend to have higher gross margin
percentages than licensed-in products. Some deterioration of the gross
margin percentage is anticipated as new products are developed and acquired.
Over time, as these products are fully integrated into the Company's
manufacturing and marketing operations, the Company expects to be able to
improve the gross margin percentage. The Company expects product costs as a
percentage of product sales to increase in 2000 as the Company begins to
record sales of Wipe Out<TM> Dairy Wipes, a new product that was acquired by
the Company on December 30, 1999. At this stage in the Company's development,
management is focusing on growing the absolute dollar value of the gross
margin on product sales.
The Company decreased its expenditures for research and development to
approximately $813,000 in 1999 as compared to $1,013,000 in 1998. Research
and development expenses aggregated 17% and 23% of total revenues in 1999 and
1998, respectively. Research and development expenses exceeded grant income
by approximately $626,000 in 1999 and by $731,000 in 1998. These "net"
research and development expenses were reduced to 13% of product sales in
1999 from 17% of product sales in 1998. During 1998, the Company shifted the
primary focus of its research and development efforts to products for the
animal health industry. To expand its commercialized line of products for
use by dairy and beef producers, the Company has invested in the development
of new diagnostic products leveraging the Company's experience with
infectious diseases. The Company has also initiated early stage development
programs of certain vaccine and disease preventive products. The Company has
one product, DiffGAM, in human clinical trials to prevent and treat
Clostridium difficile-associated diarrhea. However, for clinical development
to proceed into more expensive Phase II and III trials, a partner would be
required. The Company has also invested in the development of a test
intended to detect the presence of Cryptosporidium parvum in drinking water.
Sales and marketing expenses increased by approximately $73,000 (9%)
to $890,000 in 1999, aggregating 19% of product sales in 1999 and 1998. The
Company continues to leverage its small sales force through wholesale
distribution channels. General and administrative expenses were
approximately $439,000 in 1999 as compared to $637,000 in 1998. This decrease
was due principally to the reduction in payroll resulting from the
resignation of the Company's former President at the end of 1998. General
and administrative expenses in 1998 included the accrual of severance costs
associated with that resignation. The Company has continued its efforts to
control its general and administrative expenses while incurring all the
necessary expenses associated with being a publicly held company.
Fiscal 1998 Compared to Fiscal 1997
Total revenues for the year ended December 31, 1998 of $4,482,000
decreased by $75,000 (2%) from $4,557,000 in 1997. Product sales for the
year ended December 31, 1998 of $4,200,000 were $217,000 (5%) more than the
product sales recorded in 1997. Product selling prices have generally
increased in line with inflation. Other revenues, comprised of technology
licensing income and grant income decreased to $282,000 in 1998 from $574,000
in 1997.
Aggregate sales of First Defense
and the Kamar
Heatmount
Detector totaled approximately $3,984,000 (95% of total product sales) for the
year ended December 31, 1998 as compared to approximately $3,770,000 (95% of
total product sales) for the year ended December 31, 1997. The sales of
First Defense are seasonal with highest sales expected in the winter months.
Sales of the Company's human infectious disease diagnostic reagents
decreased to approximately $28,000 (less than 1% of total product sales) for
the year ended December 31, 1998 from approximately $58,000 (1% of total
product sales) for the year ended December 31, 1997.
The Company received technology licensing income totaling $325,000 (7%
of total revenues) in 1997, which was comprised of a $75,000 option payment
received in January 1997 and a $250,000 payment received in November 1997
upon the exercise of the option for a license to the Company's milk protein
purification technology for use in the purification of certain milk proteins
other than lactoferrin. The Company received no similar technology licensing
income in 1998.
Grant income increased to approximately $282,000 (6% of total revenues)
in 1998 as compared to $249,000 (5% of total revenues) in 1997. In October
1997, the Company was awarded approximately $710,000 under a two-year federal
research grant to partially fund the Company's efforts to develop a product
to prevent Travelers' Diarrhea. In 1998, the remaining funding then
available under this grant was reallocated to the development of DiffGAM.
Approximately $282,000 and $200,000 in grant income was recognized under this
grant in 1998 and 1997, respectively. The 1997 grant income also includes
approximately $49,000 recognized under a grant awarded to the Company in 1996
to partially fund development of a commercial prototype of the Company's
diagnostic test to detect Cryptosporidium in water.
Interest income exceeded interest expense by approximately $20,000 in
1998. Interest expense exceeded interest income by $29,000 in 1997.
Interest expense was incurred in both years on the Company's outstanding bank
debt. The reduction in interest expense in 1998 resulted from a refinancing
of the Company's bank debt in May 1998. The Company's share of the loss in
the equity of its joint ventures aggregated $123,000 and $13,000 in 1998 and
1997, respectively. The Company's joint venture loss was principally caused
by the limited sales of lactoferrin due to the financial crisis in Asia, the
primary market for this product.
Product costs amounted to 48% of product sales in 1998 as compared to
46% in 1997. Internally developed products tend to have higher gross margin
percentages than licensed-in products.
The Company decreased its expenditures for research and development to
approximately $1,013,000 in 1998 as compared to $1,068,000 in 1997. Research
and development expenses exceeded grant income by approximately $731,000 in
1998 and by $819,000 in 1997. Research and development expenses aggregated
23% of total revenues in 1998 and 1997. Research and development expenses
were reduced to 24% of product sales in 1998 from 27% of product sales in
1997.
During 1998, the Company shifted the primary focus of its research and
development efforts to products for the animal health industry. To expand
its commercialized line of products for use by dairy and beef producers, the
Company has invested in the development of new diagnostic products leveraging
the Company's experience with infectious diseases. The Company has also
initiated early stage development programs of certain vaccine and disease
preventive products. The Company has one product, DiffGAM, in human clinical
trials to prevent and treat Clostridium difficile-associated diarrhea.
However, for clinical development to proceed into more expensive Phase II and
III trials, a potential partner would be required. The Company has also
invested in the development of a test intended to detect the presence of
Cryptosporidium parvum in drinking water.
Sales and marketing expenses of approximately $817,000 were
essentially unchanged in 1998 compared to 1997, aggregating 19% of product
sales in 1998 compared to 21% in 1997. The Company continues to leverage its
small sales force through wholesale distribution channels. General and
administrative expenses were approximately $637,000 in 1998 as compared to
$546,000 in 1997. This increase was due principally to severance costs
incurred in connection with the resignation of the Company's former
President, which costs were incurred in 1998 and paid in 1999. The Company
has continued its efforts to control its general and administrative expenses
while incurring all the necessary expenses associated with being a publicly
held company.
Financial Position, Liquidity and Capital Resources
The Company's total assets increased to $3,856,000 at December 31, 1999
from $3,145,000 at December 31, 1998. The Company's cash balance as of
December 31, 1999 increased to $1,824,000 from $1,539,000 at December 31,
1998. Net working capital increased to $2,219,000 at December 31, 1999 from
$1,866,000 at December 31, 1998. Stockholders' equity increased to
$2,815,000 at December 31, 1999 from $2,248,000 at December 31, 1998.
During 1999, approximately $680,000 in cash was provided by operating
activities as the profit of $551,000 was net of $102,000 in non-cash
depreciation expense and a $97,000 non-cash charge associated with the
Company's share of the losses of its joint venture, AgriCell Company, LLC. A
$248,000 use of cash to finance accounts receivable and inventories was
partially offset by a net increase of $161,000 in accounts payable and
accrued expenses. Investing activities were comprised of a $132,000 net
investment in fixed assets and the $250,000 acquisition of certain product
rights both relating principally to the acquisition of Wipe Out<TM>. Regular
principal repayments on the Company's bank debt were approximately offset by
the proceeds from the issuance of common stock upon the exercise of stock
options.
The Company funded its 1999 research and development expenses from
government grants and product sales. The Company's current profitability
provides positive cash flow to fund all operating expenses as well as new
product acquisitions while reporting a net operating profit. During the year
ended December 31, 1999, the $2,569,000 gross margin from product sales more
than funded the aggregate of $1,954,000 in net research and development ("net
R&D") expenses and general, sales and administrative ("G, S&A") expenses. In
1998, the $2,185,000 gross margin on product sales was approximately equal to
the aggregate of net R&D and G, S&A expenses. In 1997, the gross margin on
product sales contributed $2,163,000 to the aggregate of $2,182,000 in net
R&D and G, S&A expenses. In a manner similar to many biotechnology product
development funding models, funding of DiffGAM beyond the completion of the
current clinical trial would require a strategic alliance with a corporate
partner.
Since 1990, the Company has been awarded five Phase I and three Phase II
Small Business Innovation Research grants from the National Institutes of
Health. These grants aggregate approximately $1,991,000 in funding for the
Company's research and development programs. Approximately $1,763,000 of
this grant income was recognized prior to 1999, approximately $162,000 was
recognized in 1999. Approximately $66,000 is expected to be recognized in
2000 in support of the DiffGAM clinical development program. Additionally,
since 1994 a small portion of the Company's research and development efforts
has been supported by two grants from the State of Maine aggregating
approximately $45,000. Additionally, for the two year period ending December
31, 2001, the Company has been awarded $40,000 to participate in a
collaborative study funded by the American Water Work's Association Research
Foundation related to Crypto-Scan
. The Company continues to seek federal
research grant support as a means of leveraging the funds that it is able to
spend developing new products.
Long-term debt decreased to $435,000 at December 31, 1999, from $453,000
at December 31, 1998. The current portion of this bank debt obligation
increased to $19,000 at December 31, 1999 from $17,000 at December 31, 1998.
In May 1998, the Company refinanced its bank debt obligations by using the
proceeds from a $480,000 mortgage loan together with approximately $29,000 in
additional cash to repay all of the then outstanding bank debt obligations.
The Company is obligated to make monthly principal and interest payments
aggregating approximately $5,000 under the outstanding debt obligation. (See
Note 5 to the accompanying financial statements for further detail on these
debt obligations).
Management believes that its current cash and investments balance will be
sufficient to meet its operating and capital requirements in 2000.
Forward-Looking Statements
The statements contained in this report which are not historical fact are
"forward-looking statements" that involve various important assumptions,
risks, uncertainties and other factors. There can be no assurance that
actual results will not differ materially from those projected or suggested
in such forward-looking statements as a result of various factors including,
but not limited to, the risk factors discussed below. The Company is heavily
dependent on the successful development of new products for its future
growth. These new products have the potential to increase the Company's
profitability.
It is the Company's objective to fund all selling, general and
administrative expenses as well as all research and development expenditures
that are not funded by an outside source with the gross margin earned from
product sales. Continuation of the Company's profitability will, in large
part, be determined by the ongoing successful marketing of First Defense
and
the Kamar
Heatmount
Detector. Growth in the Company's profitability
will, in large part, be determined by the success of the Company's efforts
to market its two new products, Tip-Test<TM>: Johne's and Wipe Out<TM> Dairy
Wipes as well as its ability to effectively develop and acquire additional
animal health products. The Company estimates that it may be able to achieve
annual sales of $400,000 and $750,000 for Tip-Test: Johne's and Wipe
Out, respectively.
The Company estimates that sales of its Crypto-Scan
water
diagnostic test could reach approximately $1-2,000,000 per year if regulatory
and market acceptance can be achieved and maintained in the United Kingdom. The
Company anticipates being able to earn a royalty of approximately $150,000 per
year from the use of its technology in the production of whey protein isolate
by an Australian partner for as long as the Company is able to keep the
applicable technology license in effect, which will require the Company and
its partners to meet certain minimum equipment purchase requirements.
If clinical trials are successful, sales of DiffGAM would not be
anticipated to begin until approximately the year 2002, due to the complex
regulatory process required to obtain approval of this product. If the
product is successfully developed, the Company intends to enter into a
marketing alliance with a corporate partner to fund clinical development
beyond the Phase I/II trial that the Company expects to complete in the first
quarter of 2000 and to distribute the product if FDA approval is obtained.
The Company estimates that any such partner could achieve potential sales of
DiffGAM of approximately $50,000,000 to $100,000,000. The Company
anticipates being able to financially benefit from a manufacturing and supply
agreement, or other royalty arrangements with a potential marketing partner.
The ultimate profitability of this product cannot be accurately predicted at
this time.
Risk Factors
The development of these new products is subject to financial, efficacy,
regulatory and market risks. There can be no assurance that the Company will
be able to finance the development of these new product opportunities nor
that, if financed, the new products will be found to be efficacious and gain
the appropriate regulatory approval. Furthermore, if regulatory approval is
obtained, there can be no assurance that the market estimates will prove to
be accurate or that market acceptance at a profitable price level can be
achieved or that the products can be profitably manufactured. The license
covering the sales of the Kamar
Heatmount
Detector is subject to
twelve months' notice of early termination prior to December 31, 2003.
Effects of Inflation and Interest Rates
The Company believes that neither inflation nor interest rates have had a
significant effect on revenues and expenses.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company, together with the notes thereto
and the report of the accountants thereon, are set forth on Pages F-1 through
F-14 at the end of this report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(A) Information with respect to the Company's directors is incorporated
herein by reference to the section of the Company's 2000 Proxy Statement
titled "Election of the Board of Directors", which is intended to be filed
with the Securities and Exchange Commission within 120 days after the end of
the Company's fiscal year.
(B) The Company's executive officers are as follows:
MICHAEL F. BRIGHAM (Age: 39, Officer Since: October 1991, Director Since:
March 1999) was appointed to serve as President and Chief Executive Officer
in February 2000, while maintaining the titles of Treasurer and Secretary,
and was appointed to serve as a Director of the Company in March 1999. He
previously had been elected Vice President of the Company in December 1998
and served as Chief Financial Officer since October 1991. He has served as
Secretary since December 1995 and as Treasurer since October 1991. Prior to
that, he served as Director of Finance and Administration since originally
joining the Company in September 1989. Mr. Brigham serves on the Board of
Directors of the Biotechnology Association of Maine and of the Maine Center
for Innovation in Biotechnology. Prior to joining the Company, he was
employed as an audit manager for the public accounting firm of Ernst & Young.
Mr. Brigham earned his Masters in Business Administration from New York
University in 1989.
JOSEPH H. CRABB, Ph.D. (Age: 45, Officer Since: March 1996) served as a
Director of the Company from March 1999 until he resigned from that position
in February 2000 and was elected Vice President of the Company in December
1998, while maintaining the title of Chief Scientific Officer. He has served
as Chief Scientific Officer since September 1998. Prior to that, he served as
Vice President of Research and Development since March 1996. Prior to that,
he served as Director of Research and Development and Senior Scientist since
originally joining the Company in November 1988. Dr. Crabb currently holds a
Clinical Assistant Professorship at Tufts University School of Veterinary
Medicine and serves on National Institutes of Health and American Water Works
Association advisory committees. Prior to joining the Company in 1988, Dr.
Crabb earned his Ph.D. in Biochemistry from Dartmouth Medical School and
completed postdoctoral studies in microbial pathogenesis at Harvard Medical
School, where he also served on the faculty.
STAFFORD C. WALKER (Age: 48, Officer Since: December 1998) served as a
Director of the Company from March 1999 until he resigned from that position
in February 2000 and was elected Vice President and Chief Marketing Officer
of the Company in December 1998. Prior to that, he served as Director of
Sales and Marketing since originally joining the Company in July 1992. Prior
to joining the Company, he held various product management and sales
positions in the animal health division of American Cyanamid Company.
There is no family relationship between any director, executive officer,
or person nominated or chosen by the Company to become a director or
executive officer.
ITEM 11 - EXECUTIVE COMPENSATION
Information regarding cash compensation paid to executive officers of
the Company is incorporated herein by reference to the section of the
Company's 2000 Proxy Statement titled "Executive Compensation", which is
intended to be filed with the Securities and Exchange Commission within 120
days after the end of the Company's fiscal year.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of the Company's common stock by certain
owners and management is incorporated herein by reference to the section of
the Company's 2000 Proxy Statement titled "Security Ownership of Certain
Beneficial Owners and Management", which is intended to be filed with the
Securities and Exchange Commission within 120 days after the end of the
Company's fiscal year.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
incorporated herein by reference to the section of the Company's 2000 Proxy
Statement titled "Certain Relationships and Related Transactions", which is
intended to be filed with the Securities and Exchange Commission within 120
days after the end of the Company's fiscal year.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's 1987 Registration Statement
Number 33-12722 on Form S-1 as filed with the Commission).
3.2 Certificate of Amendment to the Company's Certificate of Incorporation
(incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly
Report on Form 10-Q for the three months ended June 30, 1990).
3.3 Certificate of Amendment to the Company's Certificate of Incorporation
effective August 24, 1992 (incorporated by reference to Exhibit 3.4 of
the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992).
3.4 Bylaws of the Registrant as amended (incorporated by reference to
Exhibit 3.3 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
4.1 Rights Agreement dated as of September 5, 1995, between the Registrant
and American Stock Transfer and Trust Co., as Rights Agent, which
includes as Exhibit A thereto the form of Right Certificate and as
Exhibit B thereto the Summary of Rights to Purchase Common Stock
(incorporated by reference to Exhibit 4.1 to the Registrant's Current
Report on Form 8-K dated September 5, 1995).
4.2 $480,000 Note Payable to Peoples Heritage Bank dated May 6, 1998
(incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly
Report on Form 10-Q for the three months ended June 30, 1998).
10.1+ 1989 Stock Option and Incentive Plan of the Registrant (incorporated by
reference to Exhibit 10.27 to the Registrant's Annual Report on Form 10-
K for the fiscal year ended December 31, 1989).
10.2+{ }Form of Incentive Stock Option Agreement (incorporated by reference
to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989).
10.3+ Form of Indemnification Agreement entered into with each of the
Company's directors and officers (incorporated by reference to Exhibit
10.32 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989).
10.4+ Amendment, dated April 1992, to Employment Agreement dated November
1991, between the Registrant and Michael F. Brigham (incorporated by
reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10-
K for the fiscal year ended December 31, 1992).
10.5+ Amendment, dated April 1992, to Employment Agreement dated November
1991, between the Registrant and Joseph H. Crabb (incorporated by
reference to Exhibit 10.32 to the Registrant's Annual Report on Form 10-
K for the fiscal year ended December 31, 1995).
10.6 License and Supply Agreement between Bio-Vac, Inc. and the Registrant
dated June 15, 1993 (incorporated by reference to Exhibit 10.25 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993).
10.7(1) ImmuCell - Advanced Separation Technologies, Inc. Agreement for
exclusivity in protein separation of milk or whey proteins, dated August
30, 1993 (incorporated by reference to Exhibit 10.27 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993).
10.8 Distribution and Licensing Agreement between Kamar, Inc. and the
Registrant dated December 3, 1993 (incorporated by reference to Exhibit
10.30 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993).
10.9 Amendment No. 1 to Agreement for Exclusivity between Advanced Separation
Technologies, Inc. and the Registrant dated January 14, 1994
(incorporated by reference to Exhibit 10.33 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993).
10.10(2)Exclusive License Agreement between The Regents of the University of
California of Alameda, California and the Registrant dated February 23,
1994 (incorporated by reference to Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the three months ended March 31,
1994).
10.11 Non-qualified Stock Option Agreement dated November 10, 1994 between
the Registrant and Redwood MicroCap Fund, Inc. (incorporated by
reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-
K for the fiscal year ended December 31, 1994).
10.12 Amendment No. 2 to Agreement for Exclusivity between Advanced
Separation Technologies, Inc. and the Registrant dated December 16, 1994
(incorporated by reference to Exhibit 10.26 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994).
10.13(3) License Agreement between Registrant and Wisconsin Alumni Research
Foundation effective March 1, 1995 (incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the three
months ended March 31, 1995).
10.14 1995 Stock Option Plan for Outside Directors (incorporated by reference
to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for
the three months ended June 30, 1995).
10.15 Form of Stock Option Agreement (incorporated by reference to Exhibit
10.2 to the Registrant's Quarterly Report on Form 10-Q for the three
months ended June 30, 1995).
10.16 Amendment No. 3 to Agreement for Exclusivity between Advanced
Separation Technologies, Inc. and the Registrant dated May 3, 1995
(incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly
Report on Form 10-Q for the three months ended June 30, 1995).
10.17 Amendment No. 4 to Agreement for Exclusivity between Advanced
Separation Technologies, Inc. and the Registrant dated November 15, 1995
(incorporated by reference to Exhibit 10.28 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995).
10.18 Limited Liability Company Agreement of AgriCell Company, LLC dated as
of September 10, 1996 between the Registrant and Agri-Mark, Inc. of
Methuen, MA (incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the three months ended
September 30, 1996).
10.19 Amendment No. 5 to Agreement for Exclusivity between Advanced
Separation Technologies, Inc. and the Registrant dated October 2, 1997
(incorporated by reference to Exhibit 10.25 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997).
10.20(4) License Agreement between the Registrant and Murray Goulburn Co-
operative Co., Limited, dated November 14, 1997 (incorporated by
reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10-
K for the fiscal year ended December 31, 1997).
10.21(5)Amendment No. 1 to Distribution and Licensing Agreement between the
Registrant and Kamar, Inc. dated July 1, 1998 (incorporated by reference
to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for
the three months ended September 30, 1998).
10.22+ Employment Agreement dated April 29, 1999 between the Registrant and
Michael F. Brigham.
10.23+ Employment Agreement dated April 29, 1999 between the Registrant and
Joseph H. Crabb.
10.24+ Employment Agreement dated April 29, 1999 between the Registrant and
Stafford C. Walker.
10.25 License Agreement between the Registrant and Hydros Environmental
Diagnostics, Inc. dated December 8, 1999.
10.26 Asset Purchase Agreement between the Registrant and AMBI Inc. dated
December 30, 1999 (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K dated as of December 30, 1999).
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit
21.1 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996).
23.1 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule (Filed Only Electronically).
(1) Confidential Treatment as to certain portions obtained effective
until December 31, 2000. The copy filed as an exhibit omits the information
subject to the Confidential Treatment.
(2) Confidential Treatment as to certain portions obtained effective
until March 31, 2002. The copy filed as an exhibit omits the information
subject to the Confidential Treatment.
(3) Confidential Treatment as to certain portions has been requested
effective until March 1, 2005. The copy filed as an exhibit omits the
information subject to the confidentiality request.
(4) Confidential Treatment as to certain portions obtained effective
until November 14, 2012. The copy filed as an exhibit omits the information
subject to the Confidential Treatment.
(5) Confidential Treatment as to certain portions obtained effective
until December 31, 2003. The copy filed as an exhibit omits the information
subject to the Confidential Treatment.
+ Management contract or compensatory plan or arrangement.
(b) Index to Financial Statement Schedules
Report of PricewaterhouseCoopers LLP, Independent Accountants F-1
Consolidated Balance Sheets - December 31, 1999 and 1998 F-2 to F-3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1999, 1998, and 1997 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7 to F-14
All financial statement schedules have been omitted as they are not required,
are not applicable, or the information is included in the consolidated
financial statements or otherwise.
(c) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated December 30, 1999
with the Commission reporting under Item 2, "Other Events", the acquisition
of rights to the product Wipe Out<TM> Dairy Wipes and certain other related
rights.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of
ImmuCell Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity, and cash flows
present fairly, in all material respects, the financial position of ImmuCell
Corporation and Subsidiary at December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Portland, Maine
January 28, 2000
<PAGE>
<TABLE>
<CAPTION>
IMMUCELL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 and 1998
ASSETS
1999 1998
_______________________
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,823,688 $1,538,905
Accounts receivable, net of allowance
for doubtful accounts of $41,000 and
$44,000 at December 31, 1999 and 1998,
respectively 453,139 249,754
Inventories 520,656 475,949
Prepaid expenses 27,826 45,516
_______________________
Total current assets 2,825,309 2,310,124
PROPERTY, PLANT AND
EQUIPMENT, at cost:
Laboratory and manufacturing equipment 961,554 837,179
Building and improvements 586,242 583,472
Office furniture and equipment 63,418 68,540
Land 50,000 50,000
_______________________
1,661,214 1,539,191
Less-accumulated depreciation 881,384 789,419
_______________________
Net property, plant and
equipment 779,830 749,772
INVESTMENT IN JOINT VENTURE -- 84,111
PRODUCT RIGHTS AND OTHER ASSETS 250,840 840
_______________________
TOTAL ASSETS $3,855,979 $3,144,847
======================-
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMMUCELL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 and 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
_______________________
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 322,241 $ 140,312
Accrued expenses 264,991 286,333
Current portion of long-term debt 18,691 17,257
_______________________
Total current liabilities 605,923 443,902
LONG-TERM DEBT:
Mortgage loan 434,658 453,349
_______________________
Total long-term debt 434,658 453,349
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY:
Common stock, Par value - $.10 per share
Authorized-8,000,000 shares
Issued-2,834,682 and 2,818,482
shares at December 31, 1999 and
1998, respectively 283,468 281,848
Capital in excess of par value 8,354,246 8,338,907
Accumulated deficit (5,235,581) (5,786,424)
________________________
3,402,133 2,834,331
Treasury stock,at cost-389,598 shares (586,735) (586,735)
________________________
Total stockholders' equity 2,815,398 2,247,596
________________________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $3,855,979 $3,144,847
========================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMMUCELL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
1999 1998 1997
_____________________________________
<S> <C> <C> <C>
REVENUES:
Product sales $4,722,374 $4,199,851 $3,982,798
Technology licensing income -- -- 325,000
Grant income 186,871 282,016 248,880
_____________________________________
Total revenues 4,909,245 4,481,867 4,556,678
COSTS AND EXPENSES:
Product costs 2,152,959 2,014,626 1,819,587
Research and development
expenses 812,892 1,012,813 1,068,069
Sales and marketing
expenses 889,501 816,705 817,089
General and administrative
expenses 438,923 637,439 546,073
_____________________________________
Total costs and expenses 4,294,275 4,481,583 4,250,818
Interest and other income 72,763 64,973 39,802
Interest expense (39,757) (45,217) (68,378)
Equity in net loss
of joint ventures (97,133) (122,558) (13,432)
_____________________________________
Net interest and other (64,127) (102,802) (42,008)
_____________________________________
NET PROFIT (LOSS) $ 550,843 $ (102,518) $ 263,852
=====================================
BASIC NET PROFIT (LOSS)
PER COMMON SHARE $ 0.23 $ (0.04) $ 0.11
DILUTED NET PROFIT (LOSS)
PER COMMON SHARE $ 0.22 $ (0.04) $ 0.10
=====================================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,432,701 2,426,474 2,332,939
=====================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMMUCELL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
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, 1996 2,719,162 $271,916 $8,139,791 $(5,947,758) 389,598 $(586,735) $1,877,214
Net profit -- -- -- 263,852 -- -- 263,852
Issuance of
Common Stock 80,820 8,082 174,517 -- -- -- 182,599
Exercise of
stock options 4,500 450 5,393 -- -- -- 5,843
________________________________________________________________________________
BALANCE,
December 31, 1997 2,804,482 280,448 8,319,701 (5,683,906) 389,598 (586,735) 2,329,508
Net loss -- -- -- (102,518) -- -- (102,518)
Exercise of
stock options 14,000 1,400 19,206 -- -- -- 20,606
________________________________________________________________________________
BALANCE,
December 31, 1998 2,818,482 281,848 8,338,907 (5,786,424) 389,598 (586,735) 2,247,596
Net profit -- -- -- 550,843 -- -- 550,843
Exercise of
stock options 16,200 1,620 15,339 -- -- -- 16,959
________________________________________________________________________________
BALANCE,
December 31, 1999 2,834,682 $283,468 $8,354,246 $(5,235,581) 389,598 $(586,735) $2,815,398
======================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMMUCELL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
1999 1998 1997
_____________________________________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit (loss) $ 550,843 $ (102,518) $ 263,852
Adjustments to reconcile net
profit (loss) to net cash
provided by operating
activities-
Depreciation 101,537 105,542 98,872
Equity share in joint venture
losses 97,134 127,558 5,000
Changes in:
Accounts receivable (203,385) 431,513 (310,469)
Inventories (44,707) (1,423) 173,750
Prepaid expenses 17,690 (18,475) (1,294)
Accounts payable 181,929 (16,911) (112,362)
Accrued expenses (21,342) 114,535 (13,458)
--------- --------- ---------
Net cash provided by
operating activites 679,699 639,821 103,891
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, building
and improvements, net (131,595) (65,931) (71,627)
(Investment in) distribution from
joint venture (13,023) 25,000 (17,000)
Acquisition of product rights (250,000) -- --
--------- --------- ---------
Net cash used for
investing activities (394,618) (40,931) (88,627)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt obligations -- 480,000 --
Payments of debt obligations (17,257) (579,415) (229,323)
Proceeds from issuance of
common stock 16,959 20,606 193,345
Stock issuance costs -- (2,500) (2,403)
--------- --------- ---------
Net cash used for
financing activities (298) (81,309) (38,381)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 284,783 517,581 (23,117)
BEGINNING CASH AND CASH
EQUIVALENTS 1,538,905 1,021,324 1,044,441
-------------------------------------
ENDING CASH AND CASH
EQUIVALENTS $1,823,688 $1,538,905 $1,021,324
=====================================
CASH PAID FOR INTEREST $ 39,883 $ 45,153 $ 69,165
=====================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
IMMUCELL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BUSINESS OPERATIONS
ImmuCell Corporation (the "Company") is a biotechnology company primarily
engaged in the development of animal health products to expand its
commercialized line of products for use by dairy and beef producers. The
Company was originally incorporated in Maine in 1982 and reincorporated in
Delaware in March 1987.
The Company is subject to certain risks associated with its stage of
development including dependence on key individuals, competition from other
larger companies, the successful marketing of existing products and the
development of additional commercially viable products. In addition, sales of
a significant product are subject to a license that is scheduled to expire on
December 31, 2003 and is subject to earlier termination upon twelve months'
notice.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Consolidation Principles
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.
(b) Cash and Cash Equivalents
The Company considers all highly liquid investment instruments purchased
with an original maturity of three months or less to be cash equivalents.
(c) Inventories
Inventories include raw materials, work-in-process and finished goods and
are recorded at the lower of standard cost which approximates cost on the
first-in, first-out method or market (net realizable value). Work-in-process
and finished goods inventories include materials, labor and manufacturing
overhead.
Inventories consist of the following:
DECEMBER 31,
1999 1998
[S] [C] [C]
Raw materials $136,909 $ 61,938
Work-in-process 243,895 383,691
Finished goods 139,852 30,320
-------- --------
$520,656 $475,949
======== ========
(d) Equipment, Building and Improvements and Intangible Assets
The Company provides for depreciation and amortization on the straight-
line method by charges to operations in amounts estimated to allocate the cost
of the assets over their estimated useful lives, generally equal to five to ten
years for equipment and ten years for building improvements. The cost of the
building is being depreciated over 30 years. The $250,000 acquisition of
certain product rights on December 30, 1999 is valued at cost and is being
amortized to cost of sales over ten years.
(e) Revenue Recognition
Revenues related to the sale of manufactured products are recorded at
the time of shipment to the customer. Collaborative research and development
revenue and income on government research grants are recognized as
reimburseable expenses are incurred. Indirect costs which are billed to the
government are subject to their review. All related research and development
costs are expensed as incurred, as are all patent costs. Income from the sale
of technology licenses is recognized when definitive agreement as to terms is
reached, which approximates the receipt of the associated cash payments.
(f) Net Profits (Loss) Per Common Share
The basic net profits (loss) per common share have been computed in
accordance with Financial Accounting Standards Board Statement No. 128 by
dividing the net profits (loss) by the weighted average number of common shares
outstanding during the year. The denominator in the diluted net profit per
common share calculation in 1999 was increased by 409,800 "in-the-money" common
stock options and reduced by 322,539 shares that could have been repurchased
with the proceeds from the exercise of these common stock options. Options to
purchase 168,667 shares of common stock at prices ranging from $1.69 to $4.00
per share were outstanding during 1999 but not included in the computation of
diluted net profit per share because the options' exercise prices were greater
than the average market price of the common shares and, therefore, the effect
would be antidilutive. Common stock equivalents outstanding have not been
included in the 1998 diluted net loss per common share computation, as the
effect would be antidilutive, thereby decreasing the net loss per common share.
The denominator in the diluted net profit per common share calculation in 1997
was increased by 466,167 "in-the-money" common stock options and reduced by
269,013 shares that could have been repurchased with the proceeds from the
exercise of these common stock options. Options to purchase 54,000 shares of
common stock at prices ranging from $3.06 to $4.00 per share were outstanding
during 1997 but not included in the computation of diluted net profit per share
because the options' exercise prices were greater than the average market price
of the common shares and, therefore, the effect would be antidilutive. For
additional disclosures regarding the outstanding common stock options see Notes
7(a) and 7(b).
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual amounts could differ from those estimates.
(h) Segment Information
In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 supersedes SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise, replacing the "industry segment" approach
with the "management" approach. The management approach designates the
internal organization that is used by management for making operating decisions
and assessing performance as the source of the Company's reportable segments.
SFAS No. 131 also requires disclosures about products and services, geographic
areas, and major customers. The adoption of SFAS No. 131 did not affect
results of operations or financial position but did affect the disclosure of
segment information (see Note 9, "Segment and Significant Customer
Information").
(3) INVESTMENT IN JOINT VENTURE
In 1996, the Company and Agri-Mark, Inc. of Methuen, Massachusetts formed
a joint venture, AgriCell Company, LLC, a Delaware limited liability company,
to manufacture and sell lactoferrin, a nutritional milk protein derived from
cheese whey. The Company licensed certain proprietary technology to AgriCell,
invested $125,000 in new fixed assets and contributed other fixed assets with a
net book value of approximately $95,000 as well as additional personnel costs
to assist in the installation of the commercial production facility. Agri-Mark
invested approximately $1,000,000 in principally working capital, fixed assets
and production facility modifications. Agri-Mark has the right to receive 90%
of the profits from the joint venture until it obtains the return of an amount
equal to its original investment, after which all profits are to be split
equally.
This investment is accounted for under the equity method. During the
year ended December 31, 1999, the Company recorded a $97,000 non-cash charge
against earnings reflecting its equity share in AgriCell's net loss. This loss
principally resulted from a write down of inventory costs due to the limited
product sales achieved to date. As of December 31, 1999, the investment in
this joint venture asset was completely written off; any further losses
incurred by the joint venture will have no impact on the Company's financial
statements.
(4) ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
<S> <C> <C>
Accrued royalties $ 70,537 $ 69,403
Accrued professional fees 49,370 34,744
Accrued payroll 101,509 147,016
Accrued other 43,575 35,170
-------- --------
$264,991 $286,333
======== ========
</TABLE>
(5)(5) DEBT OBLIGATIONS
The Company has long-term debt obligations, net of current maturities, as
follows:
<TABLE>
<CAPTION>
DECEMBER
1999 1998
<S> <C> <C>
8.62% Bank mortgage, collateralized by first security
interest in building, due 1999 to 2003 $453,349 $470,606
Less current portion 18,691 17,257
-------- --------
Long-term debt $434,658 $453,349
======== ========
</TABLE>
In May 1998, the Company refinanced its bank debt obligations by using the
proceeds from a $480,000 mortgage loan together with approximately $29,000 in
additional cash to repay all of the then outstanding bank debt obligations.
The new mortgage has a 15 year amortization schedule with interest payable at
the fixed rate of 8.62% per year for the first five years. The Company intends
to repay the then outstanding principal at the end of this five year period,
but the mortgage does provide the option of resetting at a new fixed interest
rate to be determined at that time for one additional five year period.
Principal payments under the above debt obligations due subsequent to December
31, 1999 are approximately as follows: $19,000 (2000); $20,000 (2001); $22,000
(2002); and $392,000 (2003). The weighted average interest rate of the bank
debt outstanding as of December 31, 1999 and 1998 is 8.62%. The difference
between the fair value and the carrying value of these debt obligations is
immaterial.
(6) INCOME TAXES
The Company accounts for income taxes in accordance with Financial
Accounting Standards Board Statement No. 109. Deferred income taxes reflect
the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. The significant components of the Company's deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
1999 1998
<S> <C> <C>
Deferred tax assets:
Net operating loss carryover $ 1,883,878 $2,083,564
Expenses not currently deductible 61,046 73,435
General business credit carryforward 183,538 215,655
----------- ----------
Total deferred tax assets 2,128,462 2,372,654
=========== ==========
Deferred tax liabilities:
Tax over book depreciation 7,173 1,330
----------- ----------
Total deferred tax liabilities 7,173 1,330
----------- ----------
Net deferred tax assets
before valuation allowance 2,121,289 2,371,324
Valuation allowance (2,121,289) (2,371,324)
----------- ----------
Net deferred tax assets $ -- $ --
=========== ==========
</TABLE>
The Company offset current tax expense for 1999 of approximately $200,000
by utilizing the benefit of approximately $200,000 of net operating loss
carryforwards. As a result, the Company has reduced its deferred tax valuation
allowance to reflect such utilization.
Due to the uncertainty of future taxable income, the Company has fully
reserved for its net deferred tax assets. The Company will have remaining
federal and state net operating loss carryforwards of approximately $4,700,000,
expiring in years 2002 through 2018. The net operating loss carryforwards are
available to offset future federal and state taxable income.
(7) STOCKHOLDERS' EQUITY
(a) Non-qualified Stock Options
In April 1992, a total of 200,000 non-qualified stock options were issued
to the three, then-serving executive officers of the Company at an exercise
price of $1.05 per share, the then current market price of the Company's common
stock. These options, which were granted outside of the stock option plans
described below, expire in April 2002. Half of these options became
exercisable in April 1993, and the remaining half became exercisable in April
1994. A former executive officer of the Company exercised 16,200 of such
options during October 1999 and the aggregate of an additional 133,800 of such
options during January and February 2000.
In November 1994, the Company entered into a non-exclusive investment
banking contract with Redwood MicroCap Fund of Colorado Springs, Colorado
("Redwood"). As compensation for services provided under this contract, the
Company issued 30,000 non-qualified stock options to Redwood. The options
expired without being exercised on November 2, 1999.
In April 1999, a total of 93,300 non-qualified stock options were issued
to the three executive officers of the Company at an exercise price of $1.31
per share, the then current market price of the Company's common stock. These
options, which were granted outside of the stock option plans described below,
expire in April 2009. One third of these options became exercisable in March
2000, an additional one third become exercisable in March 2001 and the
remaining options become exercisable in March 2002.
(b) Stock Option Plans
In May 1989, the stockholders approved the 1989 Stock Option and Incentive
Plan (the "1989 Plan") pursuant to the provisions of the Internal Revenue Code
of 1986, under which employees may be granted options to purchase shares of the
Company's common stock at i) no less than fair market value on the date of
grant in the case of incentive stock options and ii) no less than 85% of fair
market value on the date of grant in the case of non-qualified stock options.
Vesting requirements are determined by the Compensation and Stock Option
Committee of the Board of Directors on a case by case basis. Originally,
90,000 shares of common stock were reserved for issuance under the 1989 Plan;
the stockholders of the Company approved an increase in this number to 190,000
shares at the August 1992 Annual Meeting and a further increase in this number
to 290,000 shares at the June 1994 Annual Meeting and a further increase in
this number to 340,000 shares at the June 1998 Annual Meeting. All options
granted under the 1989 Plan expire no later than ten years from the date of
grant. The 1989 Plan expired in March 1999, and no further options may be
granted under the 1989 Plan; however, outstanding options under the 1989 Plan
may be exercised in accordance with their terms. Since the inception of the
1989 Plan and prior to December 31, 1999, 49,833 options have been exercised.
In February 1995, the Board of Directors adopted the 1995 Stock Option
Plan for Outside Directors (the "1995 Plan"). The 1995 Plan was approved by the
stockholders of the Company on June 23, 1995. Under the 1995 Plan, each
director who was not an employee of the Company on the date the Plan was
adopted was automatically granted a non-qualified stock option to purchase
8,000 shares of common stock at its fair market value on the date of the grant.
Directors who were newly elected to the Board subsequent to February 1995
received an automatic grant of an option to purchase 8,000 shares, at fair
market value on the date when such directors were first elected to the Board by
the stockholders. As of February 1995, 64,000 shares of common stock were
reserved for issuance under the 1995 Plan. Options to purchase an aggregate of
40,000 shares were automatically granted on the date the Plan was adopted by
the Board of Directors. Of these 40,000 options, 8,000 terminated in September
1995. Options to purchase another 8,000 shares were automatically granted in
June 1995, which options terminated in December 1999. Options as to 4,000 of
such shares were exercised during 1997. All options granted under the 1995
Plan expire no later than five years from the date of grant. The 1995 Plan
expired in February 2000, and no further options may be granted under the 1995
Plan; however, outstanding options under the 1995 Plan may be exercised in
accordance with their terms.
Activity under the stock option plans described above, was as follows:
<TABLE>
<CAPTION>
Weighted Average
1989 Plan 1995 Plan Exercise Price
--------- --------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1996 230,000 40,000 $2.29
Grants 48,667 -- 2.48
Terminations (24,000) -- 3.40
Exercises (500) (4,000) 1.30
-------- --------
Balance at December 31, 1997 254,167 36,000 2.25
Grants 15,000 -- 1.66
Terminations (41,534) -- 2.42
Exercises (14,000) -- 1.47
-------- --------
Balance at December 31, 1998 213,633 36,000 2.23
Grants 79,700 -- 1.31
Terminations (19,966) (8,000) 1.65
Exercises -- -- --
-------- --------
Balance at December 31, 1999 273,367 28,000 2.04
Exercisable at December 31, 1999 174,442 28,000 $2.32
-------- --------
</TABLE>
At December 31, 1999, approximately 578,467 common shares were reserved for
future issuance under all outstanding stock options described above.
(c) Compliance with Financial Accounting Standards Board New Accounting
Standard
In 1995, the Financial Accounting Standards Board ("FASB") issued
"Statement of Financial Accounting Standard ("SFAS") No. 123 - Accounting
for Stock-Based Compensation". This statement requires a fair value based
method of accounting for employee and director stock options and would
result in expense recognition for the Company's stock plans. It also
permits a Company to continue to measure compensation expense for such
plans using the intrinsic value based method as prescribed by Accounting
Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock
Issued to Employees". The Company has elected to follow APB No. 25 in
accounting for its stock plans, and accordingly, no compensation cost has
been recognized.
Had compensation cost for the Company's stock plans been determined
based on the fair value requirements of SFAS No. 123, the Company's net
profit (loss) and basic net profit (loss) per share would have been reduced
(increased) to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C>
Net profit (loss) As reported $550,843 $(102,518) $263,852
Pro forma $464,163 $(173,061) $211,072
Basic net profit (loss)
per share As reported $0.23 $(0.04) $0.11
Pro forma $0.19 $(0.07) $0.08
</TABLE>
The weighted average remaining life of the options outstanding under
the 1989 Plan and the 1995 Plan as of December 31, 1999 was approximately
six years and three months. The exercise price of the options outstanding
and of the options exercisable as of December 31, 1999 ranged from $1.25 to
$4.00. The weighted-average grant date fair values of options granted
during 1999 and 1998 were $1.31 and $1.12 per share, respectively. The
fair value of each stock option grant has been estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate 5.8% 5.1% 5.7%
Dividend yield 0 0 0
Expected volatility 76.2% 79.7% 83.4%
Expected life 5 years 5 years 5 years
(d) Common Stock Rights Plan
On September 5, 1995, the Board of Directors of the Company adopted a
Common Stock Rights Plan and declared a dividend of one common share
purchase right (a "Right") for each of the then outstanding shares of the
common stock of the Company. The dividend was distributed to the
shareholders of record as of the close of business on September 19, 1995.
Each Right entitles the registered holder to purchase from the Company one
share of common stock at an initial purchase price of $70.00 per share,
subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement between the Company and American Stock
Transfer & Trust Co., as Rights Agent.
The Rights become exercisable and transferrable apart from the common
stock upon the earlier of (i) 10 days following a public announcement that
a person or group (acquiring person) has, without the prior consent of the
Continuing Directors (as such term is defined in the Rights Agreement),
acquired beneficial ownership of 15 percent or more of the outstanding
common stock, or (ii) 10 days following commencement of a tender offer or
exchange offer the consummation of which would result in ownership by a
person or group of 20% or more of the outstanding common stock (the earlier
of such dates being called the "Distribution Date").
Upon the acquisition of 15% or more of the Company's common stock by
an acquiring person, the holder of each Right not owned by the acquiring
person would be entitled to purchase common stock having a market value
equal to two times the exercise price of the Right (i.e., at a 50 percent
discount). If, after the Distribution Date, the Company should
consolidate or merge with any other entity and the Company were not the
surviving company, or, if the Company were the surviving company, all or
part of the Company's common stock were changed or exchanged into the
securities of any other entity, or if more than 50% of the Company's assets
or earning power were sold, each Right would entitle its holder to
purchase, at the Rights' then-current purchase price, a number of shares of
the acquiring company's common stock having a market value at that time
equal to twice the Right's exercise price.
<PAGE>
At any time after a person or group becomes an acquiring person and prior to
the acquisition by such person or group of 50% or more of the outstanding
common stock, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which have become void), in
whole or in part, at an exchange ratio of one share of common stock per Right
(subject to adjustment).
At any time prior to fourteen days following the date that any person or
group becomes an acquiring person (subject to extension by the Board of
Directors), the Board of Directors of the Company may redeem the then
outstanding Rights in whole, but not in part, at a price of $.005 per Right,
subject to adjustment. The Rights will expire on the earlier of (i) the close
of business on September 19, 2005, or (ii) the time at which the Rights are
redeemed by the Company.
(8) COMMITMENTS AND CONTINGENCIES
In connection with the acquisition of Wipe Out<TM> Dairy Wipes, the Company
assumed the rights and obligations of a certain sub-contractor manufacturing
contract. As of December 31, 1999, the Company would be obligated to pay this
sub-contractor approximately $56,000 in the event of the termination of this
contract. The contingent liability reduces on a per unit basis as the Company
purchases product from this sub-contractor.
The Company has entered into employment contracts with its three executive
officers which could require the Company to pay three months' salary as
severance pay depending upon the circumstances of any termination of employment
of these key employees.
In June 1998, the Company entered into a renewal of its service and
license agreement effective through December 31, 2003 with Kamar, Inc. whereby
Kamar will continue to provide the Company warehousing, distribution and
certain other services and the Company will continue to market a certain bovine
heat detection device under an exclusive world-wide license. The renewal
agreement is cancelable by either party upon twelve months written notice. The
Company is committed to pay Kamar a monthly fee for distribution services and
related license fees of $21,100 (adjusted annually for inflation) until the
license agreement is canceled. Royalties paid on sales made during the years
ended December 31, 1999, 1998 and 1997 were $228,000, $217,000 and $188,000,
respectively.
The research, manufacturing and marketing of human and animal health care
products by the Company entail an inherent risk that liability claims will be
asserted against the Company. The Company feels it has adequate levels of
liability insurance to support its operations.
(9) SEGMENT AND SIGNIFICANT CUSTOMER INFORMATION
The Company principally operates in the business segment described in Note
1. The Company's primary customers for the majority of its 1999 product sales
(74%) are in the United States dairy and beef industries. Revenues derived
from foreign customers, who are also in the dairy and beef industries,
aggregated 24% of 1999 product sales. Government grant income amounted to
approximately 4% ($187,000), 6% ($282,000) and 5% ($249,000) of total revenues
in the years ended December 31, 1999, 1998 and 1997, respectively.
In 1998, the Company adopted SFAS No. 131. The prior year=*s segment
information has been restated to present the Company=*s two reportable
segments: (1) Animal Health Products and (2) Research and Development ("R&D").
The accounting policies of the segments are the same as those described in Note
2, "Summary of Significant Accounting Policies." The Company evaluates the
performance of its segments and allocates resources to them based on
contribution before allocation of corporate overhead charges. The table below
presents information about reported segments for the years ending December 31:
</TABLE>
<TABLE>
<CAPTION>
Animal Health
1999: Products R&D Other Total
------------- ------- -------- -------
<S> <C> <C> <C> <C>
Product Sales $4,655,231 -- $ 67,143 $4,722,374
Grant Income -- $186,871 -- 186,871
---------- --------- --------- ----------
Total Revenues 4,655,231 186,871 67,143 4,909,245
Product Costs 2,123,847 -- 29,112 2,152,959
Research and Development -- 812,892 -- 812,892
Sales and Marketing Expenses 889,501 -- -- 889,501
Other Expenses -- -- 503,050 503,050
---------- --------- --------- ----------
Net Profit (Loss) $1,641,883 $(626,021) $(465,019) $ 550,843
========== ---------- ---------- ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Animal Health
1998: Products R&D Other Total
------------- ------- -------- -------
<S> <C> <C> <C> <C>
Product Sales $4,120,367 -- $79,484 $4,199,851
Grant Income -- $282,016 -- 282,016
Other Income -- -- -- --
---------- -------- -------- ----------
Total Revenues 4,120,367 282,016 79,484 4,481,867
Product Costs 1,950,476 -- 64,150 2,014,626
Research and Development -- 1,012,813 -- 1,012,813
Sales and Marketing Expenses 816,705 -- -- 816,705
Other Expenses -- -- 740,241 740,241
---------- -------- -------- ----------
Net Profit (Loss) $1,353,186 $(730,797) $(724,907) $ (102,518)
========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Animal Health
1997: Products R&D Other Total
------------- ------- -------- -------
<S> <C> <C> <C> <C>
Product Sales $3,918,710 -- $64,088 $3,982,798
Grant Income -- $ 248,880 -- 248,880
Other Income -- -- 325,000 325,000
---------- ---------- --------- ----------
Total Revenues 3,918,710 248,880 389,088 4,556,678
Product Costs 1,784,819 -- 34,768 1,819,587
Research and Development -- 1,068,069 -- 1,068,069
Sales and Marketing Expenses 817,089 -- -- 817,089
Other Expenses -- -- 588,081 588,081
---------- ---------- --------- ----------
Net Profit (Loss) $1,316,802 $(819,189) $(233,761) $ 263,852
========== ---------- --------- ----------
</TABLE>
(10) EMPLOYEE BENEFITS
The Company has a 401(k) savings plan in which all employees completing
one year of service with the Company (working at least 1,000 hours) are
eligible to participate. Participants may contribute up to 20% of their annual
compensation to the plan, subject to certain limitations. Beginning January 1,
1994, the Company has matched 50% of each employee's contribution to the plan
up to a maximum match of 3% of each employee's base compensation. Under this
matching contribution program, the Company paid the aggregate of $18,000,
$24,000 and $24,000 to the plan for the years ended December 31, 1999, 1998 and
1997, respectively. The Company intends to continue this same matching
contribution program in 2000.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
IMMUCELL CORPORATION
Date: March 24, 2000 By: /S/ MICHAEL F. BRIGHAM
Michael F. Brigham
President, Chief Executive Officer
and Treasurer
POWER OF ATTORNEY
We, the undersigned directors and officers of ImmuCell Corporation hereby
severally constitute and appoint Michael F. Brigham our true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for us and in our stead, in any and all capacities, to sign any and all
amendments to this report and all documents relating thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-
fact and agent, full power and authority to do and perform each and every act
and thing necessary or advisable to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 24, 2000 By: /S/ Michael F. Brigham
Michael F. Brigham
President, Chief Executive Officer,
Treasurer and Director
Date: March 24, 2000 By: /S/Anthony B. Cashen
Anthony B. Cashen, Director
Date: March 24, 2000 By: /S/John P. Donahoe
John P. Donahoe, Ph.D., Director
Date: March 24, 2000 By: /S/Keith N. Haffer
Keith N. Haffer, Ph.D., Director
Date: March 24, 2000 By: /S/William H. Maxwell
William H. Maxwell, Ph.D., Director
Date: March 24, 2000 By: /S/Mitchel Sayare
Mitchel Sayare, Ph.D., Director
<PAGE>
IMMUCELL CORPORATION AND SUBSIDIARY
Exhibit Index
10.22 Employment Agreement dated April 29, 1999 between the Registrant and
Michael F. Brigham.
10.23 Employment Agreement dated April 29, 1999 between the Registrant and
Joseph H. Crabb.
10.24 Employment Agreement dated April 29, 1999 between the Registrant and
Stafford C. Walker.
10.25 License Agreement between the Registrant and Hydros Environmental
Diagnostics, Inc. dated December 8, 1999.
23.1 Consent of PricewaterhouseCoopers LLP
27.1 Financial Data Schedule (Filed Only Electronically).
IMMUCELL CORPORATION AND SUBSIDIARY
Exhibit 10.22
Employment Agreement dated April 29, 1999 between the Registrant and
Michael F. Brigham.
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made this 29th day of April, 1999, between IMMUCELL
CORPORATION, a Delaware Corporation (the "Company"), and Michael F.
Brigham, of Kennebunk, Maine ("Brigham").
WITNESSETH:
In consideration of the mutual promises hereinafter contained, the
parties hereto agree as follows:
1. EMPLOYMENT AND TERM. The Company hereby employs Brigham and Brigham
hereby
accepts employment by the Company subject to the provisions of this
Agreement for a term commencing on April --, 1999 and ending upon the
date of termination of Brigham's employment with the Company.
2. DUTIES OF BRIGHAM. Brigham shall be employed by the Company as Vice
President, Chief Financial Officer, Treasurer and Secretary to perform
such duties consistent with such a position as Vice President, Chief
Financial Officer, Treasurer and Secretary as its Board of Directors
shall assign Brigham from time to time. Brigham shall serve the Company
faithfully and diligently, use his best efforts to promote the interests
of the Company, and shall devote his full time and efforts to the
business and affairs of the Company.
3. COMPENSATION.
(a) BASE SALARY. As compensation for his services hereunder, the Company
shall pay Brigham $7,916.66 per month, beginning on February 1, 1999.
During the entire term of this agreement, Brigham's salary shall be
subject to periodic review and adjustment by the Board of Directors of
the Company, which Board of Directors may in its sole discretion change
the salary to an amount greater than that provided for therein; provided,
however, that in no event may the Company's Board of Directors decrease
Brigham's salary below that which is provided for herein.
(b) EMPLOYEE BENEFITS. During the term of this Agreement the Company
shall provide Brigham with the standard health, life, and disability
insurance coverage that is provided to the Company's other non-officer
employees. Brigham shall also be eligible to receive all other employee
benefits of the Company in the same manner and to the same extent as
other employees of the Company in accordance with the Company's policies,
including, without limitation, any incentive pay programs offered by the
Company to all of its non-officer employees.
(c) NONQUALIFIED STOCK OPTIONS.
(1) GRANT. By unanimous resolution of the full Board of Directors on
March 1, 1999 the Company granted to Brigham an option (`Option') to
purchase thirty-one thousand and one hundred (31,100) shares of
ImmuCell common stock (`Shares') at a price equal to $1.3125 per
share.
(2) VESTING. Brigham's right to purchase the Shares subject to this
Option shall vest as follows:
(i) As to 10,366 Shares on and after March 1, 2000;
(ii) As to an additional 10,367 Shares on and after March 1, 2001;
and
(iii) As to the remaining 10,367 Shares on and after March 1, 2002.
(3) EXERCISE. Except as hereinafter provided, the Option may be
exercised in full or in part at any time to the extent vested in
accordance with subsection (2). In no event may the Option be
exercised to purchase fewer than one hundred (100) Shares, unless
fewer than one hundred (100) Shares are subject to the Option.
The purchase price for the Shares acquired upon exercise of the
Option shall be paid (i) in cash or certified check, or (ii) at the
discretion of the Compensation and Stock Option Committee of the
Board of Directors of the Company by delivery of one or more stock
certificates, duly endorsed, evidencing other Shares with a Fair
Market Value on the date of exercise equal to the option price, or
(iii) at the discretion of the Compensation and Stock Option
Committee, by a combination of the methods described in (i) or (ii).
As soon as practicable after Brigham has tendered payment of the
purchase price to the Company, the Company shall provide Brigham
with a Certificate evidencing the Shares purchased. Such
certificate shall include any legends required under federal or
state securities laws.
In the event of Brigham's termination of employment with the
Company (except for by reason of "just cause" as provided by
subsection (c) of Section 4 of this Agreement), disability or death,
the Option shall be exercisable during the eighteen-month period
following the date of Brigham's termination. In the event of
Brigham's termination for "just cause" as provided by subsection (c)
of Section 4, the Option shall be exercisable for the three month
period following such termination only to the extent it was
exercisable at the time of such termination.
(4) EXPIRATION OF OPTION. This Option shall expire at 5:00 p.m.,
Eastern time on February 28, 2009, unless sooner terminated as
provided in Section (c)(3) above, and may not be exercised
thereafter.
(5) NONTRANSFERABILITY. Brigham may not transfer the Option other
than by will or the laws of descent and distribution. During
Brigham's lifetime, only Brigham may exercise the Option.
(6) CHANGE IN CONTROL. In the event of a change in control of the
Company, Brigham's right to purchase Shares subject to the Option
shall vest immediately. For purposes of this Amendment, `change in
control' shall mean any one of the following events:
(a) Any person shall become beneficial owner, directly or
indirectly, of securities representing fifty percent
(50%) or more of the combined voting power of the
Company's then outstanding stock.
As used in this Paragraph 6 (a), `beneficial owner' shall
have the meaning ascribed to it from time to time under rules
promulgated by the Securities and Exchange Commission pursuant
to Section 13 (d) of the Securities Exchange Act of 1934, or
any similar successor statute or rule; and a `person' shall
include any natural person, corporation, partnership, trust,
association, or any group or combination thereof, whose
ownership of the Company stock would be reportable pursuant to
such provision of the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder;
(b) The Company's stockholders approve (i) any
consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation
or pursuant to which shares of Company common stock
would be converted into cash, securities or other
property, or (ii) any sale, lease, exchange,
liquidation or other transfer (in one transaction or a
series of transactions) of all or substantially all of
the assets of the Company.
(c) Any other event which a majority of all the Company's
Directors who are not employees of the Company
determines constitutes a change of control.
(7) NO REGISTRATION OF SECURITIES. The parties agree that the Company
presently intends to rely on the securities registration exemption
contained in Section 10502 (1) (L) of the Revised Maine Securities
Act and that, accordingly, no registration or exemption filing shall
be made by the Company under such Act with respect to the Shares.
Brigham acknowledges that transfer of the Shares may be
restricted by applicable federal and state securities laws and that
the Shares when issued shall contain an appropriate legend to that
effect. Notwithstanding the foregoing, the Company agrees to
register these shares in conjunction with its next Registration
Statement on Form S-8 to be filed with the Securities and Exchange
Commission.
(d) BONUS. A cash bonus will be paid to Brigham by the Company if certain
performance objectives are met during any fiscal year. These objectives
will be specified by the Company's Board of Directors on an annual basis.
Each and any such annual incentive compensation agreement shall be
incorporated by reference into this Employment Agreement. Any bonus
earned during a fiscal year will be paid by 1 February of the next fiscal
year.
4. TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY TERMINATION. Should Brigham voluntarily terminate his
employment with the company,
Brigham hereby covenants that, for a period of one (l) year he will abide
by the terms of the "Agreement in Connection with Employment" dated
August 24, 1989 between Brigham and the Company, a copy of which is
appended hereto as ATTACHMENT A.
(b) OTHER TERMINATION. (i) Should Brigham's employment with the Company
terminate for any reason except through Brigham's voluntary act or by
termination for "just cause" as provided by subsection (c) of this
Section 4 or (ii) should Brigham's status or position with the Company be
in any way altered without Brigham's consent so as to materially reduce
Brigham's status or responsibilities in a manner inconsistent with his
position as Vice President and Chief Financial Officer of the Company (it
being understood that the Board of Directors may at any time elect other
individuals to the offices of Treasurer and Secretary without diminution
in Brigham's status or responsibilities as Vice President and Chief
Financial Officer) and should Brigham resign from all offices and
positions held with the Company in response to such change or alteration
in his status or position with the Company or (iii) should the Company
terminate Brigham's employment at any time, Brigham shall receive from
the Company salary and benefits at the monthly level existing prior to
termination for an additional three (3) months after the date of
termination of Brigham's employment.
In consideration for the payments to be made to him pursuant to this
subsection (b), Brigham shall be bound by the provisions of subsection
(a) of this Section in the same manner as if his termination had been
voluntary, and Brigham shall not compete with the Company as provided
therein for a period of one (1) year from the date of termination of
Brigham's employment by the Company.
(c) TERMINATION FOR JUST CAUSE. Notwithstanding the forgoing provisions
of this Section 4, a majority of the Board of Directors of the Company
may at any time terminate the employment of Brigham for just cause (as
hereinafter defined) upon seven (7) days' written notice to Brigham. Upon
the expiration of such seven (7) day period, Brigham's employment with
the Company shall cease, and from and after such date the Company shall
have no further liability or obligation to make any payments or provide
any benefits which would otherwise be paid to Brigham hereunder, except
as such have accrued on or before such date. In the event of the
termination of Brigham's employment for just cause as provided herein,
Brigham shall be bound by the provisions of subsection (a) of this
Section in the same manner as if his termination had been voluntary, and
Brigham shall not compete with the Company as provided therein for a
period of one (1) year from the date of termination of Brigham's
employment.
As used in this subsection (c), "just cause" shall be deemed to include
only the following:
(i) Brigham's conviction of a felony involving moral turpitude
or dishonesty; or
(ii) Brigham's persistent failure to comply with the reasonable
directives or assignments of the Company's Board of Directors,
provided that such directives or assignments are consistent
with Brigham's status and position as set forth in Section 2 of
this Agreement; or
(iii) Brigham's persistent failure to devote his full time and
efforts to the business and affairs of the Company in the
manner contemplated by Section 2 of this Agreement.
(d) CERTAIN EVENTS. In the event that (i) following the termination of
Brigham's employment pursuant to subsection (b) of this Section 4 the
Company shall fail to pay Brigham when due, or within ten (10) business
days thereafter, all current sums payable to Brigham pursuant to said
subsection (b), or (ii) following the termination of Brigham's employment
for any reason whatsoever, the Company or any successor or assignee of
the Company entitled to the benefits of this Agreement shall cease to
conduct the business of the company engaged in by the Company at the
times of such termination, then, and in either such event, the covenants
against competition set forth in subsections (a), (b), and (c) of this
Section 4 shall be terminated and Brigham shall thereafter not be bound
by the provisions thereof. The termination of said covenants against
competition shall not alter or affect the obligation of the Company to
make any payments required to be made to Brigham pursuant to the
provisions of subsection (b) of this Section 4.
5. COVENANT CONCERNING OTHER EMPLOYEES. Should Brigham voluntarily
terminate his employment with the Company for any reason whatsoever,
Brigham hereby covenants that, for a period of one (1) year, Brigham will
not directly or indirectly persuade, induce or otherwise encourage any
other employee of the Company to leave the employ of the Company to join
or form any other firm, corporation, partnership, association, joint
venture, trust or business entity of any kind engaged in, or to be
engaged in the future in, any business which is similar to or competitive
with the business now or at any time hereafter engaged in by the Company.
6. MISCELLANEOUS.
a) NOTICE. Any notice required to be given hereunder shall be given in
writing and shall be delivered by hand or sent by registered or certified
mail, postage prepaid, return receipt requested, or by Federal Express,
if to the Company, at the address of its principal offices on the date
upon which such notice is given, and if to Brigham, at the then current
residential address of Brigham (as reflected on the records of the
Company) by any of the aforesaid means. Any such notice shall be
effective when delivered in person or deposited in the United States
mails in accordance with the provisions of this subsection.
b) DEATH. In the event of the death of Brigham during the term of this
Agreement while he shall be an employee of the Company, Brigham's
compensation pursuant to Section 3 hereof shall cease as of the last day
of the month in which Brigham's death occurs. Any remaining amounts owing
to Brigham pursuant to Section 3 hereof in respect to such month shall be
paid to his estate or shall pass by applicable laws of descent and
distribution. In the event of the death of Brigham after he has
terminated his employment with the Company, but prior to the payment of
all amounts payable to him pursuant to the provisions of subsection (b)
of Section 4 hereof, the remaining such amounts shall be paid to the
representatives of Brigham's estate.
(c) INJUNCTIVE RELIEF. The parties agree that the extent of damage to the
Company in the event of the breach by Brigham of the noncompetition
covenants contained in the agreement attached hereto as ATTACHMENT A
would be difficult or impossible to ascertain and that there would be no
adequate remedy at law available to the Company in the event of such
breach. Therefore, in the event of any such breach, the Company shall be
entitled to enforce any or all of such covenants by injunction or other
equitable relief in addition to receiving damages or other relief to
which the Company may be entitled.
(d) BINDING EFFECT; ASSIGNMENT. The provision of this Agreement shall be
binding upon and shall inure to the benefit of the Company and its
successors and assigns and to the benefit of Brigham and his heirs and
legal representative. This Agreement is a personal contract and the
rights and interest of Brigham herein may not be sold, transferred,
assigned, pledged, or hypothecated and any such attempted sale, transfer,
assignment, pledge or hypothecation shall be null, void and of no effect.
(e) ENTIRE AGREEMENT. Except as set forth in the next succeeding
sentence, this Agreement contains the entire agreement between the
parties hereto with respect to the transactions contemplated herein and
supersedes all prior agreements and understandings, written and oral with
respect to the subject matter hereof, including without limitation the
Employment Agreement dated November 8, 1991 between Brigham and the
Company, and may not be amended or modified except by an instrument in
writing signed by both parties hereto. It is understood and agreed that
the following additional agreements shall remain in full force and effect
and shall not be superceded by this Agreement: (i) the "Agreement in
Connection with Employment" dated August 24, 1989 and appended hereto as
ATTACHMENT A, (ii) the provisions regarding the nonqualified stock
options granted to Brigham contained in the Amendment to Employment
Agreement dated April 13, 1992 between Brigham and the Company, and (iii)
all other incentive and non-qualified stock option agreements previously
entered into between Brigham and the Company, which agreements remain in
full force to the same extent they were in force before this Agreement
was executed.
(f) SEVERABILITY. If any provision of this Agreement is declared invalid,
illegal or unenforceable, such provision shall be severed and all
remaining provisions shall continue in full force and effect.
(g) LAW GOVERNING. This Agreement shall be governed by and enforced in
accordance with the laws of the State of Maine
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
intending the same to take effect as a sealed instrument, as of the date
first above written.
IMMUCELL CORPORATION
/S/ Michael F. Brigham /S/ Anthony B. Cashen
Michael F. Brigham By: Anthony B. Cashen
Vice President and Chief Financial Member, Compensation and Stock
Officer Option Committee
IMMUCELL CORPORATION AND SUBSIDIARY
Exhibit 10.23
Employment Agreement dated April 29, 1999 between the Registrant and
Joseph H. Crabb.
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made this 29th day of April, 1999, between IMMUCELL
CORPORATION, a Delaware Corporation (the "Company"), and Joseph H. Crabb,
of Newfield, Maine ("Crabb").
WITNESSETH:
In consideration of the mutual promises hereinafter contained, the
parties hereto agree as follows:
2. EMPLOYMENT AND TERM. The Company hereby employs Crabb and Crabb hereby
accepts employment by the Company subject to the provisions of this
Agreement for a term commencing on April 29, 1999 and ending upon the
date of termination of Crabb's employment with the Company.
2. DUTIES OF CRABB. Crabb shall be employed by the Company as Vice
President and Chief Scientific Officer to perform such duties consistent
with such a position as Vice President and Chief Scientific Officer as
its Board of Directors shall assign Crabb from time to time. Crabb shall
serve the Company faithfully and diligently, use his best efforts to
promote the interests of the Company, and shall devote his full time and
efforts to the business and affairs of the Company.
3. COMPENSATION.
(a) BASE SALARY. As compensation for his services hereunder, the Company
shall pay Crabb $7,916.66 per month, beginning on February 1, 1999.
During the entire term of this agreement, Crabb's salary shall be subject
to periodic review and adjustment by the Board of Directors of the
Company, which Board of Directors may in its sole discretion change the
salary to an amount greater than that provided for therein; provided,
however, that in no event may the Company's Board of Directors decrease
Crabb's salary below that which is provided for herein.
(b) EMPLOYEE BENEFITS. During the term of this Agreement the Company
shall provide Crabb with the standard health, life, and disability
insurance coverage that is provided to the Company's other non-officer
employees. Crabb shall also be eligible to receive all other employee
benefits of the Company in the same manner and to the same extent as
other employees of the Company in accordance with the Company's policies,
including, without limitation, any incentive pay programs offered by the
Company to all of its non-officer employees.
(c) NONQUALIFIED STOCK OPTIONS.
(8) GRANT. By unanimous resolution of the full Board of Directors on
March 1, 1999 the Company granted to Crabb an option (`Option') to
purchase thirty-one thousand and one hundred (31,100) shares of
ImmuCell common stock (`Shares') at a price equal to $1.3125 per
share.
(9) VESTING. Crabb's right to purchase the Shares subject to this
Option shall vest as follows:
(iv) As to 10,366 Shares on and after March 1, 2000;
(v) As to an additional 10,367 Shares on and after March 1, 2001;
and
(vi) As to the remaining 10,367 Shares on and after March 1, 2002.
(10) EXERCISE. Except as hereinafter provided, the Option may be
exercised in full or in part at any time to the extent vested in
accordance with subsection (2). In no event may the Option be
exercised to purchase fewer than one hundred (100) Shares, unless
fewer than one hundred (100) Shares are subject to the Option.
The purchase price for the Shares acquired upon exercise of the
Option shall be paid (i) in cash or certified check, or (ii) at the
discretion of the Compensation and Stock Option Committee of the
Board of Directors of the Company by delivery of one or more stock
certificates, duly endorsed, evidencing other Shares with a Fair
Market Value on the date of exercise equal to the option price, or
(iii) at the discretion of the Compensation and Stock Option
Committee, by a combination of the methods described in (i) or (ii).
As soon as practicable after Crabb has tendered payment of the
purchase price to the Company, the Company shall provide Crabb with
a Certificate evidencing the Shares purchased. Such certificate
shall include any legends required under federal or state securities
laws.
In the event of Crabb's termination of employment with the
Company (except for by reason of "just cause" as provided by
subsection (c) of Section 4 of this Agreement), disability or death,
the Option shall be exercisable during the eighteen-month period
following the date of Crabb's termination. In the event of Crabb's
termination for "just cause" as provided by subsection (c) of
Section 4, the Option shall be exercisable for the three month
period following such termination only to the extent it was
exercisable at the time of such termination.
(11) EXPIRATION OF OPTION. This Option shall expire at 5:00 p.m.,
Eastern time on February 28, 2009, unless sooner terminated as
provided in Section (c)(3) above, and may not be exercised
thereafter.
(12) NONTRANSFERABILITY. Crabb may not transfer the Option other than
by will or the laws of descent and distribution. During Crabb's
lifetime, only Crabb may exercise the Option.
(13) CHANGE IN CONTROL. In the event of a change in control of the
Company, Crabb's right to purchase Shares subject to the Option
shall vest immediately. For purposes of this Amendment, `change in
control' shall mean any one of the following events:
(d) Any person shall become beneficial owner, directly or
indirectly, of securities representing fifty percent
(50%) or more of the combined voting power of the
Company's then outstanding stock.
As used in this Paragraph 6 (a), `beneficial owner' shall
have the meaning ascribed to it from time to time under rules
promulgated by the Securities and Exchange Commission pursuant
to Section 13 (d) of the Securities Exchange Act of 1934, or
any similar successor statute or rule; and a `person' shall
include any natural person, corporation, partnership, trust,
association, or any group or combination thereof, whose
ownership of the Company stock would be reportable pursuant to
such provision of the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder;
(e) The Company's stockholders approve (i) any
consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation
or pursuant to which shares of Company common stock
would be converted into cash, securities or other
property, or (ii) any sale, lease, exchange,
liquidation or other transfer (in one transaction or a
series of transactions) of all or substantially all of
the assets of the Company.
(f) Any other event which a majority of all the Company's
Directors who are not employees of the Company
determines constitutes a change of control.
(14) NO REGISTRATION OF SECURITIES. The parties agree that the
Company presently intends to rely on the securities registration
exemption contained in Section 10502 (1) (L) of the Revised Maine
Securities Act and that, accordingly, no registration or exemption
filing shall be made by the Company under such Act with respect to
the Shares. Crabb acknowledges that transfer of the Shares may be
restricted by applicable federal and state securities laws and that
the Shares when issued shall contain an appropriate legend to that
effect. Notwithstanding the foregoing, the Company agrees to
register these shares in conjunction with its next Registration
Statement on Form S-8 to be filed with the Securities and Exchange
Commission.
(d) BONUS. A cash bonus will be paid to Crabb by the Company if certain
performance objectives are met during any fiscal year. These objectives
will be specified by the Company's Board of Directors on an annual basis.
Each and any such annual incentive compensation agreement shall be
incorporated by reference into this Employment Agreement. Any bonus
earned during a fiscal year will be paid by 1 February of the next fiscal
year.
4. TERMINATION OF EMPLOYMENT.
(b) VOLUNTARY TERMINATION. Should Crabb voluntarily terminate his
employment with the company,
Crabb hereby covenants that, for a period of one (l) year he will abide
by the terms of the "Agreement in Connection with Employment" dated
September 19, 1988 between Crabb and the Company, a copy of which is
appended hereto as ATTACHMENT A.
(b) OTHER TERMINATION. (i) Should Crabb's employment with the Company
terminate for any reason except through Crabb's voluntary act or by
termination for "just cause" as provided by subsection (c) of this
Section 4 or (ii) should Crabb's status or position with the Company be
in any way altered without Crabb's consent so as to materially reduce
Crabb's status or responsibilities in a manner inconsistent with his
position as Vice President and Chief Scientific Officer of the Company
and should Crabb resign from all offices and positions held with the
Company in response to such change or alteration in his status or
position with the Company or (iii) should the Company terminate Crabb's
employment at any time, Crabb shall receive from the Company salary and
benefits at the monthly level existing prior to termination for an
additional three (3) months after the date of termination of Crabb's
employment.
In consideration for the payments to be made to him pursuant to this
subsection (b), Crabb shall be bound by the provisions of subsection (a)
of this Section in the same manner as if his termination had been
voluntary, and Crabb shall not compete with the Company as provided
therein for a period of one (1) year from the date of termination of
Crabb's employment by the Company.
(c) TERMINATION FOR JUST CAUSE. Notwithstanding the forgoing provisions
of this Section 4, a majority of the Board of Directors of the Company
may at any time terminate the employment of Crabb for just cause (as
hereinafter defined) upon seven (7) days' written notice to Crabb. Upon
the expiration of such seven (7) day period, Crabb's employment with the
Company shall cease, and from and after such date the Company shall have
no further liability or obligation to make any payments or provide any
benefits which would otherwise be paid to Crabb hereunder, except as such
have accrued on or before such date. In the event of the termination of
Crabb's employment for just cause as provided herein, Crabb shall be
bound by the provisions of subsection (a) of this Section in the same
manner as if his termination had been voluntary, and Crabb shall not
compete with the Company as provided therein for a period of one (1) year
from the date of termination of Crabb's employment.
As used in this subsection (c), "just cause" shall be deemed to include
only the following:
(i) Crabb's conviction of a felony involving moral turpitude or
dishonesty; or
(ii) Crabb's persistent failure to comply with the reasonable
directives or assignments of the Company's Board of Directors,
provided that such directives or assignments are consistent
with Crabb's status and position as set forth in Section 2 of
this Agreement; or
(iii) Crabb's persistent failure to devote his full time and
efforts to the business and affairs of the Company in the
manner contemplated by Section 2 of this Agreement.
(d) CERTAIN EVENTS. In the event that (i) following the termination of
Crabb's employment pursuant to subsection (b) of this Section 4 the
Company shall fail to pay Crabb when due, or within ten (10) business
days thereafter, all current sums payable to Crabb pursuant to said
subsection (b), or (ii) following the termination of Crabb's employment
for any reason whatsoever, the Company or any successor or assignee of
the Company entitled to the benefits of this Agreement shall cease to
conduct the business of the Company engaged in by the Company at the
times of such termination, then, and in either such event, the covenants
against competition set forth in subsections (a), (b), and (c) of this
Section 4 shall be terminated and Crabb shall thereafter not be bound by
the provisions thereof. The termination of said covenants against
competition shall not alter or affect the obligation of the Company to
make any payments required to be made to Crabb pursuant to the provisions
of subsection (b) of this Section 4.
5. COVENANT CONCERNING OTHER EMPLOYEES. Should Crabb voluntarily
terminate his employment with the Company for any reason whatsoever,
Crabb hereby covenants that, for a period of one (1) year, Crabb will not
directly or indirectly persuade, induce or otherwise encourage any other
employee of the Company to leave the employ of the Company to join or
form any other firm, corporation, partnership, association, joint
venture, trust or business entity of any kind engaged in, or to be
engaged in the future in, any business which is similar to or competitive
with the business now or at any time hereafter engaged in by the Company.
6. MISCELLANEOUS.
a) NOTICE. Any notice required to be given hereunder shall be given in
writing and shall be delivered by hand or sent by registered or certified
mail, postage prepaid, return receipt requested, or by Federal Express,
if to the Company, at the address of its principal offices on the date
upon which such notice is given, and if to Crabb, at the then current
residential address of Crabb (as reflected on the records of the Company)
by any of the aforesaid means. Any such notice shall be effective when
delivered in person or deposited in the United States mails in accordance
with the provisions of this subsection.
b) DEATH. In the event of the death of Crabb during the term of this
Agreement while he shall be an employee of the Company, Crabb's
compensation pursuant to Section 3 hereof shall cease as of the last day
of the month in which Crabb's death occurs. Any remaining amounts owing
to Crabb pursuant to Section 3 hereof in respect to such month shall be
paid to his estate or shall pass by applicable laws of descent and
distribution. In the event of the death of Crabb after he has terminated
his employment with the Company, but prior to the payment of all amounts
payable to him pursuant to the provisions of subsection (b) of Section 4
hereof, the remaining such amounts shall be paid to the representatives
of Crabb's estate.
(c) INJUNCTIVE RELIEF. The parties agree that the extent of damage to the
Company in the event of the breach by Crabb of the noncompetition
covenants contained in the agreement attached hereto as ATTACHMENT A
would be difficult or impossible to ascertain and that there would be no
adequate remedy at law available to the Company in the event of such
breach. Therefore, in the event of any such breach, the Company shall be
entitled to enforce any or all of such covenants by injunction or other
equitable relief in addition to receiving damages or other relief to
which the Company may be entitled.
(d) BINDING EFFECT; ASSIGNMENT. The provision of this Agreement shall be
binding upon and shall inure to the benefit of the Company and its
successors and assigns and to the benefit of Crabb and his heirs and
legal representative. This Agreement is a personal contract and the
rights and interest of Crabb herein may not be sold, transferred,
assigned, pledged, or hypothecated and any such attempted sale, transfer,
assignment, pledge or hypothecation shall be null, void and of no effect.
(e) ENTIRE AGREEMENT. Except as set forth in the next succeeding
sentence, this Agreement contains the entire agreement between the
parties hereto with respect to the transactions contemplated herein and
supersedes all prior agreements and understandings, written and oral with
respect to the subject matter hereof, including without limitation the
Employment Agreement dated November 8, 1991 as amended on March 17, 1992
between Crabb and the Company, and may not be amended or modified except
by an instrument in writing signed by both parties hereto. It is
understood and agreed that the following additional agreements shall
remain in full force and effect and shall not be superceded by this
Agreement: (i) the "Agreement in Connection with Employment" dated
September 19, 1988 and appended hereto as ATTACHMENT A, (ii) the
provisions regarding the nonqualified stock options granted to Crabb
contained in the Amendment to Employment Agreement dated April 13, 1992
between Crabb and the Company, and (iii) all other incentive and non-
qualified stock option agreements previously entered into between Crabb
and the Company, which agreements remain in full force to the same extent
they were in force before this Agreement was executed.
(f) SEVERABILITY. If any provision of this Agreement is declared invalid,
illegal or unenforceable, such provision shall be severed and all
remaining provisions shall continue in full force and effect.
(g) LAW GOVERNING. This Agreement shall be governed by and enforced in
accordance with the laws of the State of Maine
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
intending the same to take effect as a sealed instrument, as of the date
first above written.
IMMUCELL CORPORATION
/S/ Joseph H. Crabb /S/ Anthony B. Cashen
Joseph H. Crabb By: Anthony B. Cashen
Vice President and Chief Scientific Member, Compensation and
Officer Stock Option Committee
IMMUCELL CORPORATION AND SUBSIDIARY
Exhibit 10.24
Employment Agreement dated April 29, 1999 between the Registrant and
Stafford C. Walker.
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made this 29th day of April, 1999, between IMMUCELL
CORPORATION, a Delaware Corporation (the "Company"), and Stafford C.
Walker, of Carmel, Indiana ("Walker").
WITNESSETH:
In consideration of the mutual promises hereinafter contained, the
parties hereto agree as follows:
3. EMPLOYMENT AND TERM. The Company hereby employs Walker and Walker
hereby
accepts employment by the Company subject to the provisions of this
Agreement for a term commencing on April 29, 1999 and ending upon the
date of termination of Walker's employment with the Company.
2. DUTIES OF WALKER. Walker shall be employed by the Company as Vice
President and Chief Marketing Officer to perform such duties consistent
with such a position as Vice President and Chief Marketing Officer as its
Board of Directors shall assign Walker from time to time. Walker shall
serve the Company faithfully and diligently, use his best efforts to
promote the interests of the Company, and shall devote his full time and
efforts to the business and affairs of the Company.
3. COMPENSATION.
(a) BASE SALARY. As compensation for his services hereunder, the Company
shall pay Walker $7,916.66 per month, beginning on February 1, 1999.
During the entire term of this agreement, Walker's salary shall be
subject to periodic review and adjustment by the Board of Directors of
the Company, which Board of Directors may in its sole discretion change
the salary to an amount greater than that provided for therein; provided,
however, that in no event may the Company's Board of Directors decrease
Walker's salary below that which is provided for herein.
(b) EMPLOYEE BENEFITS. During the term of this Agreement the Company
shall provide Walker with the standard health, life, and disability
insurance coverage that is provided to the Company's other non-officer
employees. Walker shall also be eligible to receive all other employee
benefits of the Company in the same manner and to the same extent as
other employees of the Company in accordance with the Company's policies,
including, without limitation, any incentive pay programs offered by the
Company to all of its non-officer employees.
(c) NONQUALIFIED STOCK OPTIONS.
(15) GRANT. By unanimous resolution of the full Board of Directors on
March 1, 1999 the Company granted to Walker an option (`Option') to
purchase thirty-one thousand and one hundred (31,100) shares of
ImmuCell common stock (`Shares') at a price equal to $1.3125 per
share.
(16) VESTING. Walker's right to purchase the Shares subject to this
Option shall vest as follows:
(vii) As to 10,366 Shares on and after March 1, 2000;
(viii) As to an additional 10,367 Shares on and after March 1, 2001;
and
(ix) As to the remaining 10,367 Shares on and after March 1, 2002.
(17) EXERCISE. Except as hereinafter provided, the Option may be
exercised in full or in part at any time to the extent vested in
accordance with subsection (2). In no event may the Option be
exercised to purchase fewer than one hundred (100) Shares, unless
fewer than one hundred (100) Shares are subject to the Option.
The purchase price for the Shares acquired upon exercise of the
Option shall be paid (i) in cash or certified check, or (ii) at the
discretion of the Compensation and Stock Option Committee of the
Board of Directors of the Company by delivery of one or more stock
certificates, duly endorsed, evidencing other Shares with a Fair
Market Value on the date of exercise equal to the option price, or
(iii) at the discretion of the Compensation and Stock Option
Committee, by a combination of the methods described in (i) or (ii).
As soon as practicable after Walker has tendered payment of the
purchase price to the Company, the Company shall provide Walker with
a Certificate evidencing the Shares purchased. Such certificate
shall include any legends required under federal or state securities
laws.
In the event of Walker's termination of employment with the
Company (except for by reason of "just cause" as provided by
subsection (c) of Section 4 of this Agreement), disability or death,
the Option shall be exercisable during the eighteen-month period
following the date of Walker's termination. In the event of
Walker's termination for "just cause" as provided by subsection (c)
of Section 4, the Option shall be exercisable for the three month
period following such termination only to the extent it was
exercisable at the time of such termination.
(18) EXPIRATION OF OPTION. This Option shall expire at 5:00 p.m.,
Eastern time on February 28, 2009, unless sooner terminated as
provided in Section (c)(3) above, and may not be exercised
thereafter.
(19) NONTRANSFERABILITY. Walker may not transfer the Option other
than by will or the laws of descent and distribution. During
Walker's lifetime, only Walker may exercise the Option.
(20) CHANGE IN CONTROL. In the event of a change in control of the
Company, Walker's right to purchase Shares subject to the Option
shall vest immediately. For purposes of this Amendment, `change in
control' shall mean any one of the following events:
(g) Any person shall become beneficial owner, directly or
indirectly, of securities representing fifty percent
(50%) or more of the combined voting power of the
Company's then outstanding stock.
As used in this Paragraph 6 (a), `beneficial owner' shall
have the meaning ascribed to it from time to time under rules
promulgated by the Securities and Exchange Commission pursuant
to Section 13 (d) of the Securities Exchange Act of 1934, or
any similar successor statute or rule; and a `person' shall
include any natural person, corporation, partnership, trust,
association, or any group or combination thereof, whose
ownership of the Company stock would be reportable pursuant to
such provision of the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder;
(h) The Company's stockholders approve (i) any
consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation
or pursuant to which shares of Company common stock
would be converted into cash, securities or other
property, or (ii) any sale, lease, exchange,
liquidation or other transfer (in one transaction or a
series of transactions) of all or substantially all of
the assets of the Company.
(i) Any other event which a majority of all the Company's
Directors who are not employees of the Company
determines constitutes a change of control.
(21) NO REGISTRATION OF SECURITIES. The parties agree that the
Company presently intends to rely on the securities registration
exemption contained in Section 10502 (1) (L) of the Revised Maine
Securities Act and that, accordingly, no registration or exemption
filing shall be made by the Company under such Act with respect to
the Shares. Walker acknowledges that transfer of the Shares may be
restricted by applicable federal and state securities laws and that
the Shares when issued shall contain an appropriate legend to that
effect. Notwithstanding the foregoing, the Company agrees to
register these shares in conjunction with its next Registration
Statement on Form S-8 to be filed with the Securities and Exchange
Commission.
(d) BONUS. A cash bonus will be paid to Walker by the Company if certain
performance objectives are met during any fiscal year. These objectives
will be specified by the Company's Board of Directors on an annual basis.
Each and any such annual incentive compensation agreement shall be
incorporated by reference into this Employment Agreement. Any bonus
earned during a fiscal year will be paid by 1 February of the next fiscal
year.
4. TERMINATION OF EMPLOYMENT.
(c) VOLUNTARY TERMINATION. Should Walker voluntarily terminate his
employment with the company,
Walker hereby covenants that, for a period of one (l) year he will abide
by the terms of the "Agreement in Connection with Employment" dated July
7, 1992 between Walker and the Company, a copy of which is appended
hereto as ATTACHMENT A.
(b) OTHER TERMINATION. (i) Should Walker's employment with the Company
terminate for any reason except through Walker's voluntary act or by
termination for "just cause" as provided by subsection (c) of this
Section 4 or (ii) should Walker's status or position with the Company be
in any way altered without Walker's consent so as to materially reduce
Walker's status or responsibilities in a manner inconsistent with his
position as Vice President and Chief Marketing Officer of the Company and
should Walker resign from all offices and positions held with the Company
in response to such change or alteration in his status or position with
the Company or (iii) should the Company terminate Walker's employment at
any time, Walker shall receive from the Company salary and benefits at
the monthly level existing prior to termination for an additional three
(3) months after the date of termination of Walker's employment.
In consideration for the payments to be made to him pursuant to this
subsection (b), Walker shall be bound by the provisions of subsection (a)
of this Section in the same manner as if his termination had been
voluntary, and Walker shall not compete with the Company as provided
therein for a period of one (1) year from the date of termination of
Walker's employment by the Company.
(c) TERMINATION FOR JUST CAUSE. Notwithstanding the forgoing provisions
of this Section 4, a majority of the Board of Directors of the Company
may at any time terminate the employment of Walker for just cause (as
hereinafter defined) upon seven (7) days' written notice to Walker. Upon
the expiration of such seven (7) day period, Walker's employment with the
Company shall cease, and from and after such date the Company shall have
no further liability or obligation to make any payments or provide any
benefits which would otherwise be paid to Walker hereunder, except as
such have accrued on or before such date. In the event of the termination
of Walker's employment for just cause as provided herein, Walker shall be
bound by the provisions of subsection (a) of this Section in the same
manner as if his termination had been voluntary, and Walker shall not
compete with the Company as provided therein for a period of one (1) year
from the date of termination of Walker's employment.
As used in this subsection (c), "just cause" shall be deemed to include
only the following:
(i) Walker's conviction of a felony involving moral turpitude
or dishonesty; or
(ii) Walker's persistent failure to comply with the reasonable
directives or assignments of the Company's Board of Directors,
provided that such directives or assignments are consistent
with Walker's status and position as set forth in Section 2 of
this Agreement; or
(iii) Walker's persistent failure to devote his full time and
efforts to the business and affairs of the Company in the
manner contemplated by Section 2 of this Agreement.
(d) CERTAIN EVENTS. In the event that (i) following the termination of
Walker's employment pursuant to subsection (b) of this Section 4 the
Company shall fail to pay Walker when due, or within ten (10) business
days thereafter, all current sums payable to Walker pursuant to said
subsection (b), or (ii) following the termination of Walker's employment
for any reason whatsoever, the Company or any successor or assignee of
the Company entitled to the benefits of this Agreement shall cease to
conduct the business of the Company engaged in by the Company at the
times of such termination, then, and in either such event, the covenants
against competition set forth in subsections (a), (b), and (c) of this
Section 4 shall be terminated and Walker shall thereafter not be bound by
the provisions thereof. The termination of said covenants against
competition shall not alter or affect the obligation of the Company to
make any payments required to be made to Walker pursuant to the
provisions of subsection (b) of this Section 4.
5. COVENANT CONCERNING OTHER EMPLOYEES. Should Walker voluntarily
terminate his employment with the Company for any reason whatsoever,
Walker hereby covenants that, for a period of one (1) year, Walker will
not directly or indirectly persuade, induce or otherwise encourage any
other employee of the Company to leave the employ of the Company to join
or form any other firm, corporation, partnership, association, joint
venture, trust or business entity of any kind engaged in, or to be
engaged in the future in, any business which is similar to or competitive
with the business now or at any time hereafter engaged in by the Company.
6. MISCELLANEOUS.
a) NOTICE. Any notice required to be given hereunder shall be given in
writing and shall be delivered by hand or sent by registered or certified
mail, postage prepaid, return receipt requested, or by Federal Express,
if to the Company, at the address of its principal offices on the date
upon which such notice is given, and if to Walker, at the then current
residential address of Walker (as reflected on the records of the
Company) by any of the aforesaid means. Any such notice shall be
effective when delivered in person or deposited in the United States
mails in accordance with the provisions of this subsection.
b) DEATH. In the event of the death of Walker during the term of this
Agreement while he shall be an employee of the Company, Walker's
compensation pursuant to Section 3 hereof shall cease as of the last day
of the month in which Walker's death occurs. Any remaining amounts owing
to Walker pursuant to Section 3 hereof in respect to such month shall be
paid to his estate or shall pass by applicable laws of descent and
distribution. In the event of the death of Walker after he has terminated
his employment with the Company, but prior to the payment of all amounts
payable to him pursuant to the provisions of subsection (b) of Section 4
hereof, the remaining such amounts shall be paid to the representatives
of Walker's estate.
(c) INJUNCTIVE RELIEF. The parties agree that the extent of damage to the
Company in the event of the breach by Walker of the noncompetition
covenants contained in the agreement attached hereto as ATTACHMENT A
would be difficult or impossible to ascertain and that there would be no
adequate remedy at law available to the Company in the event of such
breach. Therefore, in the event of any such breach, the Company shall be
entitled to enforce any or all of such covenants by injunction or other
equitable relief in addition to receiving damages or other relief to
which the Company may be entitled.
(d) BINDING EFFECT; ASSIGNMENT. The provision of this Agreement shall be
binding upon and shall inure to the benefit of the Company and its
successors and assigns and to the benefit of Walker and his heirs and
legal representative. This Agreement is a personal contract and the
rights and interest of Walker herein may not be sold, transferred,
assigned, pledged, or hypothecated and any such attempted sale, transfer,
assignment, pledge or hypothecation shall be null, void and of no effect.
(e) ENTIRE AGREEMENT. Except as set forth in the next succeeding
sentence, this Agreement contains the entire agreement between the
parties hereto with respect to the transactions contemplated herein and
supersedes all prior agreements and understandings, written and oral with
respect to the subject matter hereof and may not be amended or modified
except by an instrument in writing signed by both parties hereto. It is
understood and agreed that the following additional agreements shall
remain in full force and effect and shall not be superceded by this
Agreement: (i) the "Agreement in Connection with Employment" dated July
7, 1992 and appended hereto as ATTACHMENT A AND (ii) all other incentive
and non-qualified stock option agreements previously entered into between
Walker and the Company, which agreements remain in full force to the same
extent they were in force before this Agreement was executed.
(f) SEVERABILITY. If any provision of this Agreement is declared invalid,
illegal or unenforceable, such provision shall be severed and all
remaining provisions shall continue in full force and effect.
(g) LAW GOVERNING. This Agreement shall be governed by and enforced in
accordance with the laws of the State of Maine
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
intending the same to take effect as a sealed instrument, as of the date
first above written.
IMMUCELL CORPORATION
/S/ Stafford C. Walker /S/ Anthony B. Cashen
Stafford C. Walker By: Anthony B. Cashen
Vice President and Chief Marketing Officer Member, Compensation and Stock
Option Committee
IMMUCELL CORPORATION AND SUBSIDIARY
Exhibit 10.25
License Agreement between the Registrant and Hydros Environmental
Diagnostics, Inc. dated December 8, 1999.
<PAGE>
LICENSE AGREEMENT
LICENSE AGREEMENT
This License Agreement ("Agreement") is made effective the 8th day of
December, 1999 by and between Hydros Environmental Diagnostics, Inc., a
Massachusetts corporation with its principal place of business at 230
Jones Road, Falmouth, Massachusetts 02540, USA (hereinafter called
"Hydros"), and ImmuCell Corporation (hereinafter called "ImmuCell"), a
Delaware corporation with its principal place of business at 56 Evergreen
Drive, Portland, Maine, 04103, USA, together hereinafter called the
Parties.
WHEREAS, Hydros has developed certain technology as described in
Section 1.1 herein entitled "LICENSED TECHNOLOGY", and Hydros is
willing to grant a license for said LICENSED TECHNOLOGY to ImmuCell;
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 the Components
assembled in a Tip format and an associated Tray with Kit Reagents
that can be used to further manufacture diagnostic kits to detect
infectious disease organisms or other substances. Such LICENSED
TECHNOLOGY also shall refer to and include (i) United States Patent
5,171,537 and any additional related patents now or hereafter owned or
licensed by Hydros, (ii) all foreign equivalents thereof, (iii) any
and all U.S. and/or foreign patent applications that claim said
LICENSED TECHNOLOGY. LICENSED TECHNOLOGY does not include the
reagents and other materials exclusively supplied by ImmuCell.
1.2 "Field of Use" shall mean detection of certain diseases in
bovines set forth in Appendix A, through the detection of an agent or
any marker indicating the presence of such disease. This Field of Use
may be expanded pursuant to the provisions of Section 5 of this
Agreement.
1.3 "Territory" shall be worldwide.
1.4 "TTJ" shall mean ImmuCell's product, Tip-Test:
<trademark> Johne's, for which a complete product license application
was submitted to the U.S. Department of Agriculture on or about June
30, 1999. TTJ is the first test to be developed by ImmuCell utilizing
the LICENSED TECHNOLOGY.
1.5 "Kit Reagents" shall mean certain chemical formulations
used to effect the desired diagnostic test result. Kit Reagents do
not include the chemical formulations currently supplied by ImmuCell
for TTJ.
1.6 "Trays" shall mean a multi well plastic container used to
contain the Kit Reagents and Tip(s) together with a lid seal.
1.7 "Tip" shall mean the Hydros AffiniTip, which is a single
plastic tip having at least three elements, two covers and a storage
buffer.
1.8 "Components" shall mean the Kit Reagents, a Tray and a Tip,
which collectively comprise the intended diagnostic test. Components
shall not include the luer adapter or syringe.
1.9 "Bulk Product" shall mean certain non-assembled Components
including Tip(s) and Kit Reagents supplied by Hydros in bulk
containers which are part of the diagnostic test. Bulk Product shall
not include the syringe, luer adapter or Trays.
Section 2: License
2.1(a) Hydros hereby grants to ImmuCell an exclusive license to
use the LICENSED TECHNOLOGY to use and sell Components as part of
diagnostic kits in the Field of Use throughout the Territory for the
term of the Agreement, including any extension thereof.
2.1(b) Hydros hereby further grants to ImmuCell an exclusive
license to use the LICENSED TECHNOLOGY to make Trays and/or Bulk
Product as part of diagnostic kits in the Field of Use throughout the
Territory for the term of the Agreement, including any extension
thereof, provided that ImmuCell meets the minimum purchase
requirements defined in Section 3.1 and pays the royalties due to
Hydros as defined in Section 4.
2.1 (c) Hydros hereby further grants to ImmuCell an exclusive
license to use the LICENSED TECHNOLOGY to make Tips, Trays and/or Bulk
Product as part of diagnostic kits in the Field of Use throughout the
Territory for the term of the Agreement, including any extension
thereof, which license shall be operative only if Hydros fails to
supply a) the minimum purchase requirements of Components defined in
Section 3.1 by the first of each month as defined or b) subsequent
orders for Components, Tips and/or Bulk Product within three months of
an order by ImmuCell, except that any delays caused by ImmuCell
supplying reagents late will not count toward the three month period.
Should ImmuCell exercise its right to make Tips under the LICENSED
TECHNOLOGY, Hydros will provide technical training to ImmuCell
personnel as necessary to enable ImmuCell to make Components; provided
however, that Hydros has no obligation to disclose information that is
protected by any other agreement(s) in force on January 12, 1999.
2.2 The licenses shall revert to a non-exclusive licenses
following the term of the Agreement, including any extension thereof.
The provisions of this Section 2.2 shall survive termination of the
Agreement.
2.3 ImmuCell shall not obtain rights of any kind in the
LICENSED TECHNOLOGY other than the rights specifically set forth
herein.
2.4 Hydros hereby acknowledges receipt from ImmuCell of good
and sufficient payment in January 1999 in consideration for the
licenses granted to ImmuCell pursuant to this Agreement.
Section 3: Supply of Components and Services
3.1 Hydros agrees to sell to ImmuCell, and ImmuCell agrees to
purchase from Hydros those quantities of Components and Tips set forth
in Appendix C at the times specified in Appendix C, subject to
ImmuCell's right to cancel set forth in Section 9.3 hereof.
3.2 Appendix B sets forth the prices to be paid by ImmuCell
to Hydros for all tests in the Field of Use. However, if and when the
bill of materials (for raw materials, direct labor and machine costs)
for the Components of a given test supports a cost that is
significantly different (defined as greater than 5%) from the cost
associated with the TTJ Components, Hydros has the right to adjust the
price commensurate with the increased cost of Components for such
test. Such cost increases will be documented in writing. When the
license becomes non-exclusive, Hydros agrees to sell ImmuCell
Components at prices no less favorable than Components sold to other
companies.
3.3 Prices shall be reviewed as of January 1, 2001 and each
January 1 thereafter during the term of this Agreement. The price to
ImmuCell for Components will not increase at a rate that exceeds the
inflation rate as measured by the U.S. consumer price index for the
previous year plus two percent (2%) and may be adjusted no more than
once per year, except that Hydros may increase the price if it
experiences extraordinary increases in its raw materials (defined as
greater than 5%), in which case costs may be passed on to ImmuCell in
their entirety, and such costs will be documented in writing.
3.4 Hydros shall use its best efforts to ship Components
ordered by ImmuCell promptly after its receipt of any written order
for such Components. ImmuCell agrees to make payment to Hydros in
U.S. Dollars for each shipment within thirty (30) days after arrival
of each shipment of Components.
3.5 Hydros agrees to manufacture and supply in bulk all
Components in such quantities as may be ordered from time to time in
writing (fax, mail or commercial courier) by ImmuCell (subject to a
minimum order of 3,000 Components per shipment prior to applicable
regulatory approval of the product and 10,000 per shipment subsequent
to such regulatory approval of the product) and ship the Components to
ImmuCell. ImmuCell will pay for shipping and any additional handling,
vialing or sealing required.
3.6 Hydros shall provide, at ImmuCell's expense, such
technical training of ImmuCell's personnel and such educational, sales
and technical documentation, information and marketing support as
shall be reasonably requested by ImmuCell in furtherance of the
purposes of this Agreement.
3.7 To facilitate ImmuCell's license to make Trays, Hydros
will assist ImmuCell by introducing ImmuCell to appropriate vendors
for the plastic and lid seal materials for direct ordering by
ImmuCell.
3.8 Title to and all risk of loss of all Components ordered
by ImmuCell hereunder shall pass to ImmuCell upon shipment from
Falmouth, MA. ImmuCell shall pay for and determine the best method of
shipment. Shipping is to be coordinated through Hydros and all
delivery will be scheduled with Hydros in advance.
The provisions of this Section 3 shall survive termination of
the Agreement.
Section 4: Royalties
For every Tip that is manufactured by Hydros and that ImmuCell
packages with a Tray not manufactured by Hydros, ImmuCell will pay
Hydros a royalty of $0.10 per test sold by ImmuCell. Hydros will bill
for royalty payments based on the number of Tips sold by Hydros to
ImmuCell less all Tips purchased by ImmuCell for research and
development. ImmuCell will remit royalty payments, if any, to Hydros
semi-annually, on July 31 and January 31 each year during the term of
this Agreement and any extension thereof.
Section 5: Option to Expand Field of Use
ImmuCell has the option to expand the Field of Use to cover
two additional bovine disease indications selected by ImmuCell
(Disease A and Disease B) by paying Hydros $5,000 upon the signing of
this Agreement. The specific diseases covered by this option must be
named by ImmuCell on or before December 31, 1999. It is understood
that ImmuCell's exclusive rights to the LICENSED TECHNOLOGY with
respect to Disease A and Disease B shall revert to non-exclusive
status if submissions of complete product license applications to the
applicable regulatory agency are not made by January 12, 2002 for
Disease A and January 12, 2003 for Disease B. Such revision of rights
to a non-exclusive status for either Disease A or Disease B shall not
effect the exclusive status for the other disease if the relevant
performance requirements have been met for that other disease.
Section 6: Non-Competition
Hydros agrees not to sell Components of tests to detect the
presence of the diseases set forth in the Field of Use outside of the
Field of Use except at a price that is four times the transfer price
of Components sold to ImmuCell during the term of this Agreement,
including any extension hereof. Hydros will take all necessary steps
to ensure that Components used to manufacture diagnostic tests for the
detection of diseases covered by the Field of Use in other species
shall not be used in the Field of Use. ImmuCell shall not advertise
its diagnostic tests using Components outside the Field of Use nor
will it fund any research that will enable the test's use other than
in bovines. On an annual basis, Hydros shall notify ImmuCell of the
quantity of Components being used for further or final manufacture of
tests for diseases covered by the Field of Use that are being used
outside the Field of Use. In no case shall Hydros use technology or
reagents from ImmuCell to manufacture a test to detect diseases
covered by the Field of Use in a species other than bovine. ImmuCell
agrees not to sell any diagnostic tests in the Field of Use with Tips
that are developed after the date of execution of this Agreement
unless the Tips are obtained from Hydros.
Section 7: Certain Warranties of Hydros
7.1 As to the LICENSED TECHNOLOGY Hydros warrants that it has
the right to grant the licenses to ImmuCell as provided in this
Agreement. However, nothing in this Agreement shall be construed as a
warranty or representation by Hydros 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. If a third party
makes a claim against ImmuCell that the LICENSED TECHNOLOGY infringes any
patent, copyright, trade secret or trademark, Hydros will defend ImmuCell
at Hydros' expense against the claim and pay all costs, damages and
expenses (including reasonable legal fees) incurred by ImmuCell arising
out of such claim. ImmuCell agrees to assist Hydros, at no cost to
ImmuCell, including agreeing to be named as a party plaintiff in any
legal action, in the event that Hydros decides to pursue third party
infringers of the LICENSED TECHNOLOGY.
7.2 Nothing contained in this Agreement shall be construed to
convey to ImmuCell any ownership rights, proprietary interest or other
rights or interest of any kind, except for the licenses granted in
Section 2 and right to use the LICENSED TECHNOLOGY in the manufacture,
distribution and sale of diagnostic tests using Components which is
expressly granted by this Agreement. ImmuCell 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 trade name used by Hydros ("TRADEMARKS"), including the
trademark and trade name "Hydros." ImmuCell 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.
7.3 Hydros warrants that Components sold hereunder shall
perform to ImmuCell's specifications for such Components as set forth
in Appendix D hereto. Hydros disclaims all other warranties not
expressly set forth in this Agreement, including warranties of
merchantability and fitness for a particular purpose.
The provisions of this Section 7 shall survive termination of the
Agreement.
Section 8: Regulatory Registration
8.1 ImmuCell shall utilize commercially reasonable efforts to
conduct clinical trials of products made from the Components in the
Territory. The costs for such clinical trials shall be borne by ImmuCell.
ImmuCell will perform such trials in a timely manner so as to achieve the
regulatory submission milestones set forth in Sections 5 and 9.2. If
requested to do so, Hydros will provide reasonable assistance to ImmuCell
in conducting clinical trials at no cost to ImmuCell.
8.2 Any and all regulatory filings to obtain applicable regulatory
approvals and any and all approvals in the Territory shall be filed in the
name of and owned by ImmuCell.
Section 9: Term And Termination
9.1 Except as provided below, the term of this Agreement shall
begin as of January 12, 1999 and continue until the earlier of (i) December
31, 2006, (ii) a petition for bankruptcy is filed by or against ImmuCell
or (iii) liquidation proceedings are instituted by or against ImmuCell.
ImmuCell may extend the term of exclusivity granted in this Agreement an
additional six (6) years by payment to Hydros of three percent (3%) of
sales of product under this license in the year 2005. Such payment must be
made to Hydros by December 31, 2006
9.2 It is understood that ImmuCell's exclusive rights to LICENSED
TECHNOLOGY with respect to each disease in the Field of Use shall revert to
non-exclusive status if the following is not met: submission of complete
product license application to the applicable regulatory agency by the
following dates: 1) Johne's disease January 12, 2000; 2) Disease #2 and
Disease #3 by January 12, 2001; and 3) Disease #4 by July 12, 2001. Such
reversion of rights to a non-exclusive status for any of the four diseases
shall not effect the exclusive status for any diseases for which
performance requirements have been met.
9.3 ImmuCell may terminate this Agreement at any time by
giving at least ninety (90) days' written notice of such termination
to Hydros. ImmuCell shall pay to Hydros a termination fee of $2,500
if it terminates the Agreement early without cause. This right to
terminate does not apply to the commitments defined in Appendix C,
Part I.
9.4 If ImmuCell at any time defaults in the timely payment
of any monies due to Hydros or commits any material breach of any
other covenant herein contained, and fails to remedy such breach
within ninety (90) days after written notice thereof by Hydros, Hydros
may, at its option, terminate this Agreement by giving written notice
of termination to ImmuCell.
9.5 Upon the termination of this Agreement, ImmuCell shall
remain obligated to pay any outstanding monies owed for Components
sold by Hydros to ImmuCell and the following Sections shall survive
termination or expiration of this Agreement: Sections 2.2, 3, 7, 9.5,
12, 13, 16, 18 and 19.
9.6 Upon the termination of this Agreement, all rights to
LICENSED TECHNOLOGY will revert to Hydros and the license to ImmuCell
shall immediately cease.
Section 10: Distribution Obligation of ImmuCell
ImmuCell shall comply with all governmental laws, ordinances,
rules and regulations applicable in connection its sale or shipment of
, or use or service of diagnostic tests which use Components, or the
fulfillment of any of ImmuCell's obligations under this Agreement
including, but not limited to, the payment of any duties (excluding
Hydros income taxes), obtaining of any governmental permits,
clearances or approvals, and compliance with customs requirements or
testing of Components.
Section 11: Minimums
ImmuCell agrees that the minimums defined by Section 3.1 and
Appendix C are reasonable and that if such annual minimums are not
achieved, the license will become non-exclusive.
Section 12: Confidentiality
Each party acknowledges and agrees that it may be necessary
during the term hereof that each party (the "Disclosing Party")
disclose to the other party (the "Recipient Party") confidential or
proprietary information of the Disclosing Party pertaining to the
Field of Use. Each Recipient Party agrees that during the term hereof
and for a period of 5 years thereafter, it shall keep confidential and
refrain from disclosing to any third party or using for its own
account, any such confidential or proprietary information of the
Disclosing Party. The Parties agree that the foregoing provisions
shall not apply with respect to any information that (i) is (through
no improper action or inaction by the Recipient Party) generally known
to the public, (ii) was in the Recipient Party's possession or known
by it prior to receipt from the Disclosing Party, or (iii) was
rightfully disclosed to the Recipient Party by a third party without
restriction. Each Recipient Party may make disclosures required by
court order provided it uses diligent effort to limit disclosures and
to obtain confidential treatment or a protective order and has allowed
Hydros the opportunity to participate in the proceeding. Each
Recipient Party further agrees that upon expiration or termination of
this Agreement, it shall return all such information which is in
writing, along with all pamphlets, referencing materials, manuals,
brochures and the like which may have been furnished to the Recipient
Party by the Disclosing Party during the term hereof, including all
copies, reproduction or translations thereof, and Hydros shall return
to ImmuCell all reagents in its possession therefore delivered to
Hydros by ImmuCell. The provisions of this Section 12 shall survive
termination of the Agreement.
Section 13: 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 un-enforceability 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 un-enforceability. The provisions of this Section
13 shall survive termination of the Agreement.
Section 14: 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 15: Future Products
Hydros agrees, in the event that it develops new products for
which a market to end customers in the bovine market may exist, that
it shall enter into good faith negotiations with ImmuCell with respect
to the distribution of such products by ImmuCell in the bovine market.
Section 16: Patent Marking:
The Parties shall agree on the manner in which patent(s) and
patent application(s) are shown on the end customer packaging of
products using Components to comply with applicable United States and
international law. Except as provided in this paragraph, all end
customer package copy shall be at the sole discretion and sole
responsibility of ImmuCell. The provisions of this Section 16 shall
survive termination of the Agreement.
Section 17: Benefit/Non-Assignability.
This Agreement shall be assignable to, inure to the benefit of
and be binding upon purchasers acquiring all or substantially all of
the assets of ImmuCell or Hydros to which this Agreement relates, and
any successor to ImmuCell or Hydros by merger, and no other person,
and this Agreement and the rights and obligations of either party
hereunder may not otherwise be assigned or transferred without the
written consent of the other party; provided, however, that Hydros
acknowledges and agrees that ImmuCell may appoint sub-distributors to
assist in discharging ImmuCell marketing obligations hereunder.
Section 18: Governing Law.
The rights and obligations of the Parties under this Agreement
shall be governed by the laws of the Commonwealth of Massachusetts,
USA. The provisions of this Section 18 shall survive termination of
the Agreement.
Section 19: Notices:
Any notice to be served or given hereunder shall be deemed to
have been given when delivered personally or sent by certified or
registered United States mail, postage prepaid, to Hydros or
ImmuCell, as the case may be at the respective addresses set forth in
this Agreement or such other address for which notice was given in the
manner provided herein. The provisions of this Section 19 shall
survive termination of the Agreement.
Section 20: Relationship.
ImmuCell shall act only as an independent contractor under
this Agreement and shall have no power, right or authority, expressed
or implied, to create or assume in any manner any obligation of any
kind on behalf of Hydros or in Hydros' name. Neither party is in any
respect an agent, employee or a legal representative of the other
party and neither party shall hold itself out as such for any purpose
whatsoever.
Section 21: 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 WHEREOF, ImmuCell and Hydros have executed this Agreement
by their duly authorized officers or representatives, effective on the
date first above written.
Hydros, Inc. ImmuCell Corporation
By: /S/ Steven H. Boyd By: /S/ Michael F. Brigham
Steven H. Boyd, President Michael F. Brigham,
Vice President and CFO
(Date) 12/8/99 (Date) 12/9/99
Witness : /S/ Kendra Williams Witness: /S/ Joyce N. Watson
(Date) 12/8/99 (Date) 12/9/99
IMMUCELL CORPORATION AND SUBSIDIARY
Exhibit 23.1
Consent of PricewaterhouseCoopers LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
of ImmuCell Corporation on Form S-8 of our report dated January 28, 2000 on
our audits of the consolidated financial statements of ImmuCell Corporation
and Subsidiary as of December 31, 1999 and 1998, and for each of the three
years in the period ended December 31, 1999, which report is included in
this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
Portland, Maine
March 17, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
IMMUCELL CORPORATION AND SUBSIDIARY
Exhibit 27.1
Financial Data Schedule (Filed Only Electronically)
Financial Data Schedule
IMMUCELL CORPORATION
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE ANNUAL PERIOD ENDED DECEMBER
31, 1999 AS REPORTED ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,823,688
<SECURITIES> 0
<RECEIVABLES> 494,059
<ALLOWANCES> 40,920
<INVENTORY> 520,656
<CURRENT-ASSETS> 2,825,309
<PP&E> 1,661,214
<DEPRECIATION> 881,384
<TOTAL-ASSETS> 3,855,979
<CURRENT-LIABILITIES> 605,923
<BONDS> 434,658
0
0
<COMMON> 2,815,398
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,855,979
<SALES> 4,722,374
<TOTAL-REVENUES> 4,909,245
<CGS> 2,152,959
<TOTAL-COSTS> 4,294,275
<OTHER-EXPENSES> 24,370
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,757
<INCOME-PRETAX> 550,843
<INCOME-TAX> 0
<INCOME-CONTINUING> 550,843
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 550,843
<EPS-BASIC> .22
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