UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
COMMISSION FILE NUMBER 1-10451
NORTH AMERICAN VACCINE, INC.
----------------------------
(Exact name of registrant as specified in its charter)
CANADA 98-0121241
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10150 OLD COLUMBIA ROAD, COLUMBIA, MARYLAND 21046
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 309-7100
FORMER ADDRESS:
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---
Indicate the number of shares outstanding of each of the registrant's classes of
Common Stock, as of the latest practicable date.
COMMON STOCK, NO PAR VALUE, OUTSTANDING AS OF NOVEMBER 3, 1999 - 32,870,350
SHARES
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TABLE OF CONTENTS
PAGE NUMBER
PART I. FINANCIAL INFORMATION -----------
Item 1. Financial Statements................................. 3
Consolidated Balance Sheets.......................... 4
Consolidated Statements of Operations................ 5
Consolidated Statements of Shareholders' Deficit..... 6
Consolidated Statements of Cash Flows................ 7
Notes to Condensed Consolidated Financial Statements. 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.......................................... 27
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 30
Item 2. Changes in Securities and Use of Proceeds............ 30
Item 6. Exhibits and Reports on Form 8-K..................... 31
SIGNATURES ................................................... 32
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
The following unaudited, condensed consolidated financial statements of North
American Vaccine, Inc. and Subsidiaries (the "Company") have been prepared in
accordance with the instructions to Form 10-Q and, therefore, omit or condense
certain footnotes and other information normally included in financial
statements prepared in accordance with generally accepted accounting principles.
This report should be read in conjunction with the Company's Annual Report on
Form 10-K filed for the year ended December 31, 1998. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial information for the interim
periods reported have been made. Results of operations for the three and nine
months ended September 30, 1999, will not necessarily be indicative of the
results for the entire fiscal year ending December 31, 1999.
3
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<CAPTION>
NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) SEPTEMBER 30, DECEMBER 31,
1999 1998
--------------- --------------
ASSETS (UNAUDITED)
- ------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,917 $ 22,953
Accounts receivable 1,729 1,625
Inventory 4,457 4,067
Prepaid expenses and other current assets 810 998
---------------- --------------
Total current assets 8,913 29,643
Property, plant and equipment, net 21,076 25,315
Investment in affiliate, at market - 1,554
Deferred financing costs, net 2,566 2,505
Cash restricted for lease obligation 3,624 4,877
Other assets 858 631
---------------- --------------
TOTAL ASSETS $ 37,037 $ 64,525
================ ==============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 4,448 $ 3,881
Short term debt 4,000 -
Deferred revenue - 850
Obligation under capital leases, current portion 1,927 1,754
Other current liabilities 8,360 5,848
---------------- --------------
Total current liabilities 18,735 12,333
6.5% Convertible subordinated notes, due May 1, 2003 75,326 83,734
4.5% Convertible secured notes, due November 13, 2003 25,000 25,000
Obligation under capital leases, net of current portion 1,016 2,356
Deferred rent credits, net of current portion 186 76
---------------- --------------
Total liabilities 120,263 123,499
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Preferred stock, no par value; unlimited shares
authorized-Series A, convertible; issued
and outstanding 2,000,000 shares;
entitled to Can $2.50 per share (or U.S. $3.4
million in the aggregate) in liquidation 6,538 6,538
Common stock, no par value; unlimited shares authorized;
issued 32,859,581 shares at September 30, 1999
and 32,216,096 shares at December 31, 1998 90,473 80,824
Additional paid-in capital 13,047 11,956
Cumulative comprehensive income excluded from net loss - 926
Accumulated deficit 193,284) (159,218)
---------------- ---------------
Total shareholders' deficit (83,226) (58,974)
---------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 37,037 $ 64,525
================ ===============
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Product sales $ 1,173 $ 501 $ 3,589 $ 845
Marketing, research and development agreements 3,249 2,563 4,037 4,282
-------------- -------------- -------------- -------------
Total revenues 4,422 3,064 7,626 5,127
-------------- -------------- -------------- -------------
OPERATING EXPENSES:
Production 5,449 5,108 15,821 14,274
Research and development 4,202 4,731 11,827 13,264
Selling, general and administrative 3,465 2,383 8,585 7,198
-------------- -------------- -------------- -------------
Total operating expenses 13,116 12,222 36,233 34,736
-------------- -------------- -------------- -------------
OPERATING LOSS (8,694) (9,158) (28,607) (29,609)
OTHER INCOME (EXPENSE):
Gain on sale of investment in affiliate - - 952 -
Interest and dividend income 66 276 446 1,232
Interest expense (2,193) (1,571) (6,857) (4,793)
-------------- -------------- -------------- -------------
NET LOSS $ (10,821) $ (10,453) $ (34,066) $ (33,170)
============== ============== ============== =============
BASIC AND DILUTED NET LOSS PER SHARE $ (0.33) $ (0.32) $ (1.05) $ (1.03)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 32,844 32,206 32,499 32,132
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
SERIES A CUMULATIVE
CONVERTIBLE COMPREHENSIVE TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL INCOME ACCUM- SHARE-
-------------------- ---------------------- PAID-IN EXCLUDED FROM ULATED HOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL NET LOSS DEFICIT DEFICIT
-------- ----------- ---------- ----------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1998 2,000 $ 6,538 32,216 $ 80,824 $ 11,956 $ 926 $ (159,218) $ (58,974)
Net loss - - - - - - (34,066) (34,066)
Increase in market
value of investment - - - - - 26 - 26
Realized investment
holding gain - - - - - (952) - (952)
----------
Comprehensive loss (34,992)
Exercises of stock
options - - 58 169 - - - 169
Shares issued under
401(k) plan - - 36 252 - - - 252
Warrant expense - - - - 1,091 - - 1,091
Conversion of 6.5%
subordinated
convertible notes
into common stock - - 550 9,228 - - - 9,228
Balance,
-------- --------- -------- ---------- ---------- ------------ ------------ -----------
September 30, 1999 2,000 $ 6,538 32,860 $ 90,473 $ 13,047 $ - $ (193,284) $ (83,226)
======== ========= ======== ========== ========== ============ ============ ===========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (34,066) $ (33,170)
Adjustments to reconcile net loss to net cash used in
operating activities:
Gain on sale of investment in affiliate (952) -
Loss on disposal of property, plant, and equipment 384 -
Depreciation and amortization 4,691 6,117
Amortization and reduction of deferred financing costs 840 366
Contribution of common stock to 401(k) plan 252 216
Debt conversion expense 940 -
Increase in other assets (227) (183)
Increase (decrease) in deferred rent 92 (29)
Cash flows provided by (used in) other working capital items 2,010 (2,427)
------------- ------------
Net cash used in operating activities (26,036) (29,110)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,686) (1,320)
Proceeds from sale of investment in affiliate 1,581 -
Proceeds from sale/leaseback 2,110 -
------------- ------------
Net cash provided by (used in) investing activities 1,005 (1,320)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities 4,000 -
Proceeds from exercises of stock options, net 169 2,017
Loan to a former officer related to the purchase of common stock - (1,228)
Principal payments on capital lease obligations (1,427) (1,180)
Cash restricted for capital lease obligation 1,253 (5,271)
------------- ------------
Net cash provided by (used in) financing activities 3,995 (5,662)
------------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (21,036) (36,092)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 22,953 45,502
------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,917 $ 9,410
============= ============
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
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<TABLE>
NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
-------------- --------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OTHER WORKING CAPITAL ITEMS:
(Increase) decrease in :
Accounts receivable $ (104) $ (2,181)
Inventory (390) (390)
Prepaid expenses and other current assets 188 (307)
Increase (decrease) in :
Accounts payable 567 (299)
Deferred revenue and other current liabilities 1,749 750
-------------- --------------
Net cash provided by (used in) other working capital items $ 2,010 $ (2,427)
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 3,572 $ 3,105
============== ==============
Equipment acquired through capital lease $ 260 $ -
============== ==============
Conversion of subordinated notes to common stock $ 8,408 $ -
============== ==============
Use of stock to exercise stock options $ - $ 3,429
============== ==============
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
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NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS
The Company is engaged in the research, development, production, and sale of
vaccines for the prevention of infectious diseases in children and adults. In
July 1998, the Company received marketing authorization from the U.S. Food and
Drug Administration ("FDA") to market its DTaP vaccine (Certiva(REGISTERED)) in
the United States for the prevention of diphtheria, tetanus, and pertussis
(whooping cough). The Company markets Certiva(REGISTERED) in the U.S. to
government purchasers, including state governments and the Centers for Disease
Control and Prevention ("CDC"). Under a marketing agreement between the Company
and Abbott Laboratories ("Abbott"), Abbott began to market Certiva(REGISTERED)
in October 1998 to private physicians and managed care markets in the United
States for immunization of infants and children. Abbott terminated the agreement
at the end of the third quarter of 1999. Previously, in 1996, regulatory
approval for a European formulation of Certiva(REGISTERED) was granted in
Sweden, and regulatory approval of a combined DTaP-IPV (polio) vaccine was
granted in Denmark. In April 1997, regulatory approval for the Company's
monovalent acellular pertussis ("aP") vaccine to vaccinate children was also
granted in Sweden. In June 1998, the Company was advised that, under the
European mutual recognition procedure, the regulatory authorities in Germany,
Austria, Sweden and Finland agreed to recognize the marketing authorization
granted by Denmark for the DTaP-IPV vaccine. In the first half of 1999, both
Germany and Austria issued their national marketing authorizations for the
Company's DTaP-IPV vaccine pending the completion of labeling issues related to
distribution of the product. Under a marketing agreement between the Company and
Chiron-Behring GmbH & Co. ("Chiron"), Chiron was to market the DTaP-IPV vaccine
in Germany and Austria. In October 1999, Chiron notified the Company that Chiron
is seeking to terminate the marketing agreement in Germany and Austria for the
Company's DTaP-IPV vaccine. Chiron alleges that the Company misrepresented the
status of European regulatory approval of its products and fraudulently induced
Chiron to enter into the agreement. Chiron has demanded that the Company repay
$3 million of nonrefundable payments that Chiron made under the agreement. If
discussions directly with Chiron do not resolve the dispute, the Company intends
to challenge Chiron's effort to terminate. The agreement between the Company and
Chiron includes an arbitration process for resolving any such dispute, and the
Company will avail itself of that process and will vigorously contest and defend
against the claims raised by Chiron. The Company believes that the claims
against it are without merit, that the Company has meritorious defenses
available to it, and that certain counterclaims also may be available to it.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF ACCOUNTING AND CURRENCY. The Company is a Canadian corporation
incorporated under the Canadian Business Corporations Act ("CBCA") on August 31,
1989. The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") in the United
States and are denominated in U.S. dollars, because the Company conducts the
majority of its transactions in this currency. The application of Canadian GAAP
would not result in material adjustments to the accompanying financial
statements except for the impact of the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 115, and the interest charge of $12.0 million
related to the issuance of the 4.5% Convertible Secured Notes due November 13,
2003 ("4.5% Notes") during the fourth quarter of 1998. Under Canadian GAAP, the
beneficial conversion feature of the 4.5% Notes would be assigned a value and
reported as additional equity to be amortized to retained earnings ratably over
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the term of the 4.5% Notes rather than being charged to interest in 1998. The
effect of foreign currency translation has been immaterial.
(b) PERVASIVENESS OF ESTIMATES. The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
(c) REVENUE RECOGNITION. Nonrefundable fees or milestone payments in connection
with research and development or collaborative agreements are recognized when
they are earned in accordance with the applicable performance requirements and
contract terms. Revenue from product sales is recognized when all significant
risks of ownership have been transferred, the amount of the selling price is
fixed and determinable, all significant related acts of performance have been
completed, and no other significant uncertainties exist. In most cases, these
criteria are met when the goods are shipped.
(d) SEGMENT REPORTING. In 1997, the Financial Accounting Standards Board issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The Company implemented SFAS No. 131 for the year ended December
31, 1998 and has determined that it currently does not have reportable segments.
Product sales in the United States were approximately $0 and $1.6 million for
the three and nine months ended September 30, 1999, respectively, and $0 for
each of the same periods in 1998. Product sales to Europe were approximately
$1.2 million and $2.0 million for the three and nine months ended September 30,
1999, respectively, and approximately $501,000 and $845,000 for the same periods
in 1998. All products are manufactured at the Company's one production facility
in the United States. The production process, and ultimately product costing, is
primarily the same for all of the Company's acellular pertussis vaccine products
sold in the United States and Europe. Because of this, and the relative
consistency in selling prices, as well as the nature of the distribution methods
utilized by the Company, the Company does not differentiate and manage its
business along geographic lines.
3. PROPERTY, PLANT AND EQUIPMENT
In September 1999, the Company completed a sale/leaseback of its only owned
facility. The approximately 31,000 square foot facility, which is used as a
warehousing and testing facility was sold for approximately $2.1 million with a
loss on the sale of $378,000. The lease for the facility is for an initial term
of ten years, with two five-year renewal options. The initial base annual rent
under the lease is approximately $237,000 with minimum annual escalations.
In March 1998, the Company leased an approximately 75,500 square foot facility
to be used for research, development, selling, general and administrative
functions and for future expansion of the Company's operations. The lease is for
an initial term of ten years, with two five-year renewal options. The initial
base annual rent under the lease is approximately $981,000 with minimum annual
escalations. At the end of the fifth year of the initial term, the Company has
the right to terminate the lease for a specified fee. In addition, the Company
has an option to purchase the facility during specified periods of the lease
10
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term. The landlord provided the Company a tenant improvement allowance of
approximately $1.4 million.
4. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
Components of inventory cost include materials, labor, and manufacturing
overhead. Production costs attributable to a product are expensed until
regulatory approval is obtained for such product. Beginning in the third quarter
of 1998, costs to produce Certiva(REGISTERED) for sale in the United States were
capitalized, except that costs attributable to Certiva(REGISTERED) production
under non-regulatory approved optimization production processes are being
expensed until regulatory approval is obtained for such new processes. Any
production costs incurred in excess of net realizable value are expensed in the
quarter in which they are incurred. Inventories consist of the following:
September 30, December 31,
1999 1998
----------------------------
(in thousands)
Raw materials $ 2,418 $ 2,509
Work in process 1,753 1,024
Finished goods 286 534
------- -------
Total $ 4,457 $ 4,067
======= =======
5. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following components:
September 30, December 31,
1999 1998
---------------------------
(in thousands)
Accrued interest $ 2,536 $ 1,103
Payroll and fringe benefits 2,838 1,702
Accrued taxes 810 1,149
Reserve for contract loss 720 720
Accrued consulting and professional fees 424 353
Accrued costs of clinical trials 245 216
Other accrued liabilities 787 605
------- -------
Total other current liabilities $ 8,360 $ 5,848
======= =======
6. RESTRICTED CASH AND OBLIGATIONS UNDER CAPITAL LEASE
In connection with an operating lease for a 35,000 square foot development and
production facility, the Company entered into an agreement that included the
purchase and lease of equipment and leasehold improvements. As part of the
operating lease, the Company assumed the underlying real estate leases which are
scheduled to expire in February 2001, but may be extended through 2011. Under
11
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the terms of the equipment lease, there are certain financial covenants that
obligate the Company to maintain certain cash and investment balances, a minimum
tangible net worth (defined to include amounts under the outstanding convertible
subordinated notes), and certain other financial ratios. The equipment lease
agreement permits the Company, at its option, to suspend the application of
financial covenants by posting a stand-by letter of credit, which may be revoked
by the Company provided certain conditions are satisfied. In April 1998, as
permitted by the equipment lease agreement, the Company voluntarily posted a
letter of credit in the amount of $5.9 million, thereby suspending the
application of all financial covenants. The letter of credit decreases on a
monthly basis as the payments on the lease obligation are made and is secured by
a restricted cash deposit of an equal amount. The balance of the letter of
credit and the corresponding restricted cash is $3.6 million at September 30,
1999. The letter of credit will expire by its terms on November 1, 2000.
7. CONVERTIBLE DEBT
In November 1998, the Company completed a $25 million financing through the
private placement of 4.5% Convertible Secured Notes ("4.5% Notes"). The 4.5%
Notes were sold at par, mature on November 13, 2003 and provide for interest
payable semi-annually on May 13 and November 13 of each year commencing on May
13, 1999. The net proceeds from this offering were approximately $24.6 million.
The 4.5% Notes are convertible, in whole or in part, by the holder(s) at any
time prior to maturity (unless previously redeemed or repurchased) into shares
of the Company's Common Stock at the conversion price of approximately $8.54 per
share. The 4.5% Notes are secured by certain assets of the Company, are
otherwise subordinated in right of payment to all existing and future senior
indebtedness of the Company, do not restrict the incurrence of future senior or
other indebtedness of the Company, and are redeemable, in whole or in part, at
the option of the Company on or after one year from the date of issuance at par,
plus accrued interest to the redemption date.
On November 12, 1998, the date on which the 4.5% Notes were issued, the closing
price for the Company's Common Stock was $12.625, which exceeded the initial
conversion price for the 4.5% Notes. The difference between the initial
conversion price and the fair market value per share on the date of issue of the
4.5% Notes, for the number of equivalent shares, has been recognized and
recorded as paid in capital, with a corresponding charge to interest expense,
thus increasing the effective interest rate of the 4.5% Notes. Given that the
4.5% Notes are immediately convertible, the interest expense of approximately
$12.0 million was recognized immediately and was included in the 1998
Consolidated Statements of Operations.
In June 1999, the Company retired $8.4 million principal amount of the 6.5%
convertible subordinated notes ("6.5% Notes") in exchange for 550,000 shares of
Common Stock. As a result of the transaction, the Company has recognized a
one-time non-cash debt conversion expense of approximately $940,000, which is
included in interest expense. The principal balance of the outstanding notes was
$75.3 million at September 30, 1999.
12
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8. LINE OF CREDIT
In July 1999, the Company obtained from a bank a $6 million revolving line of
credit maturing December 31, 1999. The interest rate on borrowings under the
line of credit is LIBOR plus 265 basis points. BioChem Pharma Inc. ("BioChem"),
an affiliate of the Company, has provided the guarantee of the line of credit,
which will remain in place for a maximum of two years, unless there is a change
of control such as the contemplated acquisition by the third party. (See Note
9.) Upon drawing down on the line of credit by the Company, BioChem was entitled
to receive warrants to purchase up to a total of 750,000 shares of the Company's
Common Stock. The warrants were issued by the Company ratably as it drew down
under the line of credit such that BioChem received a warrant for 125,000 shares
of Common Stock for each $1 million drawn down by the Company. Each warrant has
a term of two years from the date of issuance. The per share exercise price
under the warrant is approximately $5.14, which is the average of the closing
price of the Company's Common Stock on the American Stock Exchange over five
trading days that began on June 28 and ended on July 2, 1999. Each warrant
contains anti-dilution provisions and registration rights among other
provisions. The Company drew down $4 million and $2 million in the third and
fourth quarters of 1999, respectively, under the revolving line of credit and
accordingly has issued warrants to purchase 750,000 shares of Common Stock to
BioChem.
The Company will recognize a total of approximately $1.6 million of interest
expense calculated using the Black-Scholes pricing model based upon the issuance
of these warrants to purchase up to 750,000 shares of common stock. The Company
is recognizing interest expense over the life of the line of credit beginning at
the issuance date of the warrants and ending on December 31, 1999, the repayment
date for the line of credit. The expense related to the issuance of the 500,000
warrants was $429,000 for the three months and nine months ended September 30,
1999.
9. SUBSEQUENT EVENT
On November 1, 1999, the Company finalized terms relating to a secured revolving
line of credit from Bank of America, N.A., which is guaranteed by an
unaffiliated third party. The credit line made $5 million immediately available
to the Company at an interest rate of LIBOR plus .625%. An additional amount of
up to $25 million will be available if the Company executes a definitive
acquisition agreement with the third party, with whom the Company is in
exclusive negotiations. The line of credit is secured by all of the Company's
otherwise unencumbered assets, including patents, patent applications and
receivables.
The Company expects to complete negotiations regarding a definitive acquisition
agreement shortly, although there can be no assurances that the Company will
enter into a definitive acquisition agreement or, if it does, that the
transaction will close. Should the Company be unable to reach a definitive
acquisition agreement by November 18, 1999 (unless otherwise extended by Bank of
America, N.A.), then the Company would be required to repay the initial $5
million within 20 days of that date. There are no assurances that the Company
would be able to obtain additional financing within that timeframe to repay the
$5 million or that such financing, if obtained, would be adequate to fund the
ongoing operations of the Company.
13
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
----------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
THE FOLLOWING PARAGRAPHS IN THIS FORM 10-Q CONTAIN CERTAIN FORWARD LOOKING
STATEMENTS, WHICH ARE WITHIN THE MEANING OF AND MADE PURSUANT TO THE SAFE HARBOR
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE
FORWARD LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, THOSE REGARDING THE
PROSPECTS AND TIMING FOR FILING FOR AND OBTAINING REGULATORY APPROVAL, THE
PROSPECTS FOR AND TIMING OF MARKETING AND DISTRIBUTION OF VACCINE PRODUCTS, THE
PROSPECTS FOR AND TIMING OF INCREASING PRODUCTION CAPACITY AND EFFICIENCY, THE
PROSPECTS FOR AND FACTORS AFFECTING FUTURE REVENUES AND PROFITABILITY, THE
AVAILABILITY OF FUNDS UNDER EXISTING CREDIT FACILITIES, THE ABILITY TO SERVICE
THE COMPANY'S DEBT AND TO MEET THE COMPANY'S CASH FLOW NEEDS, PROSPECTS FOR
PRODUCTION CAPACITY, REDUCED PRODUCTION COSTS, AND THE ABILITY TO CAMPAIGN
PRODUCTS THROUGH ITS PRODUCTION FACILITY, LIKELIHOOD OF ADDITIONAL FUNDING UNDER
LICENSE, MARKETING, DISTRIBUTION AND/OR DEVELOPMENT AGREEMENTS OR FROM FURTHER
FINANCINGS, PROSPECTS FOR AND TIMING FOR ENTERING INTO AND COMPLETING A
DEFINITIVE AGREEMENT FOR THE ACQUISITION OF THE COMPANY, CASH REQUIREMENTS FOR
FUTURE OPERATIONS, PROJECTED RESULTS OF OPERATIONS, AND PROJECTED CAPITAL
EXPENDITURES AND COST REDUCTIONS. READERS ARE CAUTIONED THAT FORWARD LOOKING
STATEMENTS INVOLVE RISKS, UNCERTAINTIES, AND FACTORS THAT MAY AFFECT THE
COMPANY'S BUSINESS AND PROSPECTS, INCLUDING WITHOUT LIMITATION THOSE DESCRIBED
BELOW AS WELL AS THE RISKS ASSOCIATED WITH: OBTAINING REGULATORY APPROVAL OF
PRODUCTS AND FACILITIES BY REGULATORY AGENCIES INCLUDING THE U.S. FOOD AND DRUG
ADMINISTRATION ("FDA"); THE PRODUCTION OF VACCINES; THE TIMING FOR AND
EFFICIENCIES RECOGNIZED FROM PRODUCT CAPACITY IMPROVEMENTS; THE NATURE OF
COMPETITION; NEED FOR EFFECTIVE MARKETING; DEPENDENCE ON SUPPLIERS, INCLUDING
STATENS SERUM INSTITUT ("SSI"), AND DISTRIBUTORS; UNCERTAINTIES RELATING TO
CLINICAL TRIALS; UNCERTAINTIES RELATING TO NEGOTIATING AND COMPLETING A
DEFINITIVE AGREEMENT FOR THE ACQUISITION OF THE COMPANY; AND THE TIMING AND
NECESSITY FOR EXPENDITURES AND/OR COST REDUCTIONS, ALL AS DISCUSSED IN THE
COMPANY'S FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ("SEC"),
INCLUDING THE 1998 ANNUAL REPORT ON FORM 10-K, TO WHICH THE READER'S ATTENTION
IS DIRECTED.
BACKGROUND
- ----------
The Company is engaged in the research, development, production, and
sale of vaccines for the prevention of infectious diseases in children and
adults. In July 1998, the Company received marketing authorization from the FDA
to market its DTaP vaccine (Certiva(REGISTERED) in the United States for the
prevention of diphtheria, tetanus, and pertussis (whooping cough). The Company
markets Certiva(REGISTERED) in the U.S. to government purchasers, including
state governments and the Centers for Disease Control and Prevention ("CDC").
Under a marketing agreement between the Company and Abbott Laboratories
("Abbott"), Abbott began to market Certiva(REGISTERED) in October 1998 to
private physicians and managed care markets in the United States for
immunization of infants and children. Abbott terminated the agreement at the end
of the third quarter. The Company is currently considering selling
Certiva(REGISTERED) in the United States to non-government purchasers through
direct arrangements with distributors, although no formal agreements have been
completed.
Previously, in 1996, regulatory approval for a European formulation of
Certiva(REGISTERED) was granted in Sweden, and regulatory approval of a combined
DTaP-IPV (polio) vaccine was granted in Denmark. In April 1997, regulatory
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approval for the Company's monovalent acellular pertussis ("aP") vaccine to
vaccinate children was also granted in Sweden. In June 1998, the Company was
advised that, under the European mutual recognition procedure, the regulatory
authorities in Germany, Austria, Sweden and Finland agreed to recognize the
marketing authorization granted by Denmark for the DTaP-IPV vaccine. In the
first half of 1999, both Germany and Austria issued their national marketing
authorizations for the Company's DTaP-IPV vaccine pending the completion of
labeling issues related to distribution of the product. Under a marketing
agreement between the Company and Chiron-Behring GmbH & Co. ("Chiron"), Chiron
was to market the DTaP-IPV vaccine in Germany and Austria. In October 1999,
Chiron notified the Company that Chiron is seeking to terminate the marketing
agreement in Germany and Austria for the Company's DTaP-IPV vaccine. Chiron
alleges that the Company misrepresented the status of European regulatory
approval of its products and fraudulently induced Chiron to enter into the
agreement. Chiron has demanded that the Company repay $3 million of
nonrefundable payments that Chiron made under the agreement. If discussions
directly with Chiron do not resolve the dispute, the Company intends to
challenge Chiron's effort to terminate. The agreement between the Company and
Chiron includes an arbitration process for resolving any such dispute, and the
Company will avail itself of that process and will vigorously contest and defend
against the claims raised by Chiron. The Company believes that the claims
against it are without merit, that the Company has meritorious defenses
available to it, and that certain counterclaims also may be available to it.
On November 1, 1999, the Company finalized terms relating to a secured
revolving line of credit from Bank of America, N.A., which is guaranteed by an
unaffiliated third party. The credit line made $5 million immediately available
to the Company at an interest rate of LIBOR plus .625%. An additional amount of
up to $25 million will be available if the Company executes a definitive
acquisition agreement with the third party, with whom the Company is in
exclusive negotiations. The line of credit is secured by all of the Company's
otherwise unencumbered assets, including patents, patent applications and
receivables.
The Company expects to complete negotiations regarding a definitive
acquisition agreement shortly, although there can be no assurances that the
Company will enter into a definitive acquisition agreement or, if it does, that
the transaction will close. Should the Company be unable to reach a definitive
acquisition agreement by November 18, 1999 (unless otherwise extended by Bank of
America, N.A.), then the Company would be required to repay the initial $5
million within 20 days of that date. There are no assurances that the Company
would be able to obtain additional financing within that timeframe to repay the
$5 million or that such financing, if obtained, would be adequate to fund the
ongoing operations of the Company.
In April 1999, the Company announced that it had significantly shortened
the timeline for preparing and submitting an application for regulatory approval
to sell its group C meningococcal conjugate vaccine in the United Kingdom
("U.K."). In October 1999, the U.K. National Health Service ("NHS") committed to
purchase 3 million doses in 2000 of NeisVac-C(TRADEMARK), the Company's group C
meningococcal conjugate vaccine. This commitment is contingent on regulatory
15
<PAGE>
approval of NeisVac-C(TRADEMARK) by the appropriate U.K. regulatory authorities.
The Company anticipates that during the fourth quarter of 1999, or shortly
thereafter, it will file with the U.K. regulatory authorities the application
for approval of NeisVac-C(TRADEMARK). The terms of the U.K. tender require,
among other things, that the Company reimburse the NHS and its affiliates for
any costs associated with delays caused by the Company should the Company be
unable to meet agreed-upon delivery schedules. Beginning in the fourth quarter
of 1999, the Company will change over from Certiva(REGISTERED) and aP production
to produce the group C meningococcal conjugate vaccine in anticipation of the
commercial launch of the product in the U.K.
In May 1996, the Company completed an offering of 6.50% Convertible
Subordinated Notes in the principal amount of $86.25 million due in full on May
1, 2003 ("6.5% Notes"). The 6.5% Notes are convertible into shares of the
Company's Common Stock, at an initial conversion price of approximately $24.86
per share, are subordinated to present and future senior indebtedness of the
Company, do not restrict the incurrence of future senior or other indebtedness
by the Company, and are redeemable, in whole or in part, at the option of the
Company on or after May 1, 1999, at certain pre-established redemption prices,
plus accrued interest. Upon a change in control, the Company is required to
offer to purchase all or part of the 6.5% Notes then outstanding at a purchase
price equal to 100% of the principal amount thereof, plus interest. The
repurchase price is payable in cash or, at the option of the Company, in shares
of the Company's Common Stock. In June 1999, the Company retired $8.4 million of
the principal amount of the 6.5% Notes in exchange for 550,000 shares of Common
Stock. The exchange was privately negotiated with a single holder of the notes,
and resulted in the recognition of an approximately $940,000 one-time non-cash
expense included in interest expense for the quarter ended June 30, 1999. As of
September 30, 1999, the principal amount of the outstanding notes was $75.3
million.
In November 1998, the Company completed a private placement of $25
million aggregate principal amount of 4.5% Convertible Secured Notes due
November 13, 2003 ("4.5% Notes"). The 4.5% Notes are convertible into the
Company's Common Stock at a conversion price of approximately $8.54 per share,
are secured by certain assets of the Company, and otherwise subordinated in
right of payment to all existing and future senior indebtedness of the Company,
do not restrict the incurrence of future senior or other indebtedness of the
Company and will be redeemable, in whole or in part, at the option of the
Company on or after November 13, 1999. Upon a change in control, the Company
will be required to offer to purchase all of the 4.5% Notes then outstanding at
a purchase price equal to 100% of the principal amount thereof, plus accrued
interest. The repurchase price will be payable in cash or, at the option of the
Company, in shares of the Company's Common Stock. The 4.5% Notes were issued to
certain existing shareholders, affiliates and accredited investors, including
BioChem Pharma Inc. ("BioChem") and Phillip Frost, M.D., which purchased 4.5%
Notes in the principal amount of $9 million and $4.25 million, respectively. In
addition, Societe financiere d'innovation inc. ("Sofinov"), a high technology
investment fund that is a subsidiary of La Caisse de depot et placement du
Quebec, purchased 4.5% Notes in the aggregate principal amount of $6.25 million.
Denis Dionne, a director of the Company, is the President of Sofinov.
16
<PAGE>
In July 1999, the Company obtained from a commercial bank a $6 million
revolving line of credit maturing December 31, 1999. BioChem, an affiliate of
the Company, has provided the guarantee of the line of credit, which will remain
in place for a maximum of two years, unless there is a change of control such as
the contemplated acquisition by the third party. The interest rate on borrowings
under the line of credit is LIBOR plus 265 basis points. Upon drawing down on
the line of credit by the Company, BioChem was entitled to receive warrants to
purchase up to a total of 750,000 shares of the Company's Common Stock. The
warrants were issued by the Company ratably as it drew down under the line of
credit such that BioChem received a warrant for 125,000 shares of Common Stock
for each $1 million drawn down by the Company. Each warrant has a term of two
years from the date of issuance. The per share exercise price under the warrants
is approximately $5.14, which is the average of the closing price of the
Company's Common Stock on the American Stock Exchange over five trading days
that began on June 28 and ended on July 2, 1999. Each warrant contains
anti-dilution provisions and registrations rights among other provisions. The
Company drew down $4 million and $2 million in the third and fourth quarters of
1999, respectively, under the revolving line of credit and accordingly issued
warrants to purchase 750,000 shares of Common Stock to BioChem. The Company will
recognize a total of approximately $1.6 million of interest expense based upon
the issuance of these warrants to purchase up to 750,000 shares of common stock.
The Company is recognizing interest expense over the life of the line of credit
beginning at the issuance date of the warrants and ending on December 31, 1999,
the repayment date for the line of credit. The expense related to the issuance
of the 500,000 warrants, issued prior to September 30, 1999, was $429,000 for
the quarter and nine months ended September 30, 1999.
In September 1999, the Company completed a sale/leaseback of its only
owned facility. The approximately 31,000 square foot facility, which is used as
a warehousing and testing facility was sold for approximately $2.1 million,
resulting in a non-cash loss on the sale of $378,000. The lease for the facility
is for an initial term of ten years, with two five-year renewal options. The
initial base annual rent under the lease is approximately $237,000 with minimum
annual escalations.
The Company had 274 and 290 employees as of September 30, 1999 and 1998,
respectively.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
In 1999, the Company recognized total revenue of $4.4 million of which
approximately $1.2 million was from sales of product to SSI and approximately
$3.2 million was collaborative agreement development funding under a
collaborative agreement with Pasteur Merieux Connaught ("PMC"). Revenue in 1998
totaled $3.1 million of which approximately $501,000 was from sales of product
to SSI and the remaining from collaborative agreements.
Production expenses were $5.4 million in 1999 compared to $5.1 million
in 1998. The increase in these expenses in 1999 is primarily attributable to: aP
production under optimized production processes that were expensed during the
17
<PAGE>
period, increased sales of product to SSI, FDA post-marketing surveillance
expenses, and higher contractor testing expenses. These increases were partially
offset by lower repairs and maintenance, lower material and labor costs, lower
royalty expenses, and lower depreciation related to the use of an accelerated
depreciation method for equipment acquired prior to 1998. Costs attributable to
Certiva(REGISTERED) production were expensed until regulatory approval was
obtained in the third quarter of 1998; however, costs attributable to aP
production under optimized production processes are being expensed until
regulatory approval is obtained for such new processes. See "Projected Results
From Operations."
Research and development expenses were $4.2 million in 1999 compared to
$4.7 million in 1998. The decrease is attributable primarily to lower
depreciation expenses related to the use of an accelerated depreciation method
for equipment acquired prior to 1998, lower costs associated with the new
facility obtained in the second quarter of 1998 because in 1999 a smaller
portion of this facility was occupied by the research group, and lower materials
and supply expenses offset in part by higher clinical trial expenses.
Selling, general and administrative expenses were $3.5 million in 1999
compared to $2.4 million in 1998. In 1999, there was an increase due to
compensation costs as part of an employee retention program, the $378,000
non-cash loss on the sale of a Company-owned building, an increase in facility
costs associated with occupying space in the new facility, and legal fees and
expenses associated with litigation related to the Company's former president
and with partnering opportunities. These were partially offset by a decrease in
outside marketing related costs and the termination of the lease of the
Company's former headquarters in July 1999, which were the result of
management's plan to reduce costs.
Interest and dividend income decreased to $66,000 in 1999 from $276,000
in 1998. This reduction is due primarily to a decrease in the average cash
balance.
Interest expense increased to $2.2 million in 1999 from $1.6 million in
1998. The increase is due primarily to the amortization of costs associated with
the issuance of 500,000 warrants under the BioChem line of credit guarantee, as
well as increased debt as a result of the issuance of the 4.5% Notes, offset in
part by the conversion of $8.4 million principal amount of the 6.5% Notes in
exchange for 550,000 shares of Common Stock in June 1999 and principal payments
made on the equipment lease.
The factors cited above resulted in a net loss of $10.8 million or
$(0.33) per share in 1999 and a net loss of $10.5 million or $(0.32) per share
in 1998. The weighted-average number of common shares outstanding was 32.8
million for 1999 compared to 32.2 million for 1998. Without the $429,000 expense
recognized on the issuance of warrants and the loss on the sale of the building,
the net loss would have been $10.0 million or $(0.30) per share. The increase in
the number of weighted-average shares outstanding for 1999 as compared to 1998
is attributable primarily to the conversion of some of the 6.5% Notes into
550,000 shares of Common Stock in June 1999 and to a lesser extent the exercise
of stock options after September 30, 1998.
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NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
In 1999, the Company recognized total revenue of $7.6 million of which
approximately $1.4 million was from product sales of Certiva(REGISTERED) to
government agencies and $200,000 was from sales to Abbott, approximately $2.0
million was from sales of product to SSI and approximately $4.0 million was
under collaborative agreements. Revenue for 1999 from collaborative agreements
consists primarily of $3.2 million of development funding under the Company's
agreement with PMC and recognition of approximately $800,000 of development
funding from Abbott. Revenue in 1998 totaled $5.1 million of which approximately
$845,000 was from sales of product to SSI and the remaining from collaborative
agreements. Revenue for 1998 from collaborative agreements consists primarily of
a milestone payment and development funding from Abbott and to a lesser extent
milestone payments under a supply and distribution agreement with Chiron.
Production expenses were $15.8 million in 1999 compared to $14.3 million
in 1998. The increase in these expenses in 1999 is primarily attributable to: aP
production under optimized production processes that were expensed during the
period, a total of $806,000 of write-offs of finished product due to production
failures and to a lesser extent non-conforming product as a result of a third
party shipping error, FDA post-marketing licensing and surveillance expenses,
higher material and labor expenses, and contractor expenses. These increases
were partially offset by lower depreciation related to the use of an accelerated
depreciation method for equipment purchased prior to 1998, and lower repair and
maintenance and royalty expenses. Costs attributable to Certiva(REGISTERED)
production were expensed until regulatory approval was obtained in the third
quarter of 1998; however, costs attributable to Certiva(REGISTERED) production
under optimized production processes are being expensed until regulatory
approval is obtained for such new processes.
Research and development expenses were $11.8 million in 1999 compared to
$13.3 million in 1998. The decrease is attributable primarily to lower
depreciation expenses related to the use of an accelerated depreciation method
for equipment acquired prior to 1998, regulatory consulting costs incurred in
1998 but not in 1999 in seeking FDA approval of Certiva(REGISTERED), lower
facility related costs associated with the new facility obtained in the second
quarter of 1998 because in 1999 a smaller portion of this facility was occupied
by the research group, and lower materials and supply expense, offset in part by
higher labor costs attributed to a higher average number of employees for
product development projects and the reimbursement of expenses under a
collaborative agreement in 1998.
Selling, general and administrative expenses were $8.6 million in 1999
compared to $7.2 million in 1998. In 1999 there was an increase in building
costs associated with the new facility occupied beginning late in the third
quarter of 1998, an increase in deferred compensation costs as part of an
employee retention program, the non-cash loss on the sale of a Company-owned
building, legal fees and expenses associated with litigation related to the
Company's former president and with partnering opportunities, and supplies and
services costs. These increases were partially offset by a decrease in outside
marketing related costs and the termination of the lease of the Company's former
headquarters in July 1999, which were the result of management's plan to reduce
costs.
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In March 1999, the Company sold the remaining 125,000 shares of its
investment in IVAX Corporation ("IVAX") Common Stock generating gross proceeds
of approximately $1.6 million and income of $952,000.
Interest and dividend income decreased to $446,000 in 1999 from $1.2
million in 1998. This reduction is due primarily to a decrease in the average
cash balance.
Interest expense increased to $6.9 million in 1999 from $4.8 million in
1998. The increase is due primarily to the $940,000 expense recognized on the
conversion of $8.4 million principal amount of 6.5% Notes, increased debt as a
result of the issuance of the 4.5% Notes, the amortization of costs associated
with the issuance of 500,000 warrants under the BioChem line of credit
guarantee, offset in part by the conversion of $8.4 million principal amount of
6.5% Notes in exchange for 550,000 shares of Common Stock in June 1999 and
principal payments made on the equipment lease.
The factors cited above resulted in a net loss of $34.1 million or
$(1.05) per share in 1999 as compared to a net loss of $33.2 million or $(1.03)
per share in 1998. The weighted-average number of common shares outstanding was
32.5 million for 1999 compared to 32.1 million for 1998. Without the gain on
sale of the investment in an affiliate, the expense recognized on the conversion
of some of the 6.5% Notes, the expense recognized on the issuance of 500,000
warrants, and the loss on the sale of the building, the net loss would have been
$33.3 million or $(1.02) per share. The increase in the number of
weighted-average shares outstanding for 1999 as compared to 1998 is attributable
primarily to the conversion of some of the 6.5% Notes into 550,000 shares of the
Company's Common Stock in June 1999 and to a lesser extent the exercise of stock
options after September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES; OUTLOOK
- ----------------------------------------
The Company's cash requirement for operations for the third quarter of
1999 was $8.2 million as compared to $10.7 million in the second quarter of
1999. The decrease is due primarily to interest payments made in May 1999 for
the 6.5% and 4.5% convertible notes. The Company's cash requirement for
operations is the net cash used in operating activities for the period being
reported less amounts received under license, marketing, distribution and/or
development agreements and further adjusted by the timing of proceeds from the
sale of an investment in an affiliate.
At September 30, 1999, the Company had cash and cash equivalents of
approximately $1.9 million. In addition, the Company had approximately $3.6
million of restricted cash pledged as collateral under the letter of credit
agreement, which will be reduced in amount as payments are made under the
equipment lease described in Note 6 of the financial statements.
PROJECTED RESULTS FROM OPERATIONS. The Company anticipates that it will
report a net loss of between $14 and $16 million for the fourth quarter of 1999.
It will likely incur a quarterly net operating loss in the first quarter of
2000, based upon several factors. The factors included in assessing the
projected losses are, among others: limited projected revenue primarily due to
limited Certiva(REGISTERED) inventory on hand and the changeover from
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Certiva(REGISTERED) to group C meningococcal vaccine production; current
manufacturing limitations; the costs required to accelerate the group C
meningococcal conjugate vaccine program; the timing and amount of milestone
payments under an existing collaboration agreement with PMC; the timing and
amount of up-front and other payments under anticipated license, distribution,
marketing and collaboration agreements; and the recognition of expense
associated with the issuance of warrants to BioChem under its line of credit
guarantee for the Company, all as more completely discussed in the following
paragraphs.
Quarterly operating results will be affected by the revenue from sales
of the remaining inventory of Certiva(REGISTERED). Revenues from the sale of
Certiva(REGISTERED) and aP sales to SSI have been limited. The reported
Certiva(REGISTERED) net sales during the third, second and first quarters of
1999 were approximately $0, $800,000, and $800,000, respectively. Although, the
national marketing authorization for the sale and distribution of its DTaP-IPV
vaccine in Germany and Austria has been completed, labeling amendments related
to distribution of the product have not been finalized. Until the labeling issue
and the termination issue with Chiron, the Company's appointed distributor in
Germany and Austria, are resolved, the Company will not be able to sell aP
vaccine to be formulated as DTaP-IPV in those countries. There can be no
assurance that these issues will be satisfactorily resolved, or that if
resolved, any product launch will generate significant revenues in 1999 or into
2000. The Company anticipates limited revenues from Certiva(REGISTERED) and aP
during the remainder of 1999 and into 2000 due to limited inventory of those
products, the termination of the marketing and distribution agreement by Abbott,
and because the Company changed over from Certiva(REGISTERED) and aP production
in August 1999 to start production of the group C meningococcal conjugate
vaccine in the fourth quarter of 1999 in anticipation of the commercial launch
of the product in the United Kingdom. The Company anticipates filing in the
fourth quarter of 1999, or shortly thereafter, for regulatory approval of the
group C meningococcal conjugate vaccine.
As noted above, quarterly operating results will be affected by various
manufacturing limitations. The Company's manufacturing facility has limited
production capacity based on the present size, configuration, equipment,
processes and methods utilized to produce, test and release its commercial
products and its acellular pertussis toxoid. Production expenses are mainly
fixed and consist primarily of expenses relating to the operation of its
production facility and maintaining a ready work force. Further, from time to
time, the Company experiences disruptions and production failures. These
disruptions and failures increase unit production costs as units are lost in the
production process. These factors have contributed to higher production costs
for the Company's acellular pertussis products, which costs currently exceed
their net realizable value. These excess costs are expensed in the quarter
incurred. In addition, the Company has not manufactured the group C
meningococcal vaccine on a commercial scale in this facility, and there can be
no assurance that there will not be disruptions or product failures.
In order to address these production limitations, the Company is
implementing a two-step enhancement program with respect to its production of
Certiva(REGISTERED) and aP vaccines. First, the Company has modified its
existing facilities and operations in a manner intended to significantly expand
production capacity and efficiency. The Company filed the appropriate
documentation with the FDA in the fourth quarter of 1999 in seeking the approval
for these enhancements. Following completion of this first step, the Company
believes that the manufacturing facility will have substantially increased
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Certiva(REGISTERED) and aP production capacity and output. The second step is to
eliminate bottlenecks and streamline and strengthen the product testing and
release process thereby reducing production disruptions and failures and
enhancing the reliability of the production process. This work will be performed
off-line during the remainder of 1999 and into early 2000, while the group C
meningococcal vaccine is being produced in the facility. Upon completion of both
of these programs, the Company expects that unit production costs will be
reduced significantly and that Certiva(REGISTERED) could be produced in
sufficient quantities to generate a gross profit based on the currently known
pricing arrangements and competitive environment, and with the Company's primary
focus on governmental sales.
As a result of a recent assessment of potential health risks related to
mercury contained in food and drugs conducted by the FDA, in cooperation with
the Environmental Protection Agency, the continued use of thimerosal in vaccines
has been questioned. Thimerosal is a mercury-containing preservative commonly
used in vaccines packaged in multi-dose vials. Thimerosal is approved for use by
the FDA and is currently included in more than 30 licensed vaccines in the
United States. Vaccines containing this preservative have been administered to
hundreds of millions of children and adults worldwide, with no scientific or
medical data to suggest that it poses a public health risk. In July 1999, the
Company decided to follow the developing recommendations of these agencies and
move toward the discontinued use of thimerosal in Certiva(REGISTERED). The
Company intends to submit data to the FDA on the European formulation of
Certiva(REGISTERED), which does not contain thimerosal, to facilitate the
approval and introduction in the United States of a thimerosal-free formulation
of the product in single-dose syringes. The Company is currently evaluating the
impact of this decision on the per unit cost to produce Certiva(REGISTERED), as
well as the impact on the current selling price. The Company expects to submit
data to the FDA on a thimerosal-free formulation of Certiva(REGISTERED) before
the end of the fourth quarter of 1999 or shortly thereafter, and the Company
will work expeditiously with the FDA to obtain approval. The American Academy of
Pediatrics has called for the FDA to expedite the review of manufacturers'
supplemental applications to eliminate or reduce the mercury content of vaccine
products. The U.S. Public Health Service, the Centers for Disease Control and
Prevention, and the American Academy of Pediatrics continue to recommend that
all children should be immunized against the diseases indicated in the
recommended immunization schedule. The Company will in the interim continue to
sell previously produced thimerosal containing Certiva(REGISTERED) that it has
in inventory to government purchasers and possibly through distributors to
private physicians and has begun to manufacture thimerosal-free
Certiva(REGISTERED) in anticipation of regulatory approval.
As a function of the two-step enhancement program for acellular
pertussis production and testing processes, the regulatory work for a
thimerosal-free Certiva(REGISTERED), and the market opportunities for a launch
of the group C meningococcal conjugate vaccine in 2000, the Company, beginning
in late fourth quarter 1999, will produce its group C meningococcal conjugate
vaccine for sale in the U.K. in the facility that had been producing
Certiva(REGISTERED). All costs associated with this production effort will be
expensed until regulatory approval is obtained. Because of the planned
production of group C meningococcal conjugate vaccine in this facility, neither
acellular pertussis vaccine nor Certiva(REGISTERED) will be manufactured until
at the earliest, the beginning of the second quarter of 2000. Thus, sales of
acellular pertussis containing products will be limited and may result in
reduced sales in the second half of 1999 through the second or third quarter of
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<PAGE>
2000 due to limited product inventory. Sales could be limited in the second half
of 2000 if the enhanced production and testing processes do n0t work properly
upon startup of acellular pertussis production and/or the Company is unable to
reach agreements with suitable distributors for these products in the U.S. and,
if necessary, in Germany and Austria.
Under the guarantee agreement with BioChem for the $6 million line of
credit obtained in July 1999, the Company issued warrants to BioChem as the
Company drew down on the line of credit. The Company drew down $4 million and $2
million in the third and fourth quarters of 1999, respectively, under the
revolving line of credit and accordingly issued warrants to purchase 750,000
shares of Common Stock to BioChem. The Company will recognize a total of
approximately $1.6 million of interest expense based upon the issuance of these
warrants to purchase up to 750,000 shares of common stock. The Company
recognizes interest expense over the life of the line of credit beginning at the
issuance date of the warrants and ending on December 31, 1999, the repayment
date for the line of credit. The expense related to the issuance of the 500,000
warrants, issued through the third quarter of 1999, was $429,000 for the three
months and nine months ended September 30, 1999.
Finally, future operating results are dependent upon the amount and
timing of further milestone and other payments under existing and new license,
distribution or development agreements. During 1999 and into 2000, the Company
will be continuing its development efforts for several products, including the
one covered by the existing agreement with PMC. The Company is entitled under
the PMC agreement to milestone payments upon achievement of prescribed events
and is entitled to be paid for certain prescribed development costs as incurred.
The milestone payments under the PMC agreement are tied to measured progress in
the regulatory process for the Company's group B meningococcal vaccine. Although
initial clinical development plans have been completed for this product, and
clinical trials are projected to commence in early 2000, there are no assurances
that such milestone events will occur during 2000, or at all, or that any such
payments will contribute materially to quarterly net operating results.
The foregoing paragraphs include forward looking statements including
statements as to: revenue projections, earnings (losses); timing and likelihood
of further regulatory approvals; the ability of the Company to timely and
efficiently expand its production capacity and lower unit costs for
Certiva(REGISTERED); the prospects for and timing of group C meningococcal
conjugate vaccine production and regulatory filings; the prospects for and
timing of milestone payments under an existing collaborative agreement; and the
ability of the Company to address production failures relating to
Certiva(REGISTERED) production, among others. The factors that affect the level
of future revenues from product sales include, among other things, the ability
of the Company to obtain distribution partners for pertussis products in the
U.S. and, if necessary, Germany and Austria, and for the group C meningococcal
vaccine in the U.K., the ability of the Company and its distribution partners to
effectively position the Company's products against competitive products
(including safety, efficacy, and pricing), the Company's ability to manufacture
and deliver pertussis and group C meningococcal vaccine products in accordance
with customer orders, the timing and amount of product orders, and the timing of
future product launches. The factors that affect the ability of the Company to
timely and efficiently expand its production capacity include, among others, the
adequacy of engineering designs, the manufacturing experience with these
enhancements, the timeliness of regulatory review of modifications, the
23
<PAGE>
acceptability of such modifications to the applicable regulatory authorities,
and the ability to successfully streamline and strengthen the product testing
and release process. There can be no assurances that the Company's plans to
increase production capacity and output will be effective or result in
anticipated production efficiencies and reduced unit cost or will be acceptable
to any regulatory agency. The factors affecting prospects for and timing of
milestone payments under an existing collaborative agreement include regulatory
authorization to commence clinical trials and adequacy of clinical trial
results. The factors affecting timing for commercialization of the group C
meningococcal conjugate vaccine include, among other things, successful
changeover in the manufacturing facility, results of ongoing clinical trials,
and expedited UK regulatory review. In addition, there are no assurances that
the steps taken by the Company to address production disruptions and failures
and quality testing inefficiencies for both the pertussis and group C
meningococcal vaccines will be effective or that disruptions, failures, and
inefficiencies will not continue in the future. Production disruptions, failures
or inefficiencies could have a material adverse effect on the Company's future
operating results and could affect the Company's existing licenses as well as
any applications for approval for its products or the timing of such approval.
No assurances can be given that the Company will be successful in maintaining
consistent and continuous commercial production of its products. Further,
because the Company's manufacturing operations are located principally in one
facility, any condition or event that adversely affects the condition or
operation of such facility would have a material adverse affect on the Company's
financial condition and future results of operations.
PROJECTED CASH REQUIREMENTS FOR OPERATIONS. The cash requirements for
operations in the fourth quarter of 1999 are projected to be between $13 and $15
million. This range could be affected by the timing and amount of additional
cash requirements associated with the acceleration of the group C meningococcal
conjugate vaccine development program. The fourth quarter cash requirement is
anticipated to be higher than that incurred in the third quarter of 1999 due
primarily to the semi-annual interest payment of $2.4 million on the 6.5% Notes
and the approximately $600,000 payment for the 4.5% Notes both due in November
1999. The above cash requirements do not include the repayment of the revolving
line of credit, guaranteed by BioChem, which expires December 31, 1999, the
balance of which was $6 million at November 5, 1999. The foregoing include
forward looking statements and the factors which affect the actual cash required
for operations could include, among other things: vaccine production levels;
regulatory authorization to commence clinical investigations; timing for the
commencement of planned clinical trials; and the level of expenditures for the
Company's ongoing research and development program, which includes the
acceleration of the group C meningococcal conjugate vaccine program. See
"Funding Sources," below.
CAPITAL EXPENDITURES. Total capital expenditures for the first nine
months of 1999 were $2.9 million which includes a $260,000 capital lease for
equipment. As noted above, the Company has expanded its manufacturing capacity
and efficiency for its acellular pertussis toxoid and Certiva(REGISTERED) and is
planning to produce the group C meningococcal conjugate vaccine beginning in the
fourth quarter of 1999. Total projected capital expenditures for the remainder
of 1999 for minor ongoing facilities' modifications, equipment, systems and
other capital additions are approximately $800,000. The foregoing include
forward looking statements. The amount of and timing for capital expenditures
could fluctuate based upon a number of factors including, without limitation,
the equipment purchases required in order to produce the group C meningococcal
conjugate vaccine; and the amount and timing of unanticipated costs to replace
24
<PAGE>
or repair existing equipment and systems in order to keep facilities operational
and in compliance with regulatory requirements.
FUNDING SOURCES. To maintain the Company's production, research,
development and growth at current levels, present cash and cash equivalents,
expected product sales of Certiva(REGISTERED) and the Company's other products,
and revenues from existing collaborative agreements are not expected to provide
sufficient cash to fund the Company's operations, debt service payments and
capital expenditures for the remainder of 1999 and into 2000. To address the
cash needs, the Company obtained a secured revolving line of credit from Bank of
America, N.A. The Company has received $5 million under the line of credit. An
additional amount of up to $25 million will be available if the Company executes
a definitive acquisition agreement with the unaffiliated third party, with whom
the Company is in exclusive negotiations. The line of credit has been guaranteed
by the third party and is secured by all of the Company's otherwise unencumbered
assets, including patents, patent applications and receivables.
Should the Company be unable to reach a definitive acquisition agreement
by November 18, 1999 (unless otherwise extended by Bank of America, N.A.), then
the Company would be required to repay all outstanding indebtedness under the
borrowing agreement within 20 days of that date. There are no assurances that
the Company would be able to obtain additional financing within that timeframe
to repay the $5 million or that such financing, if obtained, would be adequate
to fund the ongoing operations of the Company. If the Company signs the
definitive acquisition agreement and secures the additional $25 million, it
believes that it will meet 1999 and first quarter 2000 cash requirements for
operations with this line of credit, although there are no assurances in this
regard. The foregoing include forward looking statements, and the factors that
will determine the timing and amount of additional funding include, without
limitation, the satisfaction of certain conditions to the signing of a
definitive acquisition agreement with the third party.
If the Company is unable to complete the transaction with the third
party noted above, the Company would be required to obtain additional funding
through a borrowing arrangement with one or more of its affiliates, through the
sale of debt and/or equity securities and/or reduce cash requirements through
significant reductions in operating levels. There can be no assurances that the
Company will be able to obtain debt or equity financing on favorable terms in
amounts required to meet future cash requirements and the amounts owed under
outstanding lines of credit in the timeframe required, or that the Company, if
necessary, would be successful in reducing operating levels or effectively
controlling costs, or that if operating levels are reduced, the Company would be
able to maintain operations for any extended period of time.
The foregoing paragraphs contain only a partial description of the
factors affecting the Company's business prospects and risk factors affecting
future operations. Reference is made to the risk factors and other information
described elsewhere in this management's discussion and analysis of financial
condition and results of operations, including in the first paragraph hereof,
and in the Company's other filings with the SEC, for a more complete description
of the risks and uncertainties affecting the Company and its business.
25
<PAGE>
TAX AND REPORTING MATTERS
- -------------------------
At December 31, 1998, the Company and its subsidiaries had income tax
loss carry forwards of approximately $38.2 million to offset future Canadian
source income and approximately $93.2 million to offset future United States
taxable income subject to the alternative minimum tax rules in the United
States.
If more than a certain percentage of the Company's assets or income
becomes passive, the Company will be classified for U.S. tax purposes as a
passive foreign investment company ("PFIC"), and a U.S. taxpayer may be subject
to an additional Federal income tax on receiving certain dividends from the
Company or selling the Company's Common Stock. The Company has not been
classified as a PFIC to date, and it intends to, and believes that it can,
generate sufficient other income to avoid being classified as a PFIC. This is a
forward looking statement and the factors affecting this classification include,
among other things, the timing and amount of revenue from product sales; the
timing and amount of license fees, milestone payments and development funding
under license, marketing, distribution and development agreements; the
classification of payments received by the Company as active or passive; and the
classification of the Company's assets as active or passive.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company implemented SFAS No. 131
for the year ended December 31, 1998 and has determined that it currently does
not have reportable segments. There were no product sales in the United States
for the quarters ended September 30, 1999 and 1998, and approximately $1.6
million and $0 for the nine months periods ended September 30, 1999 and 1998,
respectively. Product sales to Europe, which were all made to SSI, were
approximately $1.2 million and $501,000 for the quarters ended September 30,
1999 and 1998, respectively, and approximately $2.0 million and $845,000 for the
nine months ended September 30, 1999 and 1998, respectively. All products are
currently being manufactured at the Company's one production facility in the
United States. The production process, and ultimately product costing, is
primarily the same for all of the Company's acellular pertussis vaccine products
sold in the United States and Europe. Because of this, and the relative
consistency in selling prices, as well as the nature of the distribution methods
utilized by the Company, the Company does not differentiate and manage its
business along geographic lines.
The Company has been notified by the American Stock Exchange
("Exchange") that it was considering delisting the Company because of
non-compliance with its listing requirements. The Exchange has deferred its
judgment on delisting until it has reviewed the Company's Annual Report on Form
10-K for the year ending December 31, 1999. If the proposed transaction with the
potential acquiror is not entered into or consummated, then the Exchange has
requested that the Company provide it with additional information regarding its
financial condition.
IMPACT OF THE YEAR 2000 ISSUE ON THE COMPANY
- --------------------------------------------
The Year 2000 issue is the result of some computers, software and other
equipment, including computer code, in which calendar year data is abbreviated
to only two digits. Management has initiated a company-wide program to prepare
the Company's information systems for the year 2000. Based on an internal
assessment, the Company believes that the principal management information
26
<PAGE>
system software that is currently being used is designed to be Year 2000
compliant. However, there can be no assurances in this regard. The Company
intends to test the system for Year 2000 compliance. The Company also uses
various "off the shelf" software applications for the storage and analysis of
various types of data and systems. Management is dependent on this software for
day-to-day operations. The Company has completed the inventory of its
information technology and date-sensitive systems and has completed the
assessment phases and has substantially completed the required remediation of
noncompliant, mission-critical systems to achieve Year 2000 qualification. This
process is nearing completion; however, the Company is unable at this time to
assess the impact, if any, that non-compliant systems or equipment might
ultimately have on the Company's systems and operations or its future financial
position or results of operations.
The Company has communicated with substantially all of its significant
suppliers to determine the extent to which the Company is vulnerable to failures
by such third parties to remediate their own Year 2000 issues. The Company has
not been advised by its suppliers that costs to obtain Year 2000 compliance will
be passed on to the Company; however, there can be no assurances that such costs
will not be passed through to the Company either directly or indirectly or, if
passed through to the Company, the magnitude of such charges. The systems of
other companies on which the Company's systems rely may not be timely converted.
Accordingly, there are no assurances that the failure by such other companies'
systems to achieve Year 2000 qualification, or qualify in a manner that is
compatible to Company systems, would not have a material adverse effect on the
Company. The Company is finalizing contingency plans for various possible
scenarios.
The Company has determined that it has no exposure to contingencies
related to the Year 2000 Issue for product it has sold. Based on the internal
assessment, the Company has not identified any material costs or expenditures
specifically related to modifications of information systems for Year 2000
compatibility. This internal assessment is a continuing process, consequently
there can be no assurances that the Company will not be required to expend
significant amounts on achieving Year 2000 qualification or that such
expenditures will not have a material adverse affect on future results from
operations or financial condition.
The foregoing paragraphs contain forward looking statements and the
factors affecting the impact of Year 2000 on the Company include, among others,
the availability and cost of programming and testing resources, vendors' ability
to modify proprietary software, unanticipated problems identified in the ongoing
compliance assessment, and compliance of material third party suppliers and
vendors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Company does not have significant exposure to changing interest
rates on invested cash at September 30, 1999. The Company invests in U.S.
Treasury bills and investment grade commercial paper that have maturities of
three months or less. As a result, the interest rate market risk implicit in
these investments at September 30, 1999, is low, as the investments mature
within three months.
27
<PAGE>
The Company had $25 million of 4.5% Notes at September 30, 1999, which
bear interest at 4.5% per annum and mature in November 2003. The Company does
not have significant exposure to changing interest rates related to the 4.5%
Notes because the interest rate on these notes is fixed.
The Company had $75.3 million of 6.5% Notes at September 30, 1999, which
bear interest at 6.5% per annum and mature in May 2003. The Company does not
have significant exposure to changing interest rates related to the 6.5% Notes
because the interest rate on these notes is fixed.
The Company has drawn down a total of $6 million in three equal draws
under the revolving line of credit guaranteed by BioChem. The loans bear
interest at LIBOR plus 265 basis points, which are currently between 8.06% and
8.09%. Each draw under the line is an individual revolving loan. New interest
rates and periods will be determined when these loans mature. The entire
principal balance on the line of credit must be repaid no later than December
31, 1999. The Company has exposure to changing interest rates related to the $6
million of debt but does not deem it material due to the time limitations on the
borrowing.
The Company drew down $5 million in November 1999 under a revolving line
of credit guaranteed by a third party. The loan bears interest at LIBOR plus
.625%. The Company has exposure to changing interest rates related to the $5
million of debt but does not deem it material due to the time limitations on the
borrowing.
The Company has not undertaken any actions to cover interest market risk
and is not a party to any interest rate market risk management activities.
A hypothetical ten percent change in the market interest rates over the
next year would not materially impact the Company's earnings or cash flow as the
interest rates on the Company's long-term convertible debt are fixed and its
revolving line of credit and cash investments are short term. A hypothetical ten
percent change in the market interest rate over the next year, by itself, would
not have a material adverse effect on the fair value of the Company's long-term
convertible debt, revolving line of credit or its short-term cash investments.
The Company does principally all of its transactions in U.S. dollars and
currently has limited payment obligations in Swedish Krona and Danish Kroner;
however, such obligations are not material to the Company's operations. In
addition, the Company's contract with the NHS in the U.K. is denominated in
British pounds sterling. The Company intends to reduce risk due to possible
changes in exchange rates between the currencies by entering into a hedging
transaction before the effective date of the contract.
28
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
Sharon Mates, the Company's former president, continues to pursue her appeal of
the judgment that the Company had obtained its favor from the U.S. District
Court in Maryland. The appeal is pending in the U.S. Court of Appeals for the
Fourth Circuit. Dr. Mates's original counsel, however, has withdrawn from their
representation, causing Dr. Mates to apply for an extension of time to find new
counsel and file her brief. On October 15, 1999, the Fourth Circuit granted Dr.
Mates's motion, giving her until November 18, 1999, to file her brief.
The lawsuit was filed by Dr. Mates in November 1998 and included claims against
the Company and two directors for, among other things, abusive discharge,
defamation, interference with business relations, and breach of contract. In
December 1998, the Company filed a motion to dismiss on the basis that the
allegations in the complaint did not state any claim under applicable law. In
June 1999, the U.S. District Court in Maryland dismissed all claims filed by Dr.
Mates, as well as the claims filed against the two named directors and an
affiliate, BioChem Pharma Inc. ("BioChem"). In July 1999, Dr. Mates filed a
notice of appeal.
In October 1999, Chiron-Behring GmbH & Co. ("Chiron") notified the Company that
Chiron is seeking to terminate the marketing agreement in Germany and Austria
for the Company's DTaP-IPV vaccine. Chiron alleges that the Company
misrepresented the status of European regulatory approval of its products and
fraudulently induced Chiron to enter into the agreement. Chiron has demanded
that the Company repay $3 million of nonrefundable payments that Chiron made
under the agreement. If discussions directly with Chiron do not resolve the
dispute, the Company intends to challenge Chiron's effort to terminate. The
agreement between the Company and Chiron includes an arbitration process for
resolving any such dispute, and the Company will avail itself of that process
and will vigorously contest and defend against the claims raised by Chiron. The
Company believes that the claims against it are without merit, that the Company
has meritorious defenses available to it, and that certain counterclaims also
may be available to it.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
In July 1999 the Company obtained a $6 million revolving line of credit maturing
December 31, 1999. The interest rate on borrowings under the line of credit is
LIBOR plus 265 basis points. BioChem, an affiliate of the Company, has provided
the guarantee of the line of credit, which will remain in place for a maximum of
two years, unless there is a change of control such as the contemplated
acquisition by the third party. The Company issued to BioChem warrants to
purchase a total of 500,000 shares of the Company's Common Stock in reliance on
Section 4(2) of the Securities Act, related to draws of $4 million under the
line of credit through September 30, 1999. An additional 250,000 warrants have
been issued by the Company to BioChem for the draw of the remaining $2 million
under the line during the fourth quarter of 1999. Each warrant has a term of two
years from the date of issuance. The per share exercise price under each warrant
is approximately $5.14, which is the average of the closing price of the
Company's Common Stock on the American Stock Exchange over five trading days
that began on June 28 and ended on July 2, 1999. Each warrant contains
anti-dilution provisions and registrations rights among other provisions.
29
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
Exhibit No. Description
10.45 Common Stock Purchase Warrant No. W-2 dated August
26, 1999
10.46 Common Stock Purchase Warrant No. W-3 dated October
28, 1999
10.47 Revolving Credit Facility Letter Agreement dated
November 1, 1999 by and between Bank of America,
N.A. and North American Vaccine, Inc.
10.48 Fee Letter dated November 1, 1999
10.49 Security Agreement dated as of November 1, 1999 by
and between North American Vaccine, Inc. and Bank
of America, N.A.
10.50 Security Agreement dated as of November 1, 1999
10.51 Patent and Trademark Assignment and Security
Agreement dated as of November 1, 1999 by and
between North American Vaccine, Inc. and Bank of
America, N.A.
10.52 Patent and Trademark Assignment and Security
Agreement dated as of November 1, 1999
10.53 Guaranty Agreement dated November 1, 1999
10.54 Reimbursement Agreement dated as of November 1,
1999
27 Financial Data Schedule
(b) Reports on Form 8-K
None
30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH AMERICAN VACCINE, INC.
----------------------------
(Registrant)
By: /s/ Randal D. Chase
------------------------
Randal D. Chase, Ph.D.
President and Chief Executive Officer
By: /s/ Lawrence J. Hineline
------------------------
Lawrence J. Hineline
Vice President - Finance
Date: March 9, 2000
31
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR PROVINCE OF CANADA AND
SUCH SECURITIES MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM
NORTH AMERICAN VACCINE, INC.
Warrant for the Purchase of Common Shares
-----------------------------------------
No. W-2 250,000 Shares
---
FOR VALUE RECEIVED, NORTH AMERICAN VACCINE, INC. (the "Company"), a
Canadian corporation, hereby certifies that BioChem Pharma Inc. or its permitted
assigns (the "Holder") is entitled to purchase from the Company, at any time or
from time to time after the date set forth on the signature page, but prior to
5:00 p.m. on August 13, 2001, two hundred fifty thousand (250,000) fully paid
and non-assessable common shares, no par value, of the Company for an aggregate
purchase price of One Million Two Hundred Eighty-Four Thousand Three Hundred
Seventy-Five U.S. Dollars (US$1,284,375) (computed on the basis of US$5.1375 per
share). (Hereinafter, (i) said common shares, together with any other equity
securities which may be issued by the Company in substitution therefor, are
referred to as the "Common Shares":, (ii) the Common Shares purchasable
hereunder are referred to as the "Warrant Shares", (iii) the aggregate purchase
price payable hereunder for the Warrant Shares is referred to as the "Aggregate
Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares,
as adjusted in the manner set forth in Section 3, is referred to as the "Per
Share Warrant Price" and (v) this Warrant and all warrants hereafter issued in
exchange or substitution for this Warrant are referred to as the "Warrants") The
Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant
Price and the number of Warrant Shares are subject to adjustment as hereinafter
provided.
1. EXERCISE OF WARRANT. This Warrant may be exercised, in whole at any time
or in part from time to time (such partial exercises to be in amounts of not
less than 1,000 Warrant Shares), on and after the date set forth on the
signature page, but prior to 5:00 p.m. on August 13, 2001, by the Holder of this
Warrant by the surrender of this Warrant (with the subscription form at the end
hereof duly executed) at the principal office of the Company in Columbia, MD
together with proper payment of the Aggregate Warrant Price applicable on such
date, or the proportionate part thereof if this Warrant is exercised in part.
Payment for Warrant Shares shall be made by (i) check payable to the order of
the Company, (ii) wire transfer to an account designated by and in the name of
the Company, (iii) by delivery to the Company of debt securities for which it is
the issuer and bound to make payment in the stated principal amount, where the
principal amount on such debt security delivered to the Company for retirement
is equal to the Aggregate Warrant Price; or (iv) by any combination of the
methods set forth in (i) through (iii), above. If this Warrant is exercised in
part, this Warrant must be exercised for a number of whole Warrant Shares, and
the Holder is entitled to receive a new Warrant covering the number of Warrant
- 1 -
<PAGE>
Shares in respect of which this Warrant has not been exercised and setting forth
the proportionate part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will issue a
certificate or certificates in the name of the Holder for the largest number of
whole Warrant Shares to which the Holder shall be entitled and, if this Warrant
is exercised in whole, in lieu of any fractional Warrant Share to which the
Holder shall be entitled, cash equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine).
2. RESERVATION OF WARRANT SHARES. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and
reserve, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the Warrant Shares free and clear of all restrictions
on sale or transfer (except as may arise under applicable securities laws) and
free and clear of all preemptive rights.
3. PROTECTION AGAINST DILUTION. (a) If, at any time or from time to time
after the date of this Warrant, the Company shall (i) issue to the holders of
the Common Shares any Common Shares by way of a stock dividend; (ii) subdivide
its outstanding Common Shares into a greater number of shares; (iii) combine its
outstanding number of Common Shares into a smaller number (i.e., a reverse stock
split); or (iv) issue by reclassification of its Common Shares any shares of
capital stock of the Company then, and in each such case, the Per Share Warrant
Price in effect immediately prior to the date of such action shall be adjusted,
or further adjusted, to a price (to the nearest cent) determined by dividing (x)
an amount equal to the number of Common Shares outstanding immediately prior to
such issuance multiplied by the Per Share Warrant Price in effect immediately
prior to such issuance by (y) the total number of Common Shares outstanding
immediately after such issuance. Upon each adjustment in the Per Share Warrant
Price resulting from a stock split or stock dividend, the number of Warrant
Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per
Share Warrant Price in effect immediately after such adjustment. Notice of each
such adjustment and each such readjustment shall be forthwith mailed to the
Holder.
(b) If the Company shall be consolidated with or merged into another
corporation, or shall sell all or substantially all of its assets as part of a
reorganization to which the Company is a party within the meaning of the
Internal Revenue Code of 1986, as presently in effect, or shall issue a security
convertible into its Common Shares as a dividend on its Common Shares, each
Warrant Share shall be replaced for the purposes hereof by the securities or
properties issuable or distributed in respect of one Common Share upon such
consolidation, merger, sale, reclassification or reorganization, and adequate
provisions to that effect shall be made at the time thereof. Notice of such
consolidation, merger, sale, reclassification or reorganization, and of said
provisions so proposed to be made, shall be mailed to the Holder not less than
15 days prior to such event.
(c) If the Board of Directors of the Company shall declare any dividend or
other distribution in cash with respect to the Common Shares, other than out of
surplus, the Company shall mail notice thereof to the Holder not less than 15
- 2 -
<PAGE>
days prior to the record date fixed for determining shareholders entitled to
participate in such dividend or other distribution.
(d) If , during the term of this Warrant, the Company shall issue or sell
its Common Shares for a consideration per share less than the Per Share Warrant
Price immediately prior to the time of such issue or sale, then forthwith upon
such issue or sale, the Per Share Warrant Price in effect immediately prior to
such issue or sale shall be reduced to the lower of the prices (calculated to
the nearest cent) determined as follows:
(1) by dividing (A) an amount equal to the sum of (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then-existing Per Share Warrant Price, and (ii) the
consideration, if any, received by the Company upon such issue or sale, by (B)
the total number of Common Shares outstanding immediately after such issue or
sale; and
(2) by multiplying the Per Share Warrant Price in effect immediately
prior to the time of such issue or sale by a fraction, the numerator of which
shall be (A) the sum of (i) the number of Common Shares outstanding immediately
prior to such issue or sale multiplied by the market price immediately prior to
such issue or sale; and (ii) the consideration received by the Company upon such
sale, divided by (B) the total number of Common Shares outstanding immediately
after such issue or sale, and the denominator of which shall be the market price
immediately prior to such issue or sale.
4. FULLY PAID SHARES; TAXES. The Company agrees that the Common Shares
represented by each and every certificate for Warrant Shares delivered on the
exercise of this Warrant shall, at the time of such delivery, be validly issued
and outstanding, fully paid and non-assessable. The Company further covenants
and agrees that it will pay, when due and payable, any and all Federal and state
stamp, original issue or similar taxes which may be payable in respect of the
issue of any Warrant Share or certificate therefor.
5. TRANSFERABILITY. This Warrant and the Warrant Shares shall not be sold,
transferred, assigned or hypothecated by the Holder except (i) pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
and qualification for sale under all other applicable state and provincial
securities rules and regulations [collectively the "Securities Acts"]; or (ii)
in full compliance with all requirements necessary to establish an exemption
from the registration requirements of the Securities Acts. In order to properly
establish compliance with (ii), above, the Company shall be entitled to request
and receive in advance of authorizing any sale, transfer, assignment or
hypothecation of this Warrant or any of the Warrant Shares: (x) appropriate
transferor and transferee representation letters supporting a claimed exemption
from registration requirements of the Securities Acts; (y) an opinion of counsel
for the holder of the Warrant and/or Warrant Shares reasonably satisfactory to
the Company that the proposed transfer from the holder of the Warrant and/or
Warrant Shares to the transferee is exempt from the registration requirements of
the Securities Act; and (z) such other documentation, representations and
- 3 -
<PAGE>
filings as may be reasonably required by counsel in order to issue the foregoing
opinion. The Company may treat the registered holder of this Warrant as it
appears on the Company's books at any time as the Holder for all purposes.
6. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, and upon
reimbursement of the Company's reasonable incidental expenses, the Company shall
execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
7. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent or
to receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
8. COMMUNICATION. No notice or other communication under this Warrant shall
be effective unless, but any notice or other communication shall be effective
and shall be deemed to have been given if, the same is in writing and is mailed
by first-class mail, postage prepaid, addressed to:
(a) the Company at North American Vaccine, Inc., 10150 Old Columbia Road,
Columbia, MD 21046 Attention: Vice President-Finance, or such other address as
the Company has designated in writing to the Holder, or
(b) the Holder at BioChem Pharma Inc., 275 Armand Frappier Boulevard,
Laval, H7V 4A7 Quebec, Canada Attention: Executive Vice President-Investments &
Subsidiaries, or such other address as the Holder has designated in writing to
the Company.
9. HEADINGS. The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
10. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York.
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<PAGE>
IN WITNESS WHEREOF, NORTH AMERICAN VACCINE, INC. has caused this Warrant to
be signed by its Senior Vice President-Legal Affairs & General Counsel and its
corporate seal to be hereunto affixed and attested by its Secretary this 26th
day of August, 1999.
ATTEST: NORTH AMERICAN VACCINE, INC.
/s/ Russell P. Wilson By: /s/ Daniel J. Abdun-Nabi
- --------------------- ------------------------
Russell P. Wilson Daniel J. Abdun-Nabi
Assistant Secretary Senior Vice President-Legal
Affairs & General Counsel
[Corporate Seal]
- 5 -
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR PROVINCE OF CANADA AND
SUCH SECURITIES MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM
NORTH AMERICAN VACCINE, INC.
Warrant for the Purchase of Common Shares
-----------------------------------------
No. W-3 250,000 Shares
---
FOR VALUE RECEIVED, NORTH AMERICAN VACCINE, INC. (the "Company"), a
Canadian corporation, hereby certifies that BioChem Pharma Inc. or its permitted
assigns (the "Holder") is entitled to purchase from the Company, at any time or
from time to time after the date set forth on the signature page, but prior to
5:00 p.m. on October 28, 2001, two hundred fifty thousand (250,000) fully paid
and non-assessable common shares, no par value, of the Company for an aggregate
purchase price of One Million Two Hundred Eighty-Four Thousand Three Hundred
Seventy-Five U.S. Dollars (US$1,284,375) (computed on the basis of US$5.1375 per
share). (Hereinafter, (i) said common shares, together with any other equity
securities which may be issued by the Company in substitution therefor, are
referred to as the "Common Shares":, (ii) the Common Shares purchasable
hereunder are referred to as the "Warrant Shares", (iii) the aggregate purchase
price payable hereunder for the Warrant Shares is referred to as the "Aggregate
Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares,
as adjusted in the manner set forth in Section 3, is referred to as the "Per
Share Warrant Price" and (v) this Warrant and all warrants hereafter issued in
exchange or substitution for this Warrant are referred to as the "Warrants") The
Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant
Price and the number of Warrant Shares are subject to adjustment as hereinafter
provided.
1. EXERCISE OF WARRANT. This Warrant may be exercised, in whole at any time
or in part from time to time (such partial exercises to be in amounts of not
less than 1,000 Warrant Shares), on and after the date set forth on the
signature page, but prior to 5:00 p.m. on October 28, 2001, by the Holder of
this Warrant by the surrender of this Warrant (with the subscription form at the
end hereof duly executed) at the principal office of the Company in Columbia, MD
together with proper payment of the Aggregate Warrant Price applicable on such
date, or the proportionate part thereof if this Warrant is exercised in part.
Payment for Warrant Shares shall be made by (i) check payable to the order of
the Company, (ii) wire transfer to an account designated by and in the name of
the Company, (iii) by delivery to the Company of debt securities for which it is
the issuer and bound to make payment in the stated principal amount, where the
principal amount on such debt security delivered to the Company for retirement
is equal to the Aggregate Warrant Price; or (iv) by any combination of the
methods set forth in (i) through (iii), above. If this Warrant is exercised in
part, this Warrant must be exercised for a number of whole Warrant Shares, and
the Holder is entitled to receive a new Warrant covering the number of Warrant
- 1 -
<PAGE>
Shares in respect of which this Warrant has not been exercised and setting forth
the proportionate part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will issue a
certificate or certificates in the name of the Holder for the largest number of
whole Warrant Shares to which the Holder shall be entitled and, if this Warrant
is exercised in whole, in lieu of any fractional Warrant Share to which the
Holder shall be entitled, cash equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine).
2. RESERVATION OF WARRANT SHARES. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and
reserve, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the Warrant Shares free and clear of all restrictions
on sale or transfer (except as may arise under applicable securities laws) and
free and clear of all preemptive rights.
3. PROTECTION AGAINST DILUTION. (a) If, at any time or from time to time
after the date of this Warrant, the Company shall (i) issue to the holders of
the Common Shares any Common Shares by way of a stock dividend; (ii) subdivide
its outstanding Common Shares into a greater number of shares; (iii) combine its
outstanding number of Common Shares into a smaller number (i.e., a reverse stock
split); or (iv) issue by reclassification of its Common Shares any shares of
capital stock of the Company then, and in each such case, the Per Share Warrant
Price in effect immediately prior to the date of such action shall be adjusted,
or further adjusted, to a price (to the nearest cent) determined by dividing (x)
an amount equal to the number of Common Shares outstanding immediately prior to
such issuance multiplied by the Per Share Warrant Price in effect immediately
prior to such issuance by (y) the total number of Common Shares outstanding
immediately after such issuance. Upon each adjustment in the Per Share Warrant
Price resulting from a stock split or stock dividend, the number of Warrant
Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per
Share Warrant Price in effect immediately after such adjustment. Notice of each
such adjustment and each such readjustment shall be forthwith mailed to the
Holder.
(b) If the Company shall be consolidated with or merged into another
corporation, or shall sell all or substantially all of its assets as part of a
reorganization to which the Company is a party within the meaning of the
Internal Revenue Code of 1986, as presently in effect, or shall issue a security
convertible into its Common Shares as a dividend on its Common Shares, each
Warrant Share shall be replaced for the purposes hereof by the securities or
properties issuable or distributed in respect of one Common Share upon such
consolidation, merger, sale, reclassification or reorganization, and adequate
provisions to that effect shall be made at the time thereof. Notice of such
consolidation, merger, sale, reclassification or reorganization, and of said
provisions so proposed to be made, shall be mailed to the Holder not less than
15 days prior to such event.
(c) If the Board of Directors of the Company shall declare any dividend or
other distribution in cash with respect to the Common Shares, other than out of
surplus, the Company shall mail notice thereof to the Holder not less than 15
- 2 -
<PAGE>
days prior to the record date fixed for determining shareholders entitled to
participate in such dividend or other distribution.
(d) If , during the term of this Warrant, the Company shall issue or sell
its Common Shares for a consideration per share less than the Per Share Warrant
Price immediately prior to the time of such issue or sale, then forthwith upon
such issue or sale, the Per Share Warrant Price in effect immediately prior to
such issue or sale shall be reduced to the lower of the prices (calculated to
the nearest cent) determined as follows:
(1) by dividing (A) an amount equal to the sum of (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then-existing Per Share Warrant Price, and (ii) the
consideration, if any, received by the Company upon such issue or sale, by (B)
the total number of Common Shares outstanding immediately after such issue or
sale; and
(2) by multiplying the Per Share Warrant Price in effect immediately
prior to the time of such issue or sale by a fraction, the numerator of which
shall be (A) the sum of (i) the number of Common Shares outstanding immediately
prior to such issue or sale multiplied by the market price immediately prior to
such issue or sale; and (ii) the consideration received by the Company upon such
sale, divided by (B) the total number of Common Shares outstanding immediately
after such issue or sale, and the denominator of which shall be the market price
immediately prior to such issue or sale.
4. FULLY PAID SHARES; TAXES. The Company agrees that the Common Shares
represented by each and every certificate for Warrant Shares delivered on the
exercise of this Warrant shall, at the time of such delivery, be validly issued
and outstanding, fully paid and non-assessable. The Company further covenants
and agrees that it will pay, when due and payable, any and all Federal and state
stamp, original issue or similar taxes which may be payable in respect of the
issue of any Warrant Share or certificate therefor.
5. TRANSFERABILITY. This Warrant and the Warrant Shares shall not be sold,
transferred, assigned or hypothecated by the Holder except (i) pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
and qualification for sale under all other applicable state and provincial
securities rules and regulations [collectively the "Securities Acts"]; or (ii)
in full compliance with all requirements necessary to establish an exemption
from the registration requirements of the Securities Acts. In order to properly
establish compliance with (ii), above, the Company shall be entitled to request
and receive in advance of authorizing any sale, transfer, assignment or
hypothecation of this Warrant or any of the Warrant Shares: (x) appropriate
transferor and transferee representation letters supporting a claimed exemption
from registration requirements of the Securities Acts; (y) an opinion of counsel
for the holder of the Warrant and/or Warrant Shares reasonably satisfactory to
the Company that the proposed transfer from the holder of the Warrant and/or
Warrant Shares to the transferee is exempt from the registration requirements of
the Securities Act; and (z) such other documentation, representations and
- 3 -
<PAGE>
filings as may be reasonably required by counsel in order to issue the foregoing
opinion. The Company may treat the registered holder of this Warrant as it
appears on the Company's books at any time as the Holder for all purposes.
6. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, and upon
reimbursement of the Company's reasonable incidental expenses, the Company shall
execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
7. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent or
to receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
8. COMMUNICATION. No notice or other communication under this Warrant shall
be effective unless, but any notice or other communication shall be effective
and shall be deemed to have been given if, the same is in writing and is mailed
by first-class mail, postage prepaid, addressed to:
(a) the Company at North American Vaccine, Inc., 10150 Old Columbia Road,
Columbia, MD 21046 Attention: Vice President-Finance, or such other address as
the Company has designated in writing to the Holder, or
(b) the Holder at BioChem Pharma Inc., 275 Armand Frappier Boulevard,
Laval, H7V 4A7 Quebec, Canada Attention: Executive Vice President-Investments &
Subsidiaries, or such other address as the Holder has designated in writing to
the Company.
9. HEADINGS. The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
10. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York.
- 4 -
<PAGE>
IN WITNESS WHEREOF, NORTH AMERICAN VACCINE, INC. has caused this Warrant to
be signed by its Vice President-Finance and its corporate seal to be hereunto
affixed and attested by its Assistant Secretary this 28th day of October, 1999.
ATTEST: NORTH AMERICAN VACCINE, INC.
/s/ Russell P. Wilson By: /s/ Lawrence J. Hineline
- --------------------- ------------------------
Russell P. Wilson Lawrence J. Hineline
Assistant Secretary Vice President-Finance
[Corporate Seal]
- 5 -
November 1, 1999
North American Vaccine, Inc.
10150 Old Columbia Road
Columbia, Maryland 21046
Attention: Dr. Randal Chase
Chief Executive Officer and President
Re: Revolving Credit Facility
-------------------------
Ladies/Gentlemen:
BANK OF AMERICA, N.A. ("LENDER") is pleased to make available to NORTH AMERICAN
VACCINE, INC., a Canadian corporation ("BORROWER"), a revolving credit facility
on the terms and subject to the conditions set forth below. Terms not defined
herein have the meanings assigned to them in EXHIBIT A hereto.
1. THE FACILITY.
(a) THE COMMITMENT. Subject to the terms and conditions set forth herein,
Lender agrees to make available to Borrower until the Maturity Date a
revolving line of credit providing for loans ("LOANS") in an aggregate
principal amount not exceeding at any time US$30,000,000 (the
"COMMITMENT"); PROVIDED, HOWEVER, Lender shall not be obligated to
advance Loans in an aggregate principal amount exceeding $5,000,000
until such time as Lender (I) shall have received written evidence
satisfactory to Lender of the approval of the finance committee of
Guarantor to permit Loans in an aggregate amount exceeding $5,000,000
(but in no event greater than the Commitment), (II) shall have been
granted a first priority security interest in the collateral set forth
in SCHEDULE 3(K) attached hereto and (III) shall otherwise comply with
the terms and conditions set forth in PARAGRAPH 2(B) hereof. Subject to
the foregoing limits, Borrower may borrow, repay and reborrow Loans
until the Maturity Date.
(b) BORROWINGS, CONVERSIONS, CONTINUATIONS. Borrower may request that Loans
be (i) made as or converted to Base Rate Loans by irrevocable notice to
be received by Lender not later than 11 a.m. on the Business Day of the
borrowing or conversion, or (ii) made or continued as, or converted to,
<PAGE>
Offshore Rate Loans by irrevocable notice to be received by Lender not
later than 11 a.m. three Business Days prior to the Business Day of the
borrowing, continuation or conversion. If Borrower fails to give a
notice of conversion or continuation prior to the end of any Interest
Period in respect of any Offshore Rate Loan, Borrower shall be deemed
to have requested that such Loan be converted to a Base Rate Loan on
the last day of the applicable Interest Period.
Each Offshore Rate Loan shall be in a minimum principal amount of
$1,000,000 or a multiple of $500,000 in excess thereof. Each Base Rate
Loan shall be in a minimum principal amount of $500,000 or a multiple
of $100,000 in excess thereof. There shall not be more than five (5)
different Interest Periods in effect at any time. Notwithstanding the
foregoing, except for the initial Loan, Borrower shall not be permitted
to borrow Loans in an aggregate principal amount in excess of
$2,500,000 during any consecutive fourteen (14) day period (measured on
a rolling fourteen (14) day basis) (unless otherwise consented to in
writing by Guarantor) and only for the purposes set forth in PARAGRAPH
3(F) hereof.
(c) INTEREST. At the option of Borrower, Loans shall bear interest at a
rate per annum equal to (i) the Offshore Rate PLUS .625%; or (ii) the
Base Rate. Interest on Base Rate Loans when the Base Rate is determined
by Lender's prime rate shall be calculated on the basis of a year of
365 or 366 days and actual days elapsed. All other interest hereunder
shall be calculated on the basis of a year of 360 days and actual days
elapsed.
Borrower promises to pay interest (i) for each Offshore Rate Loan, on
the last day of the applicable Interest Period, and, if the Interest
Period is longer than one month, on the respective dates that fall
every month after the beginning of the Interest Period; (ii) for Base
Rate Loans, on the last Business Day of each calendar month; and (iii)
for all Loans, on the Maturity Date. If the time for any payment is
extended by operation of law or otherwise, interest shall continue to
accrue for such extended period.
After the date any principal amount of any Loan is due and payable
(whether on the maturity date, upon acceleration or otherwise), or
after any other monetary obligation hereunder shall have become due and
payable, Borrower shall pay, but only to the extent permitted by law,
interest (after as well as before judgment) on such amounts at a rate
per annum equal to the Base Rate plus 2%. Such interest shall be
payable on demand.
In no case shall interest hereunder exceed the amount that Lender may
charge or collect under applicable law.
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<PAGE>
(d) EVIDENCE OF LOANS. The Loans and all payments thereon shall be
evidenced by Lender's loan accounts and records; PROVIDED, HOWEVER,
that upon the request of Lender, the Loans may be evidenced by a grid
promissory note in the form of EXHIBIT B hereto, instead of or in
addition to such loan accounts and records. Such loan accounts, records
and promissory note shall be conclusive absent manifest error of the
amount of the Loans and payments thereon. Any failure to record any
Loan or payment thereon or any error in doing so shall not limit or
otherwise affect the obligation of Borrower to pay any amount owing
with respect to the Loans.
(e) FEES. Borrower promises to pay the following fees in accordance with
the terms hereof:
(i) STRUCTURING FEE. Borrower shall pay to Lender a fee (the
"STRUCTURING FEE") in accordance with the terms and conditions of that
certain letter agreement dated as of November 1, 1999 among Borrower,
Guarantor and Lender. The Structuring Fee shall be due and payable to
Lender upon the execution and delivery of this Agreement and shall be
non-refundable once paid.
(ii) COMMITMENT FEE. Borrower shall pay to Lender a commitment fee (the
"COMMITMENT FEE") of .25% per annum on the daily unused portion of the
Commitment, payable in arrears on the last Business Day of each
calendar month and on the Maturity Date, and calculated on the basis on
a year of 360 days and actual days elapsed; provided that Borrower
shall not be obligated to pay the Commitment Fee with respect to the
portion of the Commitment that is not available (in accordance with the
terms of PARAGRAPH 1(A) hereof) for borrowing by Borrower.
(f) REPAYMENT. Borrower promises to pay all Loans then outstanding on the
Maturity Date, unless earlier accelerated in accordance with the terms
of this Agreement.
Borrower shall make all payments required hereunder not later than 1
p.m. on the date of payment in same day funds in United States Dollars
at the office of Lender located at 100 North Tryon Street, Charlotte,
North Carolina 28255 or such other address as Lender may from time to
time designate in writing.
-3-
<PAGE>
All payments by Borrower to Lender hereunder shall be made to Lender in
full without set-off or counterclaim and free and clear of and exempt
from, and without deduction or withholding for or on account of, any
present or future taxes, levies, imposts, duties or charges of
whatsoever nature imposed by any government or any political
subdivision or taxing authority thereof. If any taxes are required to
be withheld or deducted from any amount payable under this Agreement or
the Note (if any), then the amount payable under this Agreement or such
Note shall be increased to the amount which, after deduction from such
increased amount of all taxes required to be withheld or deducted
therefrom, will yield to Lender the amount stated to be payable under
this Agreement or such Note. Borrower shall reimburse Lender for any
taxes imposed on or withheld from such payments and paid by Lender
(other than taxes imposed on Lender's income, and franchise taxes
imposed on Lender, by the jurisdiction under the laws of which Lender
is organized or any political subdivision thereof) not later than 10
days after written demand by Lender, and Borrower shall be responsible
for any interest, penalties and expenses incurred by Lender in
connection with the collection of such amounts.
(g) PREPAYMENTS. Borrower may, upon three Business Days' notice, in the
case of Offshore Rate Loans, and upon same-day notice in the case of
Base Rate Loans, prepay Loans on any Business Day; PROVIDED that
Borrower pays all Breakage Costs (if any) associated with such
prepayment on the date of such prepayment. Prepayments of Offshore Rate
Loans must be accompanied by a payment of interest on the amount so
prepaid. Prepayments must be in a principal amount of at least $500,000
or a multiple of $100,000 in excess thereof.
(h) COMMITMENT REDUCTIONS. Borrower may, upon five Business Days' notice,
reduce or cancel the undrawn portion of the Commitment, PROVIDED, that
the amount of such reduction is not less than $500,000 or a whole
multiple thereof.
2. (a) CONDITIONS PRECEDENT TO INITIAL LOAN. As a condition precedent to the
initial Loan hereunder (which such amount shall not exceed
US$5,000,000), Lender must receive the following from or on behalf of
Borrower and/or Guarantor in form satisfactory to Lender and Guarantor
(provided that with respect to items delivered by Guarantor to Lender,
such items need only be satisfactory to Lender in its discretion):
(i) the enclosed duplicate of this Agreement duly executed and
delivered on behalf of Borrower;
(ii) (A) the Security Agreement and the IP Security Agreement, each
duly executed and delivered on behalf of Borrower to Lender and
(I) UCC financing statements executed on behalf of Borrower to
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<PAGE>
Lender for each appropriate jurisdiction as is necessary, in
Lender's and Guarantor's discretion, to perfect its security
interest in such collateral and/or (II) such
patent/trademark/copyright filings executed on behalf of Borrower
to be made with the United States Patent and Trademark Office as
requested by Lender in order to perfect Lender's security
interest in such collateral and (B) a security agreement and
intellectual property security agreement executed and delivered
on behalf of Borrower to Guarantor in consideration of Borrower's
obligations under the Reimbursement Agreement and (I) UCC
financing statements executed on behalf of Borrower to Guarantor
for each appropriate jurisdiction as is necessary, in Guarantor's
discretion, to perfect its security interest in such collateral
and/or (II) such patent/trademark/copyright filings executed on
behalf of Borrower to be made with the United States Patent and
Trademark Office as requested by Guarantor in order to perfect
Guarantor's security interest in such collateral;
(iii) legal documentation deemed necessary or appropriate by Lender and
Guarantor under Canadian law to pledge Borrower's interest with
respect to the collateral described in the Security Agreement and
the IP Security Agreement;
(iv) the Guaranty duly executed and delivered on behalf of Guarantor;
(v) the Reimbursement Agreement duly executed and delivered on behalf
of Borrower;
(vi) a favorable legal opinion of (A) U.S. counsel(s) to Borrower
acceptable to Lender and Guarantor regarding, but not limited to,
the due authorization, execution, delivery and enforceability of
this Agreement and the perfection of the security interests
granted to Lender by the Security Agreement and the IP Security
Agreement and (B) Canadian counsel to Borrower acceptable to
Lender and Guarantor regarding, but not limited to, the due
authorization, execution, delivery and enforceability of the
Canadian collateral documents and the perfection of the security
interests granted thereunder;
(vii) the execution and delivery of that certain letter agreement dated
as of November 1, 1999 among Borrower, Guarantor and Lender and
the payment of the fees referenced therein;
-5-
<PAGE>
(viii) the execution and delivery of that certain letter agreement
between Borrower and Guarantor regarding the payment by Borrower
of certain break-up fees;
(ix) a copy of (A) the articles of incorporation (or other charter
documents) and bylaws of Borrower certified by a secretary or
assistant secretary of Borrower to be true and correct as of the
Closing Date and (B) the articles of incorporation (or other
charter documents) and bylaws of Guarantor certified by a
secretary or assistant secretary of Guarantor to be true and
correct as of the Closing Date;
(x) a certified borrowing resolution or other evidence of Borrower's
authority to borrow hereunder;
(xi) a certified resolution or other evidence of Guarantor's\
authority to deliver the Guaranty;
(xii) a certificate of incumbency for each of Borrower and Guarantor;
(xiii) a certificate of good standing, existence or its equivalent with
respect to each of Borrower and Guarantor certified as of a
recent date by the appropriate governmental authorities of the
state or other jurisdiction of incorporation and each other
jurisdiction in which the failure to so qualify and be in good
standing would have a Material Adverse Effect;
(xiv) if requested by Lender, a promissory note as contemplated in
PARAGRAPH 1(D) above;
(xv) receipt of (A) audited consolidated balance sheet and statements
of earnings and cash flow of Borrower and its Subsidiaries as of
December 31, 1998 and (B) unaudited consolidated balance sheet
and statements of earnings and cash flow of Borrower and its
Subsidiaries for the fiscal quarters ending March 31, 1999 and
June 30, 1999, respectively;
(xvi) receipt of copies of (A) the Royal Bank of Canada Credit
Facility certified by an officer of Borrower to be a true and
accurate copy and (B) each other credit agreement of Borrower
and/or its Subsidiaries evidencing liabilities, in each case, of
Borrower and/or its Subsidiaries in excess of $1,000,000; and
-6-
<PAGE>
(xvii) such other documents as Lender or Guarantor may reasonably
request.
(b) CONDITIONS PRECEDENT TO SECOND BORROWING. As a condition precedent to
the second borrowing under this Agreement (which such second borrowing
shall not exceed U.S. $25,000,000 and together with the initial Loan
shall not exceed in the aggregate U.S. $30,000,000), Lender must
receive the following from or on behalf of Borrower and/or Guarantor in
form satisfactory to Lender and Guarantor (provided that with respect
to items delivered by Guarantor to Lender, such items need only be
satisfactory to Lender in its discretion):
(i) written evidence satisfactory to Lender of the approval of the
finance committee of Guarantor to permit Loans in an aggregate
amount exceeding $5,000,000;
(ii) (A) Borrower shall have granted to Lender a first priority
security interest in additional unencumbered collateral existing
at such time which is reasonably satisfactory to Lender and
Guarantor and Borrower shall have executed and delivered (I) all
necessary documents to be filed with the U.S. Patent and
Trademark Office and other appropriate filing locations and (II)
all UCC financing statements for each appropriate jurisdiction as
deemed necessary by Lender and Guarantor, in Lender's and
Guarantor's discretion, to Lender or its designee for filing with
the appropriate offices and (B) Borrower shall have granted to
Guarantor a security interest in the additional collateral
referred to in subsection (A) above and Borrower shall have
executed and delivered (I) all necessary documents to be filed
with the U.S. Patent and Trademark Office and other appropriate
filing locations and (II) all UCC financing statements for each
appropriate jurisdiction as deemed necessary by Lender and
Guarantor, in Lender's and Guarantor's discretion, to Guarantor
or its designee for filing with the appropriate offices; and
(iii) a legal opinion of counsel(s) to Borrower acceptable to Lender
and Guarantor regarding, but not limited to, the due
authorization, execution, delivery and enforceability of such
documents related to the additional collateral;
(iv) an officer's certificate of Borrower stating that all
representations and warranties set forth in PARAGRAPH 3 continue
to be true and correct in all material respects as of the date of
such borrowing and that no Default or Event of Default shall have
occurred and be continuing on the date of such borrowing;
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<PAGE>
(v) the North American Vaccine Acquisition Agreement shall have been
executed and delivered on or before November 16, 1999;
(vi) no Material Adverse Change shall have occurred since the Closing
Date; and
(vii) such other documents, filings or opinions as Lender or Guarantor
may reasonably request.
(c) CONDITIONS TO EACH BORROWING, CONTINUATION AND CONVERSION. As a
condition precedent to each borrowing (including the initial
borrowing), conversion and continuation of any Loan:
(i) Borrower must furnish Lender and Guarantor with, as appropriate,
a notice of borrowing, conversion or continuation;
(ii) each representation and warranty set forth in PARAGRAPH 3 below
shall be true and correct in all material respects as if made on
the date of such borrowing, continuation or conversion; and
(iii) no Default or Event of Default shall have occurred and be
continuing on the date of such borrowing, continuation or
conversion.
Each notice of borrowing and notice of conversion or continuation
shall be deemed a representation and warranty by Borrower that
the conditions referred to in clauses (ii) and (iii) above have
been met.
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to the
Lender that:
(a) EXISTENCE AND QUALIFICATION; POWER; COMPLIANCE WITH LAWS. It is a
corporation duly organized or formed, validly existing and in good
standing under the laws of Canada, has the power and authority and the
legal right to own and operate its properties, to lease the properties
it operates and to conduct its business, is duly qualified and in good
standing under the laws of each jurisdiction where its ownership, lease
or operation of properties or the conduct of its business requires such
qualification, and is in compliance with all laws except to the extent
that noncompliance does not have a Material Adverse Effect.
(b) POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution, delivery
and performance of this Agreement and the other Loan Documents by
Borrower are within its powers and have been duly authorized by all
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<PAGE>
necessary action, and this Agreement is and the other Loan Documents,
when executed, will be, legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective terms, except
as the enforceability thereof may be limited by applicable Debtor
Relief Laws and general principles of equity. The execution, delivery
and performance of this Agreement and the other Loan Documents are not
in contravention of law or of the terms of Borrower's organic documents
and will not result in the breach of or constitute a default under, or
result in the creation of a lien under any indenture, agreement or
undertaking to which Borrower is a party or by which it or its property
may be bound or affected.
(c) FINANCIAL STATEMENTS; NO MATERIAL ADVERSE EFFECT. (I) The audited
consolidated balance sheet and statements of earnings and cash flow of
Borrower and its Subsidiaries for the fiscal year ended as of December
31, 1998 have heretofore been furnished to Lender and filed with
Borrower's Form 10-K for the fiscal year then ended. The unaudited
consolidated balance sheet and statements of earnings and cash flows
for the fiscal quarters ending March 31, 1999 and June 30, 1999,
respectively, have heretofore been furnished to Lender and filed with
Borrower's Form 10-Q for such quarters. The financial statements for
Borrower's fiscal quarter ending June 30, 1999 (excluding any
amendments, restatements or subsequent filings with respect thereto)
present fairly the consolidated financial condition of Borrower and its
Subsidiaries as of June 30, 1999, and since June 30, 1999 there has
been no event or circumstance that has a Material Adverse Effect,
except as has been publicly disclosed by Borrower prior to the date
hereof or except as set forth in Schedule 3(c). All of the foregoing
historical financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied except as
disclosed in the notes thereto.
(II) On and as of the Closing Date, the Projections delivered to the
Lender have been prepared in good faith and are based on reasonable
assumptions, and there are no statements, calculations or conclusions
in the Projections which are based upon or include information known to
Borrower to be misleading in any material respect or which fail to take
into account material information known to Borrower regarding the
matters reported therein. On the Closing Date, Borrower believes that
the Projections are reasonable.
(d) NO MATERIAL LITIGATION. Except as set forth in SCHEDULE 3(D) hereof, no
litigation or governmental proceeding is pending or, to the best
knowledge of Borrower, threatened by or against Borrower which, if
adversely determined, has a Material Adverse Effect.
(e) NO DEFAULT. No Default or Event of Default has occurred and is
continuing.
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<PAGE>
(f) USE OF PROCEEDS. The proceeds of the Loans will be used solely for
working capital purposes of Borrower (and in any event in accordance
with the restrictions set forth in Section 4(c) hereof) and not for any
other purposes except as set forth in SCHEDULE 3(F) hereto.
(g) ERISA. Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code, and other Federal or state
law, including all requirements under the Code or ERISA for filing
reports, and benefits have been paid in accordance with the provisions
of such Plan except where the failure to be in compliance in all
material respects does not have a Material Adverse Effect.
(h) ENVIRONMENTAL MATTERS. All facilities owned or leased by Borrower or
its Subsidiaries have been and continue to be in material compliance
with all material environmental laws and regulations.
(i) YEAR 2000. Borrower has (i) initiated a review and assessment of all
areas within its and each of its Subsidiaries' business and operations
(including those affected by customers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications and devices containing imbedded computer chips
used by Borrower or any of its Subsidiaries (or their respective
customers and vendors) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable. Based on the
foregoing, Borrower believes that all computer applications and devices
containing imbedded computer chips (including those of its and its
Subsidiaries' customers and vendors) that are material to its or any of
its Subsidiaries' business and operations are reasonably expected on a
timely basis to be able to perform properly date-sensitive functions
for all dates before and after January 1, 2000 (that is, be "Year 2000
compliant"), except to the extent that a failure to do so does not have
a Material Adverse Effect.
(j) FULL DISCLOSURE. No written statement made by Borrower to Lender in
connection with this Agreement, or in connection with any Loan,
contains any untrue statement of a material fact or omits a material
fact necessary to make the statement made not misleading.
(k) INTELLECTUAL PROPERTY. Borrower owns, or has the legal right to use,
all trademarks, tradenames, copyrights, technology, know-how and
processes (the "INTELLECTUAL PROPERTY") necessary for it to conduct its
business as currently conducted, except for such Intellectual Property
for which the failure to own or have the legal right to use could not
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<PAGE>
have a Material Adverse Effect. Set forth on SCHEDULE 3(K) is a list of
all Intellectual Property that Borrower is pledging as collateral on
the Closing Date. Except as provided on SCHEDULE 3(K), no claim has
been asserted and is pending by any Person challenging or questioning
the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does Borrower have
knowledge of any such claim, and the use of such Intellectual Property
by Borrower does not infringe on the rights of any Person, except for
such claims and infringements that, in the aggregate, could not have a
Material Adverse Effect.
(l) NO OTHER LIENS. Other than as disclosed in SCHEDULE 3(K) or otherwise
disclosed in writing to Lender and Guarantor, with respect to the
"Collateral" (as defined in the Security Agreement) and the "Intellectual
Property Collateral" (as defined in the IP Security Agreement), Borrower has
not assigned rights of payment in or otherwise granted a security interest
with respect to such rights or collateral to any other Person.
4. COVENANTS. So long as principal of and interest on any Loan or any
other amount payable hereunder or under any other Loan Document remains
unpaid or unsatisfied and the Commitment has not been terminated:
(a) INFORMATION. Borrower shall deliver to Lender:
(i) (A) as soon as available and in any event within 90 days
after the end of each fiscal year of Borrower a consolidated
balance sheet of Borrower and its Subsidiaries as of the end of
such fiscal year and the related consolidated statements of
income and cash flows for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal
year, all prepared in accordance with generally accepted
accounting principles applied on a consistent basis and certified
by independent public accountants of nationally recognized
standing and (B) as soon as available and in any event within 30
days after the end of each fiscal year of Borrower a preliminary
consolidated balance sheet of Borrower and its Subsidiaries as of
the end of such fiscal year and the related preliminary
consolidated statements of income and cash flows for such fiscal
year, setting forth in each case in comparative form figures for
(I) Borrower's previous fiscal year and (II) the projected budget
for the fiscal year then ended, all in reasonable detail and duly
certified (subject to normal year-end adjustments) by the chief
financial officer of Borrower as having been prepared in
accordance with generally accepted accounting principles applied
on a consistent basis, and, in addition to the preliminary
statements required to be delivered pursuant to (B) above,
Borrower shall provide to Lender any changes or
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modifications (if any) to such preliminary financial statements
every two weeks after the initial delivery of such preliminary
statements;
(ii) (A) as soon as available and in any event within 30 days
after the end of each of the first three quarters of each fiscal
year of Borrower, a consolidated balance sheet of Borrower and
its Subsidiaries as of the end of such quarter and the related
consolidated statements of income and cash flows for such quarter
and for the portion of Borrower's fiscal year ended at the end of
such quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding
portion of Borrower's previous fiscal year, all in reasonable
detail and duly certified (subject to normal year-end
adjustments) by the chief financial officer of Borrower as having
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis and (B) as soon as
available and in any event within 15 days after the end of each
of the first three fiscal quarters of each fiscal year of
Borrower a preliminary consolidated balance sheet of Borrower and
its Subsidiaries as of the end of such quarter and related
preliminary consolidated statements of income and cash flow for
such quarter then ended;
(iii) as soon as available and in any event within 20 days after
the end of each month (except the final month of its fiscal
year), a copy of the unaudited consolidated balance sheet of
Borrower and its Subsidiaries and the related consolidated
statements of income and cash flows for such month, setting forth
in each case in comparative form the figures for (A) the
corresponding month of Borrower's previous fiscal year and (B)
the projected budget for the month then ended, all in reasonable
detail and duly certified (subject to normal year-end
adjustments) by the chief financial officer of Borrower as having
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis;
(iv) within 20 days after the end of each month (except the final
month of its fiscal year), a certificate of Borrower certified by
the chief financial officer of Borrower that (A) each of the
representations and warranties set forth in PARAGRAPH 3 hereof
are true and accurate as of the end of such fiscal month and (B)
no Default or Event of Default shall have occurred and be
continuing as of the end of such fiscal month;
(v) promptly upon transmission or receipt thereof, (A) complete
copies of any filings and registrations with, and reports
(special or otherwise) to or from, the Securities and
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Exchange Commission or any successor agency, (B) proxy
statements, notices and reports that Borrower sends to its
shareholders and (C) copies of all press releases issued by
Borrower;
(v) promptly upon Borrower's obtaining knowledge of any Default or
Event of Default, a certificate of the chief financial officer of
Borrower setting forth the details thereof and any action that
Borrower is taking or proposes to take with respect thereto; and
(vi) from time to time such additional information regarding the
financial condition or business of Borrower and its Subsidiaries
as Lender may reasonably request.
(b) OTHER AFFIRMATIVE COVENANTS. Borrower shall, and shall cause each
of its Subsidiaries to:
(i) preserve and maintain all of its rights, privileges, and
franchises necessary or desirable in the normal conduct of
its business;
(ii) comply with the requirements of all applicable laws, rules,
regulations, and orders of governmental authorities the
violation of which could result in a Material Adverse Effect;
(iii) pay and discharge when due all taxes, assessments, and
governmental charges or levies imposed on it or on its income
or profits or any of its property, except for any such tax,
assessment, charge, or levy the payment of which is being
contested in good faith and by proper proceedings and against
which adequate reserves are being maintained;
(iv) maintain all of its properties owned or used in its business
in good working order and condition ordinary wear and tear
excepted;
(v) permit representatives of Lender, during normal business
hours and upon reasonable notice, to examine, copy, and make
extracts from its books and records, to inspect its
properties, and to discuss its business and affairs with its
officers, directors, and accountants;
(vi) cause (A) all of its Intellectual Property set forth on
SCHEDULE 3(K) and (B) all of its receivables and other
collateral subject to the Security Agreement to be subject at
all times to first priority, perfected Liens in favor of
Lender to secure the obligations under this Agreement
pursuant to the terms and conditions of the IP Security
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<PAGE>
Agreement and the Security Agreement. Borrower shall promptly
notify Lender of the acquisition of any Intellectual Property
subsequent to the Closing Date; and
(vii) maintain insurance in such amounts, with such deductibles,
and against such risks as is customary for similarly situated
businesses.
(c) NEGATIVE COVENANTS. Borrower shall not, nor shall it permit any
of its Subsidiaries to:
(i) INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness, EXCEPT: (A) Indebtedness under the Loan
Documents and (B) Indebtedness outstanding on the date
hereof and listed on SCHEDULE 4(C)(I); provided that from
and after the date of this Agreement, in no event shall
Borrower or its Subsidiaries be permitted to make any
additional borrowings under the Royal Bank of Canada Credit
Facility (not to include conversions or continuations of
existing borrowed amounts).
(ii) LIENS AND NEGATIVE PLEDGES. Incur, assume or suffer to
exist, any Lien or Negative Pledge upon any of its property,
assets or revenues, whether now owned or hereafter acquired,
EXCEPT Liens and Negative Pledges existing on the date
hereof and listed on SCHEDULE 4(C)(II).
(iii) FUNDAMENTAL CHANGES. Except as provided for or contemplated
under the North America Vaccine Acquisition Agreement, merge
or consolidate with or into any Person or enter into any
other agreement contemplating a merger, consolidation or
disposition of all or substantially all of its assets with
any other Person (other than Guarantor or any Affiliate of
Guarantor) or liquidate, wind-up or dissolve itself, or
permit or suffer any liquidation or dissolution or use the
proceeds of any Loan in connection with any merger or
acquisition of assets.
(iv) DISPOSITIONS. Make any Dispositions, other than (A)
Dispositions of inventory and (B) other than Dispositions in
the ordinary course of Borrower's business and in amounts
not to exceed $25,000 for any single Disposition.
(v) INVESTMENTS. Make any Investments.
(vi) LEASE OBLIGATIONS. Create or suffer to exist any obligations
for the payment of rent for any property under lease or
agreement to lease, EXCEPT leases in existence on the date
hereof and any renewal, extension or refinancing thereof
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<PAGE>
provided that the rental payments or financed amount with
respect to such lease does not increase.
(vii) RESTRICTED PAYMENTS. Make any Restricted Payments or
otherwise prepay any obligations or liabilities (whether in
the ordinary course or otherwise).
(viii) ERISA. At any time engage in a transaction which could be
subject to Sections 4069 or 4212(c) of ERISA, or permit any
Pension Plan to (a) engage in any non-exempt "prohibited
transaction" (as defined in Section 4975 of the Code); (b)
fail to comply with ERISA or any other applicable Laws; or
(c) incur any material "accumulated funding deficiency" (as
defined in Section 302 of ERISA), which, with respect to
each event listed above, has a Material Adverse Effect.
(ix) CHANGE IN NATURE OF BUSINESS. Make any change in the nature
of the business of Borrower or its Subsidiaries as conducted
and as proposed to be conducted as of the date hereof.
(x) TRANSACTIONS WITH AFFILIATES. Enter into any transaction of
any kind with any Affiliate of Borrower other than
arm's-length transactions with Affiliates that are otherwise
permitted hereunder.
(xi) CAPITAL EXPENDITURES. Except as set forth in SCHEDULE 3(f)
hereto, mmake, or become legally obligated to make, any
capital expenditure in excess of $100,000 from the Closing
Date to and including the Maturity Date.
(xii) CHANGE IN AUDITORS. Change the certified public accountants
auditing the books of Borrower without the consent of
Lender.
5. EVENTS OF DEFAULT. The following are "EVENTS OF DEFAULT" hereunder:
(a) Borrower fails to pay any principal of any Loan as and on the date when
due; or
(b) Borrower fails to pay any interest on any Loan, or any commitment fees
due hereunder, or any portion thereof, within three days after the date
when due; or Borrower fails to pay any other fees or amount payable to
Lender under any Loan Document, or any portion thereof, within five days
after the date due; or
(c) Any default occurs in the observance or performance of any agreement
contained in PARAGRAPH 4(a) or 4(c) hereof; or
(d) Borrower fails to perform or observe any other covenant or agreement
(not specified above) contained in any Loan Document on its part to be
performed or observed and such failure continues for 10 days; or
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<PAGE>
(e) Any representation or warranty in any Loan Document or in any
certificate, agreement, instrument or other document made or delivered
by Borrower pursuant to or in connection with any Loan Document proves
to have been incorrect when made or deemed made; or
(f) Borrower (i) defaults in any payment when due of principal of or
interest on any indebtedness (other than indebtedness hereunder), or
(ii) defaults in the observance or performance of any other agreement or
condition relating to any indebtedness (other than indebtedness
hereunder) or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur, the effect
of which default or other event is to cause, or to permit the holder or
holders of such indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, indebtedness having an aggregate principal
amount in excess of $100,000 to be demanded or become due (automatically
or otherwise) prior to its stated maturity, or any guaranty obligation
in such amount to become payable, or Borrower is unable or admits in
writing its inability to pay its debts as they mature; or
(g) Any Loan Document, at any time after its execution and delivery and for
any reason other than the agreement of Lender or satisfaction in full of
all the indebtedness hereunder, ceases to be in full force and effect or
to give Lender the Liens, rights, powers and privileges purported to be
created thereby, or any Loan Document is declared by a court of
competent jurisdiction to be null and void, invalid or unenforceable in
any respect; or Borrower denies that it has any or further liability or
obligation under any Loan Document, or purports to revoke, terminate or
rescind any Loan Document; or
(h) The Guaranty or any provision thereof shall cease to be in full force
and effect or Guarantor or any Person acting by or on behalf of
Guarantor shall deny or disaffirm Guarantor's obligations under the
Guaranty, or Guarantor shall otherwise default in the due performance or
observance of any term, covenant or agreement on its part to be
performed or observed pursuant to the Guaranty, including without
limitation the occurrence of any Guaranty Event of Default; or
(i) A final judgment against Borrower is entered for the payment of money in
excess of $100,000 and such judgment remains unsatisfied without
procurement of a stay of execution within 10 calendar days after the
date of entry of judgment; or
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(j) Borrower or any of its Subsidiaries institutes or consents to the
institution of any proceeding under Debtor Relief Laws, or makes an
assignment for the benefit of creditors; or applies for or consents to
the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any
material part of its property; or any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is appointed
without the application or consent of Borrower or such Subsidiary; or
any proceeding under Debtor Relief Laws relating to Borrower or any
Subsidiary or to all or any part of Borrower's or such Subsidiary's
property is instituted without the consent of Borrower or such
Subsidiary, or an order for relief is entered in any such proceeding; or
(k) Any event occurs which has a Material Adverse Effect; or
(l) An "Event of Default" (as such term is defined in the Royal Bank of
Canada Credit Facility) occurs under the Royal Bank of Canada Credit
Facility; or
(m) The North American Vaccine Acquisition Agreement shall not be executed
by the Borrower and Guarantor on or prior to November 16, 1999 or the
North American Vaccine Acquisition shall be unwound, reversed or
otherwise rescinded in whole or in any material part for any reason or
the North American Vaccine Acquisition Agreement or any letter of intent
associated therewith shall be terminated by any party thereto; or
(n) An "Event of Default" (as such term is defined in (x) that certain
Indenture dated as of May 7, 1996 between Borrower and Marine Midland
Bank (the "MARINE MIDLAND INDENTURE"), or (y) that certain Indenture
dated November 12, 1998, between Borrower and Bankers Trust Company (the
"BT Indenture")) occurs under the Marine Midland Indenture or the BT
Indenture; or
(o) Any Change of Control.
Upon the occurrence of an Event of Default, Lender may declare the Commitment
to be terminated, whereupon the Commitment shall be terminated, and/or
declare all sums outstanding hereunder and under the other Loan Documents to
be immediately due and payable, together with all interest thereon, without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor, or other notices or demands of any kind or character,
all of which are hereby expressly waived; PROVIDED, HOWEVER, that upon the
occurrence of any event specified in Paragraph 5(j) above, the Commitment
shall automatically terminate, and all sums outstanding hereunder and under
each other Loan Document shall become immediately due and payable, together
with all interest thereon, without notice of default, presentment or demand
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for payment, protest or notice of nonpayment or dishonor, or other notices or
demands of any kind or character, all of which are hereby expressly waived.
6. MISCELLANEOUS.
(a) All financial computations required under this Agreement shall be made,
and all financial information required under this Agreement shall be
prepared, in accordance with generally accepted accounting principles
consistently applied.
(b) All references herein and in the other Loan Documents to any time of
day shall mean the local (standard or daylight, as in effect) time of
Charlotte, North Carolina.
(c) All Breakage Costs shall be for the account of Borrower.
(d) If at any time Lender, in its sole discretion, determines that (i)
deposits in the amount of any requested Offshore Rate Loan for any
requested Interest Period are not available to Lender in the offshore
dollar interbank market, or (ii) the Offshore Rate does not accurately
reflect the funding cost to Lender of lending such Loans, Lender's
obligation to make Offshore Rate Loans shall cease for the period
during which such circumstance exists.
(e) Borrower shall reimburse or compensate Lender, upon demand, for all
costs incurred, losses suffered or payments made by Lender which are
applied or reasonably allocated by Lender to the transactions
contemplated herein (all as determined by Lender in its reasonable
discretion) by reason of any and all future reserve, deposit, capital
adequacy or similar requirements against (or against any class of or
change in or in the amount of) assets, liabilities or commitments of,
or extensions of credit by, Lender; and compliance by Lender with any
directive, or requirements from any regulatory authority, whether or
not having the force of law.
(f) No amendment or waiver of any provision of this Agreement or of any
other Loan Document and no consent by Lender to any departure therefrom
by Borrower shall be effective unless such amendment, waiver or consent
shall be in writing and signed by a duly authorized officer of Lender,
and any such amendment, waiver or consent shall then be effective only
for the period and on the conditions and for the specific instance
specified in such writing. No failure or delay by Lender in exercising
any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other rights,
power or privilege.
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(g) Except as otherwise expressly provided herein, notices and other
communications to each party provided for herein shall be in writing
and shall be delivered by hand or overnight courier service, mailed or
sent by telecopy or electronic mail to the address set forth on the
signature page hereto or as otherwise provided in writing from time to
time by such party. Any such notice or other communication sent by
overnight courier service, mail or telecopy shall be effective on the
earlier of actual receipt and (i) if sent by overnight courier service,
the scheduled delivery date, (ii) if sent by mail, the fourth Business
Day after deposit in the U.S. mail first class postage prepaid, and
(iii) if sent by telecopy, when transmission in legible form is
complete. All notices and other communications sent by the other means
listed in the first sentence of this paragraph shall be effective upon
receipt. Notwithstanding anything to the contrary contained herein, all
notices (by whatever means) to Lender pursuant to PARAGRAPH 1(B) hereof
shall be effective only upon receipt.
(h) This Agreement shall inure to the benefit of the parties hereto and
their respective successors and assigns, except that Borrower may not
assign its rights and obligations hereunder. LENDER MAY AT ANY TIME (I)
ASSIGN ALL OR ANY PART OF ITS RIGHTS AND OBLIGATIONS HEREUNDER TO ANY
OTHER PERSON WITH THE CONSENT OF BORROWER, SUCH CONSENT NOT TO BE
UNREASONABLY WITHHELD, PROVIDED BORROWER HEREBY SPECIFICALLY
ACKNOWLEDGES AND AGREES THAT NO SUCH CONSENT SHALL BE REQUIRED IF THE
ASSIGNMENT IS TO (A) AN AFFILIATE OF LENDER, (B) GUARANTOR OR (C) IF A
DEFAULT OR EVENT OF DEFAULT EXISTS, AND (II) GRANT TO ANY OTHER PERSON
PARTICIPATING INTERESTS IN ALL OR PART OF ITS RIGHTS AND OBLIGATIONS
HEREUNDER WITHOUT NOTICE TO BORROWER. Borrower agrees to execute any
documents reasonably requested by Lender in connection with any such
assignment. All information provided by or on behalf of Borrower to
Lender or its affiliates may be furnished by Lender to its affiliates
and to any actual or proposed assignee or participant.
(i) Borrower shall pay Lender, on demand, all reasonable out-of-pocket
expenses and legal fees (including the allocated costs for in-house
legal services) incurred by Lender in connection with the enforcement
of this Agreement or any instruments or agreements executed in
connection herewith.
(j) If any provision of this Agreement or any other Loan Document shall be
held invalid or unenforceable in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof or
thereof. This Agreement supersedes all prior agreements and oral
negotiations with respect to the subject matter hereof.
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<PAGE>
(k) This Agreement may be executed in one or more counterparts, and each
counterpart, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same instrument.
(l) This Agreement and the other Loan Documents are governed by, and shall
be construed in accordance with, the laws of the State of New York and
the applicable laws of the United States of America. Borrower hereby
submits to the nonexclusive jurisdiction of the United States District
Court and each state court in the City of New York for the purposes of
all legal proceedings arising out of or relating to any of the Loan
Documents or the transactions contemplated thereby. Borrower
irrevocably consents to the service of any and all process in any such
action or proceeding by the mailing of copies of such process to
Borrower at its address set forth beneath its signature hereto.
Borrower irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an
inconvenient forum.
(m) BORROWER AND LENDER EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
(n) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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Please indicate your acceptance of the Commitment on the foregoing terms and
conditions by returning an executed copy of this Agreement to the undersigned
not later than November 1, 1999.
BANK OF AMERICA, N.A.
By:/s/ Lawrence J. Gordon
-----------------------------------
Name: Lawrence J. Gordon
Title: Vice President
Notice Address:
Bank of America Center
700 Louisiana Street, TX4-213-08-10
Houston, Texas 77002-2700
Attention: Lawrence J. Gordon
Vice President
Fax No.: 713-247-6719
ACCEPTED AND AGREED TO:
NORTH AMERICAN VACCINE, INC.
By: /s/ Randal Chase
-------------------------------
Name: Randal Chase, Ph.D.
-------------------------------
Title: Chief Executive Officer & President
-----------------------------------
Date: November 1, 1999
Notice Address:
10150 Old Columbia Road
Columbia, Maryland 21046
Attention: Vice-President
Fax No.: (410) 309-4077
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EXHIBIT A
DEFINITIONS
Affiliate: Any Person directly or indirectly controlling, controlled by,
or under direct or indirect common control with, Borrower. A
Person shall be deemed to be "controlled by" any other Person
if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of
directors or managing general partners; or (b) to direct or
cause the direction of the management and policies of such
Person whether by contract or otherwise.
Agreement: This letter agreement, as amended, restated, extended,
supplemented or otherwise modified in writing from time to
time.
Base Rate: A fluctuating rate per annum equal to the higher of (a) the
Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest
publicly announced from time to time by Lender as its prime
rate. The Lender's prime rate is a rate set by Lender based
upon various factors including Lender's costs and desired
return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate. Any change in
the prime rate announced by Lender shall take effect at the
opening of business on the day specified in the public
announcement of such change.
Base Rate Loan: A Loan bearing interest based on the Base Rate.
Breakage Costs: Any loss, cost or expense incurred by Lender (including any
loss of anticipated profits and any loss or expense arising
from the liquidation or reemployment of funds obtained by
Lender to maintain the relevant Offshore Rate Loan or from fees
payable to terminate the deposits from which such funds were
obtained) as a result of (i) any continuation, conversion,
payment or prepayment of any Offshore Rate Loan on a day other
than the last day of the Interest Period therefor (whether
voluntary, mandatory, automatic, by reason of acceleration, or
otherwise); or (ii) any failure by Borrower (for a reason other
than the failure of Lender to make a Loan when all conditions
to making such Loan have been met by Borrower in accordance
with the terms hereof) to prepay, borrow, continue or convert
any Offshore Rate Loan on a date or in the amount notified by
A-1
<PAGE>
Borrower. The certificate of Lender as to its costs of funds,
losses and expenses incurred shall be conclusive absent
manifest error.
Business Day: Any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized to close under the laws of, or
are in fact closed in, the State of North Carolina where
Lender's lending office is located and, if such day relates to
any Offshore Rate Loan, means any such day on which dealings in
dollar deposits are conducted by and between banks in the
offshore dollar interbank market.
Change of
Control: Any of the following events: (a) any "person" or "group"
(within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act) (other than one or more of the Principal
Shareholders) has become, directly or indirectly, the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Securities Exchange Act, except that a Person shall be
deemed to have a "beneficial ownership" of all shares that any
such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), by
way of merger, consolidation or otherwise, of 20% or more of
the voting power of the Voting Stock of Borrower on a
fully-diluted basis, after giving effect to the conversion and
exercise of all outstanding warrants, options and other
securities of Borrower convertible into or exercisable for
Voting Stock of Borrower (whether or not such securities are
then currently convertible or exercisable); or (b) during any
period of two consecutive calendar years, individuals who at
the beginning of such period constituted the board of directors
of Borrower (together with any new directors whose election to
such board or whose nomination for election by the stockholders
of Borrower was approved by a vote of a majority of the
directors then still in office who were either directors at the
beginning of such period or whose election or nomination for
election was previously approved) cease for any reason to
constitute a majority of the board of directors of Borrower
then in office; or (c) the failure of Biochem Pharma Inc. at
any time to directly own beneficially and of record on a fully
diluted basis at least 35% of the Voting Stock of Borrower.
Closing Date: Means the date of this Agreement.
Code: The Internal Revenue Code of 1986, as amended from time to
time.
Contractual
Obligation: Any provision of any security issued by such Person or of any
agreement, instrument or undertaking to which such Person is a
party or by which it or any of its property is bound.
A-2
<PAGE>
Debtor Relief
Laws: The Bankruptcy Code of the United States of America, and all
other liquidation, conservatorship, bankruptcy, assignment for
the benefit of creditors, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor
relief laws of the United States of America or other applicable
jurisdictions from time to time in effect affecting the rights
of creditors generally.
Default: Any event that, with the giving of any notice, the passage of
time, or both, would be an Event of Default.
Disposition: The sale, transfer, license or other disposition (including any
sale and leaseback transaction) of any property by any Person,
including any sale, assignment, transfer or other disposal with
or without recourse of any notes or accounts receivable or any
rights and claims associated therewith.
ERISA: The Employee Retirement Income Security Act of 1974 and any
regulations issued pursuant thereto, as amended from time to
time.
Event of
Default: Has the meaning set forth in Paragraph 5.
Federal Funds
Rate: For any day, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) equal to the weighted average of
the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers
on such day, as published by the Federal Reserve Bank of New
York on the Business Day next succeeding such day; PROVIDED
that (a) if such day is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if no such rate is so
published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to
Lender on such day on such transactions as determined by
Lender.
Governmental
Authority: Any (a) international, foreign, federal, state, county or
municipal government, or political subdivision thereof, (b)
governmental or quasi-governmental agency, authority, board,
bureau, commission, department, instrumentality, central bank
or public body, or (c) court, administrative tribunal or public
utility.
Guarantor: Baxter International, Inc., a Delaware Corporation.
Guaranty: The Guaranty dated as of the date of the Agreement given by
Guarantor for the benefit of Lender.
A-3
<PAGE>
Guaranty Event
of Default: Has the meaning set forth in the Guaranty.
Guaranty
Obligation: Any (a) guaranty by a Person of Indebtedness of, or other
obligation payable or performable by, any other Person or (b)
assurance, agreement, letter of responsibility, letter of
awareness, undertaking or arrangement given by a Person to an
obligee of any other Person with respect to the payment or
performance of an obligation by, or the financial condition of,
such other Person, whether direct, indirect or contingent,
including any purchase or repurchase agreement covering such
obligation or any collateral security therefor, any agreement
to provide funds (by means of loans, capital contributions or
otherwise) to such other Person, any agreement to support the
solvency or level of any balance sheet item of such other
Person or any "keep-well" or other arrangement of whatever
nature given for the purpose of assuring or holding harmless
such obligee against loss with respect to any obligation of
such other Person; PROVIDED, HOWEVER, that the term Guaranty
Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The
amount of any Guaranty Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the
related primary obligation, or portion thereof, covered by such
Guaranty Obligation or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as
determined by the Person in good faith.
Indebtedness: As to any Person at a particular time, all items which would,
in conformity with GAAP, be classified as liabilities on a
balance sheet of such Person as at such time (excluding trade
and other accounts payable in the ordinary course of business
in accordance with customary trade terms and which are not
overdue for a period of more than 60 days and excluding
deferred taxes), but in any event including: (a) all
obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments; (b) any direct or
contingent obligations of such Person arising under letters of
credit (including standby and commercial), banker's
acceptances, bank guaranties, surety bonds and similar
instruments; (c) net obligations under any Swap Contract in an
amount equal to (i) if such Swap Contract has been closed out,
the termination value thereof, or (ii) if such Swap Contract
has not been closed out, the mark-to-market value thereof
determined on the basis of readily available quotations
provided by any recognized dealer in such Swap Contract; (d)
A-4
<PAGE>
whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred
purchase price of property or services, and indebtedness
(excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including
indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall
have been assumed by such Person or is limited in recourse; (e)
lease payment obligations under capital leases or Synthetic
Lease Obligations; and (f) all Guaranty Obligations of such
Person in respect of any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any
Person shall include the Indebtedness of any partnership or
joint venture in which such Person is a general partner or a
joint venturer.
Intellectual
Property: Has the meaning set forth in PARAGRAPH 3(K).
Interest
Period: For each Offshore Rate Loan, (a) initially, the period
commencing on the date the Offshore Rate Loan is disbursed or
converted from a Base Rate Loan and (b) thereafter, the period
commencing on the last day of the preceding Interest Period,
and, in each case, ending on the earlier of (x) the Maturity
Date and (y) one month thereafter, as requested by Borrower;
PROVIDED that:
(i) any Interest Period that would otherwise end on a day that
is not a Business Day shall be extended to the next
succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period
shall end on the next preceding Business Day; and
(ii) any Interest Period which begins on the last Business Day
of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business
Day of the calendar month at the end of such Interest
Period.
Investment: Any acquisition or any investment by such Person, whether by
means of the purchase or other acquisition of stock or other
securities of any other Person or by means of a loan, creating
a debt, capital contribution, guaranty or other debt or equity
participation or interest in any other Person, including any
partnership and joint venture interests in such other Person.
A-5
<PAGE>
IP Security
Agreement: The Patent and Trademark Assignment and Security Agreement
dated as of the Closing Date between Borrower, as assignor, and
Lender, as assignee.
Lien: Any mortgage, pledge, hypothecation, assignment, deposit
arrangement (in the nature of compensating balances, cash
collateral accounts or security interests), encumbrance, lien
(statutory or other), charge, or preference, priority or other
security interest or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect
as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable laws
of any jurisdiction), including the interest of a purchaser of
accounts receivable.
Loan Documents: This Agreement, the Security Agreement, the IP Security
Agreement and any promissory note, certificate, fee letter,
financing statement and other instrument, document or agreement
delivered in connection with this Agreement or the Security
Agreement or the IP Security Agreement.
Material
Adverse Effect: Any set of circumstances or events which (a ) has or could
reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of any Loan
Document, (b) is or could reasonably be expected to be material
and adverse to the condition (financial or otherwise), business
operations or prospects of Borrower or (c) materially impairs
or could reasonably be expected to materially impair the
ability of Borrower to perform its obligations and liabilities
under this Agreement or any other Loan Document; provided,
however, that a Material Adverse Effect under this Agreement
shall not include any circumstances or events (including,
without limitation, any loss of personnel, loss of customers,
loss of suppliers or the delay or cancellation of any orders
for products): (i) relating to the economy in general, (ii)
relating to the industry in which Borrower operates in general,
(iii) relating to any actions taken by The American Stock
Exchange with respect to its letter to the Borrower dated
September 24, 1999, (iv) arising out of or resulting from
actions contemplated by the Borrower and the Guarantor in
connection with, or which is attributable to, the announcement
of this Agreement and/or the transactions contemplated hereby
(including, without limitation, the Guarantor's acquisition of
the Borrower), or (v) relating to the release of Borrower's
financial results or Borrower's failure to meet any publicized
financial projections for so long as Borrower's revenue and
A-6
<PAGE>
expenses are substantially in accordance with the Projections.
Maturity Date: March 31, 2000, or such earlier date on which the Commitment
may terminate in accordance with the terms hereof.
Multiemployer
Plan: Any employee benefit plan of the type described in Section
4001(a)(3) of ERISA.
Negative
Pledge: A Contractual Obligation that restricts Liens on property.
North American The acquisition by Guarantor of Borrower pursuant to the North
Vaccine American Vaccine Acquisition Agreement and all other
Acquisition: transactions contemplated by the North American Vaccine
Acquisition Agreement.
North American The Agreement and Plan of Merger to be entered into between
Vaccine Guarantor and Borrower, in substantially the form of EXHIBIT
Acquisition C hereto, as amended or modified from time to time as agreed to
Agreement: by the parties thereto.
Offshore Rate: For any Interest Period with respect to any Offshore Rate Loan,
a rate per annum determined pursuant to the following formula:
Offshore Rate = Offshore Base Rate
-------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"OFFSHORE BASE RATE" means, for such Interest Period:
(a) the rate per annum (carried out to the fifth
decimal place) equal to the rate determined by
Lender to be the offered rate that appears on the
page of the Telerate Screen that displays an
average British Bankers Association Interest
Settlement Rate (such page currently being page
number 3750) for deposits in dollars (for
delivery on the first day of such Interest
Period) with a term equivalent to such Interest
Period, determined as of approximately 11:00 a.m.
(London time) two Business Days prior to the
first day of such Interest Period, or
(b) in the event the rate referenced in the preceding
clause (a) does not appear on such page or
service or such page or service shall cease to be
available, the rate per annum (carried to the
fifth decimal place) equal to the rate determined
A-7
<PAGE>
by Lender to be the offered rate on such other
page or other service that displays an average
British Bankers Association Interest Settlement
Rate for deposits in dollars (for delivery on the
first day of such Interest Period) with a term
equivalent to such Interest Period, determined as
of approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such
Interest Period, or
(c) in the event the rates referenced in the
preceding clauses (a) and (b) are not available,
the rate per annum determined by Lender as the
rate of interest at which dollar deposits (for
delivery on the first day of such Interest
Period) in same day funds in the approximate
amount of the applicable Offshore Rate Loan and
with a term equivalent to such Interest Period
would be offered by Lender's London Branch to
major banks in the offshore dollar market at
their request at approximately 11:00 a.m. (London
time) two Business Days prior to the first day of
such Interest Period.
"EURODOLLAR RESERVE PERCENTAGE" means, for any day
during any Interest Period, the reserve percentage
(expressed as a decimal, rounded upward to the next
1/100th of 1%) in effect on such day applicable to
Lender under regulations issued from time to time by
the Board of Governors of the Federal Reserve System
for determining the maximum reserve requirement
(including any emergency, supplemental or other
marginal reserve requirement) with respect to
Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"). The Offshore Rate for
each outstanding Offshore Rate Loan shall be adjusted
automatically as of the effective date of any change
in the Eurodollar Reserve Percentage.
Offshore Rate
Loan: A Loan bearing interest based on the Offshore Rate.
Pension Plan: Any "employee pension benefit plan" (as such term is defined
in Section 3(2) of ERISA), other than a Multiemployer Plan,
that is subject to Title IV of ERISA and is sponsored or
maintained by Borrower or any ERISA Affiliates or to which
Borrower or any ERISA Affiliate contributes or has an
obligation to contribute, or in the case of a multiple employer
A-8
<PAGE>
plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five
plan years.
Person: Any individual, trustee, corporation, general partnership,
limited partnership, limited liability company, joint stock
company, trust, unincorporated organization, bank, business
association, firm, joint venture, governmental authority, or
otherwise.
Plan: Any employee benefit plan maintained or contributed to by
Borrower or by any trade or business (whether or not
incorporated) under common control with Borrower as defined in
Section 4001(b) of ERISA and insured by the Pension Benefit
Guaranty Corporation under Title IV of ERISA.
Principal
Shareholder: Each of Guarantor, Biochem Pharma Inc., Dr. Phillip Frost
and/or Frost-Nevada Limited Partnership
Projections: The projections of balance sheets, statements of cash flows and
comparative statements of operations (2000 Forecast) for
Borrower dated October 25, 1999 and delivered to Lender by
Borrower prior to the Closing Date.
Reimbursement
Agreement: That certain Reimbursement Agreement dated as of November 1,
1999 between Borrower and Guarantor.
Restricted
Payment: (a) The declaration or payment of any dividend or distribution
by Borrower or any of its Subsidiaries, either in cash or
property, on any shares of the capital stock of any class of
Borrower or any of its Subsidiaries; (b) the purchase,
repayment, redemption or retirement by Borrower or any of its
Subsidiaries of any shares of its capital stock of any class or
any warrants, rights or options to purchase or acquire any
shares of its capital stock, whether directly or indirectly;
(c) any other payment or distribution by Borrower or any of its
Subsidiaries in respect of its capital stock, either directly
or indirectly; (d) any Investment other than an Investment
otherwise permitted under any Loan Document; and (e) the
prepayment, repayment, redemption, defeasance or other
acquisition or retirement for value prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund
payment, of any Indebtedness not otherwise permitted under any
Loan Document to be so paid.
Royal Bank of
Canada Credit (A) That certain letter agreement dated July 12, 1999 delivered
Facility: by Royal Bank of Canada and accepted by Borrower, Biochem
A-9
<PAGE>
Pharma Inc. and Biochem Pharma Holdings Inc., in an aggregate
principal amount of up to US$6.0MM and (B) that certain
Guarantee and Postponement of Claims from Biochem Pharma Inc.
and Biochem Pharma Holdings Inc. in favor of Royal Bank of
Canada dated July 1, 1999.
Securities
Exchange Act: The Securities Exchange Act of 1934, as amended, and all rules
and regulations issued pursuant thereto.
Security
Agreement: The Security Agreement dated as of the Closing Date between
Borrower, as debtor, and Lender, as secured party.
Subsidiary: A corporation, partnership, joint venture, limited liability
company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting
power for the election of directors or other governing body
(other than securities or interests having such power only by
reason of the happening of a contingency) are at the time
beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more
intermediaries, or both, by Borrower.
Swap Contract: (a) Any and all rate swap transactions, basis swaps, forward
rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options,
bond or bond price or bond index swaps or options or forward
bond or forward bond price or forward bond index transactions,
interest rate options, forward foreign exchange transactions,
cap transactions, floor transactions, collar transactions,
currency swap transactions, cross-currency rate swap
transactions, currency options, or any other similar
transactions or any combination of any of the foregoing
(including any options to enter into any of the foregoing),
whether or not any such transaction is governed by or subject
to any master agreement, or (b) any and all transactions of any
kind, and the related confirmations, which are subject to the
terms and conditions of, or governed by, any form of master
agreement published by the International Swaps and Derivatives
Association, Inc., or any other master agreement (any such
master agreement, together with any related schedules, as
amended, restated, extended, supplemented or otherwise modified
in writing from time to time, a "MASTER AGREEMENT"), including
but not limited to any such obligations or liabilities under
any Master Agreement.
Synthetic Lease
Obligations: All monetary obligations of a Person under (a) a so-called
synthetic lease, or (b) an agreement for the use or possession
A-10
<PAGE>
of property creating obligations which do not appear on the
balance sheet of such Person but which, upon the insolvency or
bankruptcy of such Person, would be characterized as the
Indebtedness of such Person (without regard to accounting
treatment).
Voting Stock: All classes of capital stock of Borrower then outstanding and
normally entitled to vote in the election of directors.
A-11
<PAGE>
EXHIBIT B
FORM OF PROMISSORY NOTE
$30,000,000 _____________, 1999
FOR VALUE RECEIVED, the undersigned, NORTH AMERICAN VACCINE, INC., a
___________ corporation ("BORROWER"), hereby promises to pay to the order of
BANK OF AMERICA, N.A. ("LENDER") the principal sum of Thirty Million Dollars
(US$30,000,000) or, if less, the aggregate unpaid principal amount of all Loans
made by Lender to Borrower pursuant to the letter agreement, dated as of
[__________, 1999] (such letter agreement, as it may be amended, restated,
extended, supplemented or otherwise modified from time to time, being
hereinafter called the "AGREEMENT"), between Borrower and Lender, on the
Maturity Date. Borrower further promises to pay interest on the unpaid principal
amount of the Loans evidenced hereby from time to time at the rates, on the
dates, and otherwise as provided in the Agreement.
Lender is authorized to endorse the amount and the date on which each
Loan is made or converted, the Interest Period therefor (if applicable) and each
payment of principal with respect thereto on the schedules annexed hereto and
made a part hereof, or on continuations thereof which shall be attached hereto
and made a part hereof; PROVIDED that any failure to so endorse such information
on such schedule or continuation thereof or any error in doing so shall not
limit or otherwise affect any obligation of Borrower under the Agreement or this
promissory note.
This promissory note is the promissory note referred to in, and is
entitled to the benefits of, the Agreement, which Agreement, among other things,
contains provisions for acceleration of the maturity of the Loans evidenced
hereby upon the happening of certain stated events and also for prepayments on
account of principal of the Loans prior to the maturity thereof upon the terms
and conditions therein specified.
Unless otherwise defined herein, terms defined in the Agreement are
used herein with their defined meanings therein. This promissory note shall be
governed by, and construed in accordance with, the laws of the State of North
Carolina.
NORTH AMERICAN VACCINE, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
B-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A TO NOTE
BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS
------------------------------------------------
(1) (2) (3) (4) (5)
Amount of Base Rate
Amount of Base Rate Loan Repaid or Unpaid Principal
Loan Made or Converted Converted to Offshore Balance of Base Notation
Date from Offshore Rate Loan Rate Loan Rate Loans Made By
---- ----------------------- --------- ---------- --------
<S> <C> <C> <C> <C>
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B TO NOTE
OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS
--------------------------------------------------------
(1) (2) (3) (4) (5) (6)
Amount of Amount of
Offshore Rate Offshore Rate Unpaid Principal
Loan Made or Loan Repaid or Balance of
Converted from Converted to Base Offshore Rate Notation
DATE BASE RATE LOAN INTEREST PERIOD RATE LOAN LOANS MADE BY
---- -------------- --------------- --------- ----- -------
<S> <C> <C> <C> <C> <C>
- ---------- ------------- ------------ ------------- ------------- -------------
- ---------- ------------- ------------ ------------- ------------- -------------
- ---------- ------------- ------------ ------------- ------------- -------------
- ---------- ------------- ------------ ------------- ------------- -------------
- ---------- ------------- ------------ ------------- ------------- -------------
- ---------- ------------- ------------ ------------- ------------- -------------
- ---------- ------------- ------------ ------------- ------------- -------------
- ---------- ------------- ------------ ------------- ------------- -------------
- ---------- ------------- ------------ ------------- ------------- -------------
- ---------- ------------- ------------ ------------- ------------- -------------
- ---------- ------------- ------------ ------------- ------------- -------------
</TABLE>
B-3
<PAGE>
EXHIBIT C
[Form of North American Vaccine Acquisition Agreement]
<PAGE>
SCHEDULE 3(D) TO AGREEMENT
MATERIAL LITIGATION
1.) On November 2, 1998, Sharon Mates, Ph.D., then a director of the Company
and the Company's former president, initiated litigation in United States
District Court, District of Maryland (Civil Action No. AW 98-3678) (the
"Complaint") against the Company, two of its directors and BioChem.
2.) By letter dated October 7, 1999, Chiron Behring GmbH & Co. ("Chiron")
notified Borrower that Chiron was terminating "for cause" the parties' Supply
and Distribution Agreement dated December 3, 1996, as amended. Chiron has
alleged that Borrower misrepresented the status of regulatory approval of its
products and fraudulently induced Chiron to enter into the agreement, and has
demanded repayment from Borrower of $3 million in nonrefundable payments under
the agreement.
<PAGE>
SCHEDULE 3(F) TO AGREEMENT
USE OF PROCEEDS
<TABLE>
<CAPTION>
SCHEDULE 3(F)
NON-WORKING CAPITAL USES OF PROCEEDS
(THROUGH MARCH 31, 2000)
Preliminary Capital Additions Forecast
10/28/99
DESCRIPTION IN PROGRESS VENDOR
<S> <C> <C> <C>
Cleaning skid Whiting Turner $ 16,720
Cleaning skid Whiting Turner 4,146
MSS Project installation costs Whiting Turner 17,010
Engineering support Whiting Turner 75,868
services/mening
Four agitators - Mening C Harrington Robb 24,988
Micro filtration skid/Mening C Prime Technologies 47,864
HPLC 1100 Zee Hung Lee 45,000
Validation - HPLC Zee Hung Lee 10,050
Centrifuge N/A 5,000
Integrity Tester N/A 15,000
pH Probes N/A 20,000
Plate washers N/A 6,200
MetOne counters N/A 15,000
RCS Air Samplers N/A 15,000
UV1201 Spectrophotometer N/A 6,500
Biowaste Vessel N/A 50,000
Biowaste Vessel/Startup N/A 100,000
4' Biosafety Cabinet N/A 7,000
UV monitor N/A 2,800
Fraction collector N/A 2,500
Acqua Cal Conductivity Std. N/A 3,000
Azonics Temp Std N/A 5,000
Heat block (low temp) N/A 5,950
Heat block (high temp) N/A 5,950
Work benches N/A 5,000
Ultrafiltration skid N/A 200,000
Chem reactor (Men. C) N/A 40,000
Stainless steel tanks N/A 50,000
Miscellaneous N/A 2,384
Total 4th Qtr 1999 803,930
Additions
Chromatography columns N/A 10,000
UV detector N/A 11,000
Glucose probe N/A 6,000
Plate reader N/A 45,000
Florescent Plate reader N/A 20,000
Gas Chromatograph N/A 35,000
Microscope N/A 6,000
Ultrafiltration skid N/A 200,000
Ultrafiltration skid N/A 200,000
Microfiltration skid N/A 250,000
SS Tank/controller (for N/A 50,000
purification)
YSI analyzer N/A 12,000
Integrated balance and pump N/A 20,000
(2)
Air/Oxygen mixer (for N/A 20,000
fermentor) (2)
<PAGE>
Incubator/Shaker N/A 9,000
Floor scale N/A 6,000
Total 1st Qtr 2000 900,000
Additions
TOTAL CAPEX ADDITIONS 6 MONTHS $ 1,703,930
INTEREST PAYMENTS
6.5% Notes $ 2,448,095
4.5% Notes 562,500
TOTAL INTEREST PAYMENTS $ 3,010,595
=============
</TABLE>
<PAGE>
SCHEDULE 3(K) TO AGREEMENT
LIST OF INTELLECTUAL PROPERTY TO BE PLEDGED AS COLLATERAL
See Schedule A and Schedule B attached hereto.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SCHEDULE A
- ------------------------------------------------------------------------------------------------------------------------------------
PATENTS AND PATENT APPLICATIONS OF ASSIGNOR
- ------------------------------------------------------------------------------------------------------------------------------------
TITLE INVENTORS ASSIGNEE APPL. NO./ APPL. DATE/GRANT STATUS
PATENT NO. DATE
- ------------------------------------------------------------------------------------------------------------------------------------
ISSUED U.S. PATENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Method for the High Level Blake, et al. NVX 08/798,760 February 11, 1997 Notice of
Expression, Purification and (co-exclusive (Notice of Allowance Allowance issued
Refolding of the Outer Membrane license with PMC) issued Jan. 1999) January 1999
Group B Porin Proteins (fee paid April
1999)
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX & Rockefeller 5,439,808 August 8, 1995 Patent
Expression, Purification and University
Refolding of the Outer Membrane (co-exclusive
Group B Porin Proteins from license with PMC)
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX 5,747,287 May 5, 1998 Patent
Expression, Purification and (co-exclusive
Refolding of the Outer Membrane license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal Blake et al. NVX & Rockefeller 5,866,135 February 2, 1999 Patent
Polysaccharide Immunogenic University
Compositions and Methods
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX 5,879,686 March 9, 1999 Patent
Expression, Purification and (co-exclusive
Refolding of the Outer Membrane license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. PATENT APPLICATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Method for the High Level Tai, et al. NVX 08/096,181 July 23, 1993 Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Tai, et al. NVX 08/449,358 May 24, 1995 Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
- ------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus Michon, et al. NVX 08/481,883 June 7, 1995 Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
- ------------------------------------------------------------------------------------------------------------------------------------
Direct Methods for Molar-Mass Michon, D'Ambra NVX 08/753,242 November 22, 1996 Application
Determination of Fragments of
Haemophilus Type b Capsular
Polysaccharides and Vaccine
Preparation
- ------------------------------------------------------------------------------------------------------------------------------------
Cloning of Non-IgA FC Binding Tai, Blake NVX 08/923,992 September 5, 1997 Application
Forms of the Group B Streptococcal
Beta Antigens
- ------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus Michon, et al. NVX 09/025,225 February 18, 1998 Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Conjugates Comprising Blake, et al. NVX 09/118/180 July 17, 1998 Application
A Group B Meningococcal Porin and
an H. Influenzae Polysaccharide
- ------------------------------------------------------------------------------------------------------------------------------------
Modified Immunogenic Pneumolysin Minetti, et al. NVX 09/120,044 July 21, 1998 Application
Compositions as Vaccines
- ------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal Blake et al. NVX & 09/207,188 December 8, 1998 Application
Polysaccharide Immunogenic Rockefeller
Compositions and Methods University
- ------------------------------------------------------------------------------------------------------------------------------------
Procedures for the Extraction and Michon, Blake NVX 09/221,620 December 23, 1998 Application
Isolation of Bacterial Capsular
Polysaccharides for Use as
Vaccines or Linked to Proteins as
Conjugate Vaccines
- ------------------------------------------------------------------------------------------------------------------------------------
Gram Positive Bacterial Antigens Long-Rowe, Blake NVX 09/399,220 September 17, 1999 Application
and Methods of Purification of the
Streptococcal C-Beta Protein
- ------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Polysaccharide-Protein Michon et al. NVX 09/376,911 August 18, 1999 Application
Conjugate Useful as a Vaccine
Produced Via Conjugation Through a
CZ-3 N-Acyl Portion F A
Polysaccharide
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
SCHEDULE B
- ---------------------------------------------------------------------------------------------------------------------------
U.S. TRADEMARKS OF ASSIGNOR
- ---------------------------------------------------------------------------------------------------------------------------
MARK STATUS APPL NO./ APPL./REGIS. DATE OWNER OF RECORD
REGIS. NO.
- ---------------------------------------------------------------------------------------------------------------------------
REGISTERED U.S. TRADEMARKS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Globe Design Registered 1,932,111 October 31, 1995 North American Vaccine, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
AMVAX Registered 1,967,632 April 16, 1996 North American Vaccine, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
TRINAVACEL Registered 2,101,121 September 30, 1997 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
TRIVAX Registered 2,118,360 December 2, 1997 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
NAVA Registered 2,267,812 August 3, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
PENDING U.S. TRADEMARK APPLICATIONS
- ---------------------------------------------------------------------------------------------------------------------------
THE IMPORTANCE OF OUR WORK Pending 75/190,826 October 29, 1996 American Vaccine Corporation
GROWS BIGGER EVERY DAY
- ---------------------------------------------------------------------------------------------------------------------------
NEISVAC-C Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
NEISIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
MENCIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-2
<PAGE>
SCHEDULE 4(C)(I) TO AGREEMENT
OUTSTANDING INDEBTEDNESS
Annex B
Liabilities Greater than $1,000,000
Indenture dated May 7, 1996 between NAV and Marine Midland Bank, together with
related 6.5% Convertible Subordinated Notes.
Master Agreement dated November 1, 1996 between NAV and General Electric Capital
Corporation
Indenture dated November 12, 1998 by and between the Company and Bankers Trust
Company, as Trustee
<PAGE>
SCHEDULE 4(C)(II) TO AGREEMENT
LIENS AND NEGATIVE PLEDGES
Schedule 4(c)(ii)
Liens and Negative Pledges
Master Agreement dated November 1, 1996 between NAV and General Electric Capital
Corporation, including Security Agreement dated November 1, 1996.
Security and Pledge Agreement dated November 12, 1998 by and between the Company
and Bankers Trust Company, as trustee
Lease dated September 9, 1999 between Borrower and WRIT Limited Partnership
Lease dated February 19, 1999 between Borrower and Newcourt Financial USA Inc.
(capital lease for mass spectrometer)
Lease dated March 25, 1998 between Borrower and ARE-10150 Old Columbia LLC
Assignment of Deposit Account dated April 2, 1998 by Borrower to Chase Manhattan
Bank, with Notice of Assignment and Notice of Letter of Credit dated April 3,
1998
November 1, 1999
North American Vaccine, Inc.
10150 Old Columbia Road
Columbia, Maryland 21046
Attention: Dr. Randal Chase
Chief Executive Officer and President
Re: $30,000,000 Senior Credit Facility
Dear Dr. Chase:
Bank of America, N.A. ("Bank of America") is pleased to offer North American
Vaccine, Inc., a Canadian corporation (the "Borrower"), a $30 million Senior
Secured Credit Facility (the "Facility"). Bank of America is pleased to offer
its commitment to lend up to $30 million, upon and subject to the terms and
conditions of this letter and the letter loan agreement dated November 1, 1999
(the "Loan Agreement") delivered by Bank of America and acknowledged and agreed
to by Borrower and Guarantor.
This letter is delivered to you in connection with the Loan Agreement. Unless
otherwise defined herein, capitalized terms shall have the meanings set forth
therein. The execution and delivery of this letter is a condition to the
effectiveness of the Loan Agreement. In connection with, and in consideration of
the agreements set forth in the Loan Agreement, the Borrower agrees with Bank of
America as follows:
STRUCTURING FEE. At Closing, the Borrower will pay a structuring fee of
$25,000 to Bank of America for its own account.
By acceptance of this letter, the Borrower agrees to pay all reasonable
out-of-pocket fees and expenses (including reasonable attorneys' fees and
expenses and the allocated cost of internal counsel) incurred before or after
the date hereof by us in connection with the Facility; provided that the legal
fees and expenses of internal counsel at Bank of America in connection with the
Closing of the Facility shall be covered by the structuring fee referenced
above. The structuring fee payable above shall be fully-earned upon becoming due
and payable, shall be non-refundable for any reason whatsoever and shall be in
addition to any other fee, cost or expense payable pursuant to the Facility.
<PAGE>
North American Vaccine, Inc.
November 1, 1999
Page 2
The terms of this letter are confidential and, except for disclosure on a
confidential basis to your accountants, attorneys and other professional
advisors retained by you in connection with the Facility or as may be required
by law, may not be disclosed in whole or in part to any other person or entity
without our prior written consent.
[The remainder of this page has been intentionally left blank].
<PAGE>
North American Vaccine, Inc.
November 1, 1999
Page 3
Very truly yours,
BANK OF AMERICA, N.A.
By: /s/ Lawrence J. Gordon
----------------------------------
Name: Lawrence J. Gordon
Title: Vice President
Accepted and Agreed to
as of November 1, 1999:
NORTH AMERICAN VACCINE, INC., as Borrower
By: /s/ Randal Chase
-----------------------------------
Name: Randal Chase, Ph.D.
-------------------
Title: Chief Executive Officer & President
-----------------------------------
BAXTER INTERNATIONAL INC., as Guarantor
By: /s/ Steven J. Meyer
-----------------------------------
Name: Steven J. Meyer
Title: Corp. Treasurer
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of November 1,
1999, is made between NORTH AMERICAN VACCINE, INC., a Canadian corporation
("Debtor") and BANK OF AMERICA, N.A., a national banking association ("Secured
Party".)
Debtor and Secured Party hereby agree as follows:
SECTION 1 DEFINITIONS; INTERPRETATION.
---------------------------
(a) All capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned to them in the Loan Agreement
(as defined below.)
(b) As used in this Agreement, the following terms shall have the
following meanings:
"COLLATERAL" has the meaning set forth in Section 2.
"DOCUMENTS" means the Loan Agreement and all other documents,
agreements and instruments delivered to Secured Party in connection therewith or
with the Obligations.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
assignment, deposit arrangement, charge or encumbrance, lien, or other type of
preferential arrangement.
"LOAN AGREEMENT" means the letter loan agreement dated November 1,
1999, between Secured Party and Debtor, pursuant to which Secured Party has
agreed to make certain revolving loans to Debtor.
"OBLIGATIONS" means the indebtedness, liabilities and other
obligations of Debtor to Secured Party under or in connection with this
Agreement and the other Documents, including, without limitation, all amounts
owing under the Loan Agreement and all fees and all other amounts payable by
Debtor to Secured Party thereunder or in connection therewith, whether now
existing or hereafter arising, and whether due or to become due, absolute or
contingent, liquidated or unliquidated, determined or undetermined.
"PERMITTED LIEN" means (i) any Lien in favor of Secured Party; (ii)
any Lien that is subordinate to the Lien on the Collateral created by this
Agreement; (iii) any Lien in favor of Baxter International, Inc. under that
certain reimbursement agreement dated as of November 1, 1999; (iv) any Liens
existing as of the date hereof and disclosed in writing to Secured Party.
<PAGE>
"PERSON" means an individual, corporation, partnership, joint
venture, trust, unincorporated organization, governmental agency or authority,
or any other entity of whatever nature.
"UCC" means the Uniform Commercial Code as the same may, from time
to time, be in effect in the State of New York; PROVIDED, HOWEVER, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of New York, the term "UCC" shall mean the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection or priority and for purposes of definitions related
to such provisions.
(c) Where applicable and except as otherwise defined herein, terms
used in this Agreement shall have the meanings assigned to them in the UCC.
(d) In this Agreement, (i) the meaning of defined terms shall be
equally applicable to both the singular and plural forms of the terms defined;
and (ii) the captions and headings are for convenience of reference only and
shall not affect the construction of this Agreement.
SECTION 2 SECURITY INTEREST.
(a) As security for the payment and performance of the Obligations,
Debtor hereby pledges, assigns, transfers, hypothecates and sets over to Secured
Party, and hereby grants to Secured Party a security interest in, all of
Debtor's right, title and interest in, to and under the following property,
wherever located and whether now existing or owned or hereafter acquired or
arising (collectively, the "Collateral"):
(i) all accounts, accounts receivable, contract rights, rights
to payment, chattel paper, letters of credit, documents, securities, money and
instruments, and investment property, whether held directly or through a
securities intermediary, and other obligations of any kind owed to Debtor,
however evidenced;
(ii) all deposits and deposit accounts with any bank, savings
and loan association, credit union or like organization, and all funds and
amounts therein, and whether or not held in trust, or in custody or safekeeping,
or otherwise restricted or designated for a particular purpose;
(iii) all inventory, including, without limitation, all materials,
raw materials, parts, components, work in progress, finished goods, merchandise,
supplies, and all other goods which are held for sale, lease or other
disposition or furnished under contracts of service or consumed in Debtor's
business, including, without limitation, those held for display or demonstration
or out on lease or consignment;
(iv) all equipment, including, without limitation, all machinery,
furniture, furnishings, fixtures, trade fixtures, tools, parts and supplies,
automobiles, trucks, tractors and other vehicles, appliances, computer and other
2.
<PAGE>
electronic data processing equipment and other office equipment, computer
programs and related data processing software, and all additions, substitutions,
replacements, parts, accessories, and accessions to and for the foregoing;
excluding, however, the equipment collateral identified in the agreements
referred to in Schedule 4(c)(ii) of the Loan Agreement;
(v) all general intangibles and other personal property of
Debtor, including, without limitation, (A) all tax and other refunds, rebates or
credits of every kind and nature to which Debtor is now or hereafter may become
entitled; (B) all intellectual property and all rights therein of any type or
description, including, without limitation, all inventions and discoveries,
patents and patent applications, copyrights and applications for copyright
(together with the underlying works of authorship) whether or not registered,
together with any renewals and extensions thereof, trademarks, service marks and
trade names, and applications for registration of such trademarks, service marks
and trade names, trade secrets, trade dress, trade styles, logos, other source
of business identifiers, mask-works, mask-work registrations, mask-work
applications, software, confidential and proprietary information, customer
lists, other license rights, advertising materials, operating manuals, methods,
processes, know-how, algorithms, formulae, databases, quality control
procedures, product, service and technical specifications, operating, production
and quality control manuals, sales literature, drawings, specifications, blue
prints, descriptions, inventions, name plates and catalogs, and the entire
goodwill of or associated with the businesses now or hereafter conducted by
Debtor connected with and symbolized by any of the aforementioned properties and
assets, and all licenses relating to any of the foregoing, all reissuance,
continuations and continuations-in-part of the foregoing, all other rights
derived from or associated with the foregoing, including the right to sue and
recover for past infringement, and all income and royalties with respect
thereto; (C) all good will, choses in action and causes of action; (D) all
interests in limited and general partnerships and limited liability companies;
and (E) all indemnity agreements, guaranties, insurance policies, insurance
claims, and other contractual, equitable and legal rights of whatever kind or
nature;
(vi) all books, records and other written, electronic or other
documentation in whatever form maintained by or for Debtor in connection with
the ownership of the assets described in this Section 2 or the conduct of its
business or evidencing or containing information relating to the Collateral; and
(vii) all products and proceeds, including insurance proceeds, of
any and all of the foregoing.
(b) Anything herein to the contrary notwithstanding, (i) Debtor
shall remain liable under any contracts, agreements and other documents included
in the Collateral, to the extent set forth therein, to perform all of its duties
and obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by Secured Party of any of the rights hereunder
shall not release Debtor from any of its duties or obligations under such
contracts, agreements and other documents included in the Collateral, and (iii)
Secured Party shall not have any obligation or liability under any contracts,
agreements and other documents included in the Collateral by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of Debtor thereunder or to take any action to collect or
enforce any such contract, agreement or other document included in the
Collateral hereunder.
3.
<PAGE>
(c) Notwithstanding the foregoing provisions of this Section 2, the
grant of a security interest as provided herein shall not extend to, and the
term "Collateral" shall not include, (1) that certain U.S. Patent No. 5,425,946
which is covered by a security interest in favor of Bankers Trust Company as
evidenced by the filing in the U.S. Patent and Trademark Office (the "Excluded
Patent Collateral"), and (2) any general intangibles of Debtor (whether owned or
held as licensee or lessee, or otherwise), to the extent that (i) such general
intangibles are not assignable or capable of being encumbered as a matter of law
or under the terms of the license, lease or other agreement applicable thereto
(but solely to the extent that any such restriction shall be enforceable under
applicable law), without the consent of the licensor or lessor thereof or other
applicable party thereto and (ii) such consent has not been obtained; PROVIDED,
HOWEVER, that the foregoing grant of security interest shall extend to, and the
term "Collateral" shall include, (A) any general intangible which is an account
receivable or a proceed of, or otherwise related to the enforcement or
collection of, any account receivable, or goods which are the subject of any
account receivable, (B) any and all proceeds of any general intangibles which
are otherwise excluded to the extent that the assignment or encumbrance of such
proceeds is not so restricted, and (C) upon obtaining the consent of any such
licensor, lessor or other applicable party's consent with respect to any such
otherwise excluded general intangibles, such general intangibles as well as any
and all proceeds thereof that might have theretofore have been excluded from
such grant of a security interest and the term "Collateral."
(d) This Agreement shall create a continuing security interest in
the Collateral which shall remain in effect until terminated in accordance with
Section 19 hereof.
SECTION 3 FINANCING STATEMENTS, ETC. Debtor shall execute and
deliver to Secured Party concurrently with the execution of this Agreement, and
at any time and from time to time thereafter, all financing statements,
assignments, continuation financing statements, termination statements, account
control agreements, and other documents and instruments, in form reasonably
satisfactory to Secured Party, and take all other action, as Secured Party may
reasonably request, to perfect and continue perfected, maintain the priority of
or provide notice of the security interest of Secured Party in the Collateral
and to accomplish the purposes of this Agreement.
SECTION 4 REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants to Secured Party that:
(a) Debtor is a corporation duly organized, validly existing and in
good standing under the law of the jurisdiction of its incorporation and has all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) The execution, delivery and performance by Debtor of this
Agreement have been duly authorized by all necessary corporate action of Debtor,
and this Agreement constitutes the legal, valid and binding obligation of
Debtor, enforceable against Debtor in accordance with its terms, except in each
case as such enforceability may be limited by bankruptcy, insolvency
reorganization, liquidation, moratorium or other similar laws of general
application and equitable principles relating to or affecting creditors' rights.
4.
<PAGE>
(c) Except as otherwise disclosed in writing by Debtor to Secured
Party, no authorization, consent, approval, license, exemption of, or filing or
registration with, any governmental authority or agency, or approval or consent
of any other Person, is required for the due execution, delivery or performance
by Debtor of this Agreement.
(d) Debtor's chief executive office and principal place of business
is located at the address set forth in SCHEDULE 1; all other locations where
Debtor conducts business or Collateral is kept are set forth in SCHEDULE 1.
(e) Except as otherwise disclosed in writing by Debtor to Secured
Party, Debtor is the sole and complete owner of the Collateral, free from any
Lien other than Permitted Liens.
(f) Other than the Excluded Patent Collateral, all of Debtor's U.S.
and foreign patents and patent applications, copyrights (whether or not
registered), applications for copyright, trademarks, service marks and trade
names (whether registered or unregistered), and applications for registration of
such trademarks, service marks and trade names, are set forth in SCHEDULE 2.
SECTION 5 COVENANTS. So long as any of the Obligations remain
unsatisfied, Debtor agrees that:
(a) Debtor shall appear in and defend any action, suit or proceeding
which may affect to a material extent its title to, or right or interest in, or
Secured Party's right or interest in, the Collateral, and shall do and perform
all reasonable acts that may be necessary and appropriate to maintain, preserve
and protect the Collateral.
(b) Debtor shall comply in all material respects with all laws,
regulations and ordinances, and all policies of insurance, relating in a
material way to the possession, operation, maintenance and control of the
Collateral.
(c) Debtor shall give prompt written notice to Secured Party (and in
any event not later than 30 days following any change described below in this
subsection) of: (i) any change in the location of Debtor's chief executive
office or principal place of business, (ii) any change in the locations set
forth in Schedule 1; (iii) any change in its name, (iv) any changes in,
additions to or other modifications of its trade names and trade styles set
forth in Schedule 1 or Schedule 2, and (v) any changes in its identity or
structure in any manner which might make any financing statement filed hereunder
incorrect or misleading.
(d) Debtor shall keep separate, accurate and complete books and
records with respect to the Collateral, disclosing Secured Party's security
interest hereunder.
(e) Except as otherwise disclosed in writing by Debtor to Secured
Party, Debtor shall not surrender or lose possession of (other than to Secured
Party), sell, lease, rent, or otherwise dispose of or transfer any of the
Collateral or any right or interest therein, except in the ordinary course of
business; PROVIDED that no such disposition or transfer of Collateral consisting
of investment property or instruments shall be permitted while any Event of
Default exists.
(f) Debtor shall keep the Collateral free of all Liens except
Permitted Liens.
5.
<PAGE>
(g) Debtor shall pay and discharge all taxes, fees, assessments and
governmental charges or levies imposed upon it with respect to the Collateral
prior to the date on which penalties attach thereto, except to the extent such
taxes, fees, assessments or governmental charges or levies are being contested
in good faith by appropriate proceedings.
(h) Debtor shall maintain and preserve its corporate existence, its
rights to transact business and all other rights, franchises and privileges
necessary or desirable in the normal course of its business and operations and
the ownership of the Collateral, except in connection with any transactions
expressly permitted by the Documents.
(i) Upon the request of Secured Party, Debtor shall (i) immediately
deliver to Secured Party, or an agent designated by it, appropriately endorsed
or accompanied by appropriate instruments of transfer or assignment, all
documents and instruments, all certificated securities with respect to any
investment property, all letters of credit and all accounts and other rights to
payment at any time evidenced by promissory notes, trade acceptances or other
instruments, (ii) cause any securities intermediaries to show on their books
that Secured Party is the entitlement holder with respect to any investment
property, and/or obtain account control agreements in favor of Secured Party
from such securities intermediaries, in form and substance satisfactory to
Secured Party, with respect to any investment property, as requested by Secured
Party, (iii) mark all documents and chattel paper with such legends as Secured
Party shall reasonably specify, and (iv) obtain consents from any letter of
credit issuers with respect to the assignment to Secured Party of any letter of
credit proceeds.
(j) Debtor shall at any reasonable time and from time to time permit
Secured Party or any of its agents or representatives to visit the premises of
Debtor and inspect the Collateral and to examine and make copies of and
abstracts from the records and books of account of Debtor.
(k) Debtor shall: (i) with such frequency as Secured Party may
require, furnish to Secured Party such lists of customers and other information
relating to the accounts and other rights to payment as Secured Party shall
reasonably request; (ii) give only normal discounts, allowances and credits as
to accounts and other rights to payment, in the ordinary course of business,
according to normal trade practices utilized by Debtor, and enforce all accounts
and other rights to payment strictly in accordance with their terms, except that
Debtor may grant any extension of the time for payment or enter into any
agreement to make a rebate or otherwise to reduce the amount owing on or with
respect to, or compromise or settle for less than the full amount thereof, any
account or other right to payment, in the ordinary course of business, according
to normal and prudent trade practices utilized by Debtor; and (iii) upon the
request of Secured Party (A) at any time, notify all or any designated portion
of the account debtors and other obligors on the accounts and other rights to
payment of the security interest hereunder, and (B) upon the occurrence and
during the continuance of an Event of Default, notify the account debtors and
other obligors on the accounts and other rights to payment or any designated
portion thereof that payment shall be made directly to Secured Party or to such
other Person or location as Secured Party shall specify.
6.
<PAGE>
(l) Debtor shall (i) notify Secured Party of any material claim made
or asserted against the Collateral by any Person and of any change in the
composition of the Collateral or other event which could materially adversely
affect the value of the Collateral or Secured Party's Lien thereon; (ii) furnish
to Secured Party such statements and schedules further identifying and
describing the Collateral and such other reports and other information in
connection with the Collateral as Secured Party may reasonably request, all in
reasonable detail; and (iii) upon reasonable request of Secured Party make such
demands and requests for information and reports as Debtor is entitled to make
in respect of the Collateral.
(m) If and when Debtor shall obtain rights to any new patents,
trademarks, service marks, trade names or copyrights, or otherwise acquire or
become entitled to the benefit of, or apply for registration of, any of the
foregoing, Debtor (i) shall promptly notify Secured Party thereof and (ii)
hereby authorizes Secured Party to modify, amend, or supplement SCHEDULE 2 and
from time to time to include any of the foregoing and make all necessary or
appropriate filings with respect thereto.
(n) Debtor shall not enter into any agreement (including any license
or royalty agreement) pertaining to any of its patents, copyrights, trademarks,
service marks and trade names, except for non-exclusive licenses in the ordinary
course of business.
(o) Debtor shall give Secured Party immediate notice of the
establishment of any new deposit account and any new securities account with
respect to any investment property.
SECTION 6 COLLECTION OF ACCOUNTS. Until Secured Party exercises
its rights hereunder to collect the accounts and other rights to payment, Debtor
shall endeavor in the first instance diligently to collect all amounts due or to
become due on or with respect to the accounts and other rights to payment. At
the request of Secured Party, upon the occurrence and during the continuance of
any Event of Default, all remittances received by Debtor shall be held in trust
for Secured Party and, in accordance with Secured Party's instructions, remitted
to Secured Party or deposited to an account of Secured Party in the form
received (with any necessary endorsements or instruments of assignment or
transfer). At the request of Secured Party, upon and after the occurrence of any
Event of Default, Secured Party shall be entitled to receive all distributions
and payments of any nature with respect to any investment property or
instruments, and all such distributions or payments received by the Debtor shall
be held in trust for Secured Party and, in accordance with Secured Party's
instructions, remitted to Secured Party or deposited to an account with Secured
Party in the form received (with any necessary endorsements or instruments of
assignment or transfer). Following the occurrence of an Event of Default any
such distributions and payments with respect to any investment property held in
any securities account shall be held and retained in such securities account, in
each case as part of the Collateral hereunder. Additionally, Secured Party shall
have the right, upon the occurrence of an Event of Default, following prior
written notice to the Debtor, to vote and to give consents, ratifications and
waivers with respect to any investment property and instruments, and to exercise
all rights of conversion, exchange, subscription or any other rights, privileges
or options pertaining thereto, as if Secured Party were the absolute owner
thereof; PROVIDED that Secured Party shall have no duty to exercise any of the
foregoing rights afforded to it and shall not be responsible to the Debtor or
any other Person for any failure to do so or delay in doing so.
7.
<PAGE>
SECTION 7 AUTHORIZATION; SECURED PARTY APPOINTED ATTORNEY-IN-FACT.
Secured Party shall have the right to, in the name of Debtor, or in the name of
Secured Party or otherwise, upon notice to but without the requirement of assent
by Debtor, and Debtor hereby constitutes and appoints Secured Party (and any of
Secured Party's officers, employees or agents designated by Secured Party) as
Debtor's true and lawful attorney-in-fact, with full power and authority to: (i)
sign any of the financing statements and other documents and instruments which
must be executed or filed to perfect or continue perfected, maintain the
priority of or provide notice of Secured Party's security interest in the
Collateral (including any notices to or agreements with any securities
intermediary); (ii) assert, adjust, sue for, compromise or release any claims
under any policies of insurance; and (iii) execute any and all such other
documents and instruments, and do any and all acts and things for and on behalf
of Debtor, which Secured Party may deem reasonably necessary or advisable to
maintain, protect, realize upon and preserve the Collateral and Secured Party's
security interest therein and to accomplish the purposes of this Agreement.
Secured Party agrees that, except upon and during the continuance of an Event of
Default, it shall not exercise the power of attorney, or any rights granted to
Secured Party, pursuant to clauses (ii) and (iii). The foregoing power of
attorney is coupled with an interest and irrevocable so long as the Obligations
have not been paid and performed in full. Debtor hereby ratifies, to the extent
permitted by law, all that Secured Party shall lawfully and in good faith do or
cause to be done by virtue of and in compliance with this Section 7.
SECTION 8 EVENTS OF DEFAULT. Any of the following events which
shall occur and be continuing shall constitute an "Event of Default":
(a) Debtor shall fail to pay when due any amount payable hereunder
or under any other Document or in respect of the Obligations or an "Event of
Default" shall occur under the Loan Agreement.
(b) Any representation or warranty by Debtor under or in connection
with this Agreement any other Document shall prove to have been incorrect in any
material respect when made or deemed made.
(c) Debtor shall fail to perform or observe in any material respect
any other term, covenant or agreement contained in this Agreement, the Loan
Agreement or any other Document on its part to be performed or observed and any
such failure shall remain unremedied for a period of 5 days from the occurrence
thereof; or any "Event of Default" as defined in the Loan Agreement shall have
occurred.
(d) Any material impairment in the value of the Collateral or the
priority of Secured Party's Lien hereunder.
(e) Any levy upon, seizure or attachment of any of the Collateral.
SECTION 9 REMEDIES.
(a) Upon the occurrence and continuance of any Event of Default,
Secured Party may declare any of the Obligations to be immediately due and
8.
<PAGE>
payable and shall have, in addition to all other rights and remedies granted to
it in this Agreement or any other Document, all rights and remedies of a secured
party under the UCC and other applicable laws.
(b) For the purpose of enabling Secured Party to exercise its rights
and remedies under this Section 9 or otherwise in connection with this
Agreement, Debtor hereby grants to Secured Party an irrevocable, non-exclusive
and assignable license (exercisable without payment or royalty or other
compensation to Debtor) to use, license or sublicense any intellectual property
Collateral.
(c) The cash proceeds actually received from the sale or other
disposition or collection of Collateral, and any other amounts received in
respect of the Collateral the application of which is not otherwise provided for
herein, shall be applied FIRST, to the payment of the reasonable costs and
expenses of Secured Party in exercising or enforcing its rights hereunder and in
collecting or attempting to collect any of the Collateral, and to the payment of
all other amounts payable to Secured Party pursuant to Section 13 hereof; and
SECOND, to the payment of the Obligations. Any surplus thereof which exists
after payment and performance in full of the Obligations shall be promptly paid
over to Debtor or otherwise disposed of in accordance with the UCC or other
applicable law. Debtor shall remain liable to Secured Party for any deficiency
which exists after any sale or other disposition or collection of Collateral.
SECTION 10 CERTAIN WAIVERS. Debtor waives, to the fullest extent
permitted by law, (i) any right of redemption with respect to the Collateral,
whether before or after sale hereunder, and all rights, if any, of marshalling
of the Collateral or other collateral or security for the Obligations; (ii) any
right to require Secured Party (A) to proceed against any Person, (B) to exhaust
any other collateral or security for any of the Obligations, (C) to pursue any
remedy in Secured Party's power, or (D) to make or give any presentments,
demands for performance, notices of nonperformance, protests, notices of
protests or notices of dishonor in connection with any of the Collateral; and
(iii) all claims, damages, and demands against Secured Party arising out of the
repossession, retention, sale or application of the proceeds of any sale of the
Collateral
SECTION 11 NOTICES. All notices or other communications hereunder
shall be in writing (including by facsimile transmission) and mailed, sent or
delivered to the respective parties hereto at or to their respective addresses
or facsimile numbers set forth below their names on the signature pages hereof,
or at or to such other address or facsimile number as shall be designated by any
party in a written notice to the other parties hereto. All such notices and
other communications shall be effective (i) if delivered by hand, when
delivered; (ii) if sent by mail, upon the earlier of the date of receipt or five
business days after deposit in the mail, first class (or air mail, with respect
to communications to be sent to or from the United States); and (iii) if sent by
facsimile transmission, when sent.
SECTION 12 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part
of Secured Party to exercise, and no delay in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, remedy, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, remedy,
9.
<PAGE>
power or privilege. The rights and remedies under this Agreement are cumulative
and not exclusive of any rights, remedies, powers and privileges that may
otherwise be available to Secured Party.
SECTION 13 COSTS AND EXPENSES.
(a) Subject to the terms of any other written fee agreement between
Debtor and Secured Party or Guarantor, Debtor agrees to pay on demand:
(i) the reasonable out-of-pocket costs and expenses of
Secured Party, and the reasonable fees and disbursements of counsel to Secured
Party, in connection with the negotiation, preparation, execution, delivery and
administration of this Agreement and the Note, and any amendments, modifications
or waivers of the terms thereof, and the custody of the Collateral;
(ii) all audit, consulting, search, recording, filing and similar
costs, fees and expenses incurred or sustained by Secured Party in connection
with this Agreement or the Collateral; and
(iii) all costs and expenses of Secured Party, and the fees and
disbursements of counsel, in connection with the enforcement or attempted
enforcement of, and preservation of any rights or interests under, this
Agreement and the Loan Agreement, including in any out-of-court workout or other
refinancing or restructuring or in any bankruptcy case, and the protection, sale
or collection of, or other realization upon, any of the Collateral.
(b) Any amounts payable to Secured Party under this Section 13 or
otherwise under this Agreement if not paid upon demand shall bear interest from
the date of such demand until paid in full, at the default rate specified in the
Loan Agreement.
SECTION 14 BINDING EFFECT. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by Debtor, Secured Party and their
respective successors and assigns.
SECTION 15 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York, except as
required by mandatory provisions of law and to the extent the validity or
perfection of the security interests hereunder, or the remedies hereunder, in
respect of any Collateral are governed by the law of a jurisdiction other than
New York.
SECTION 16 ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the
entire agreement of the parties with respect to the subject matter hereof and
shall not be amended except by the written agreement of the parties.
SECTION 17 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
10.
<PAGE>
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only to
the extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.
SECTION 18 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same agreement.
SECTION 19 TERMINATION. Upon payment and performance in full of
all Obligations, this Agreement shall terminate and Secured Party shall promptly
execute and deliver to Debtor such documents and instruments reasonably
requested by Debtor as shall be necessary to evidence termination of all
security interests given by Debtor to Secured Party hereunder; PROVIDED,
HOWEVER, that the obligations of Debtor under Section 13 hereof shall survive
such termination.
11.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
as of the date first above written.
NORTH AMERICAN VACCINE, INC.
By: /s/ Lawrence J. Hineline
------------------------
Title: Vice President Finance
10150 Old Columbia Road
Columbia, Maryland 21046
Attn: Vice President Finance
Fax: (410) 309-4077
BANK OF AMERICA, N.A.
By: /s/ Lawrence J. Gordon
-----------------------
Title: Vice President
Bank of America Center
700 Louisiana Street
TX4-213-08-10
Houston, Texas 77002-2700
Attn: Lawrence J. Gordon
Fax: (713) 247-6719
12.
<PAGE>
SCHEDULE 1
to the Security Agreement
1. LOCATIONS OF CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS, INCLUDING OF
COLLATERAL
a. Chief Executive Office and Principal Place of Business:
North American Vaccine, Inc.
10150 Old Columbia Road
Columbia, Maryland 21046
b. Other locations where Debtor conducts business or any Collateral is
kept:
North American Vaccine, Inc.
9000 Virginia Manor Road
Suite 290
Beltsville, Maryland 20705
North American Vaccine, Inc.
12140 Indian Creek Court
Beltsville, Maryland 20705
AMVAX, Inc.
12040 Indian Creek Court
Beltsville, Maryland 20705
American Vaccine Corporation
1105 North Market Street, Suite 940
Wilmington, Delaware 19801
1. TRADE NAMES AND TRADE STYLES; OTHER CORPORATE, TRADE OR FICTITIOUS
NAMES, ETC.
See Schedule B attached hereto.
S-1.
<PAGE>
SCHEDULE 2
to the Security Agreement
1. PATENTS AND PATENT APPLICATIONS.
See Schedule A attached hereto.
2. COPYRIGHTS (REGISTERED AND UNREGISTERED) AND COPYRIGHT APPLICATIONS.
None.
3. TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND TRADEMARK, SERVICE MARK AND
TRADE NAME APPLICATIONS.
See Schedule B attached hereto.
S-2.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SCHEDULE A
- ------------------------------------------------------------------------------------------------------------------------------------
PATENTS AND PATENT APPLICATIONS OF ASSIGNOR
- ------------------------------------------------------------------------------------------------------------------------------------
TITLE INVENTORS ASSIGNEE APPL. NO./ APPL. DATE/GRANT STATUS
PATENT NO. DATE
- ------------------------------------------------------------------------------------------------------------------------------------
ISSUED U.S. PATENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Method for the High Level Blake, et al. NVX 08/798,760 February 11, 1997 Notice of
Expression, Purification and (co-exclusive (Notice of Allowance Allowance issued
Refolding of the Outer Membrane license with PMC) issued Jan. 1999) January 1999
Group B Porin Proteins (fee paid April
1999)
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX & Rockefeller 5,439,808 August 8, 1995 Patent
Expression, Purification and University
Refolding of the Outer Membrane (co-exclusive
Group B Porin Proteins from license with PMC)
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX 5,747,287 May 5, 1998 Patent
Expression, Purification and (co-exclusive
Refolding of the Outer Membrane license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal Blake et al. NVX & Rockefeller 5,866,135 February 2, 1999 Patent
Polysaccharide Immunogenic University
Compositions and Methods
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX 5,879,686 March 9, 1999 Patent
Expression, Purification and (co-exclusive
Refolding of the Outer Membrane license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. PATENT APPLICATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Method for the High Level Tai, et al. NVX 08/096,181 July 23, 1993 Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Tai, et al. NVX 08/449,358 May 24, 1995 Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
- ------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus Michon, et al. NVX 08/481,883 June 7, 1995 Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
- ------------------------------------------------------------------------------------------------------------------------------------
Direct Methods for Molar-Mass Michon, D'Ambra NVX 08/753,242 November 22, 1996 Application
Determination of Fragments of
Haemophilus Type b Capsular
Polysaccharides and Vaccine
Preparation
- ------------------------------------------------------------------------------------------------------------------------------------
Cloning of Non-IgA FC Binding Tai, Blake NVX 08/923,992 September 5, 1997 Application
Forms of the Group B Streptococcal
Beta Antigens
- ------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus Michon, et al. NVX 09/025,225 February 18, 1998 Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Conjugates Comprising Blake, et al. NVX 09/118/180 July 17, 1998 Application
A Group B Meningococcal Porin and
an H. Influenzae Polysaccharide
- ------------------------------------------------------------------------------------------------------------------------------------
Modified Immunogenic Pneumolysin Minetti, et al. NVX 09/120,044 July 21, 1998 Application
Compositions as Vaccines
- ------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal Blake et al. NVX & 09/207,188 December 8, 1998 Application
Polysaccharide Immunogenic Rockefeller
Compositions and Methods University
- ------------------------------------------------------------------------------------------------------------------------------------
Procedures for the Extraction and Michon, Blake NVX 09/221,620 December 23, 1998 Application
Isolation of Bacterial Capsular
Polysaccharides for Use as
Vaccines or Linked to Proteins as
Conjugate Vaccines
- ------------------------------------------------------------------------------------------------------------------------------------
Gram Positive Bacterial Antigens Long-Rowe, Blake NVX 09/399,220 September 17, 1999 Application
and Methods of Purification of the
Streptococcal C-Beta Protein
- ------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Polysaccharide-Protein Michon et al. NVX 09/376,911 August 18, 1999 Application
Conjugate Useful as a Vaccine
Produced Via Conjugation Through a
CZ-3 N-Acyl Portion F A
Polysaccharide
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
SCHEDULE B
- ---------------------------------------------------------------------------------------------------------------------------
U.S. TRADEMARKS OF ASSIGNOR
- ---------------------------------------------------------------------------------------------------------------------------
MARK STATUS APPL NO./ APPL./REGIS. DATE OWNER OF RECORD
REGIS. NO.
- ---------------------------------------------------------------------------------------------------------------------------
REGISTERED U.S. TRADEMARKS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Globe Design Registered 1,932,111 October 31, 1995 North American Vaccine, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
AMVAX Registered 1,967,632 April 16, 1996 North American Vaccine, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
TRINAVACEL Registered 2,101,121 September 30, 1997 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
TRIVAX Registered 2,118,360 December 2, 1997 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
NAVA Registered 2,267,812 August 3, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
PENDING U.S. TRADEMARK APPLICATIONS
- ---------------------------------------------------------------------------------------------------------------------------
THE IMPORTANCE OF OUR WORK Pending 75/190,826 October 29, 1996 American Vaccine Corporation
GROWS BIGGER EVERY DAY
- ---------------------------------------------------------------------------------------------------------------------------
NEISVAC-C Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
NEISIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
MENCIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of November 1,
1999, is made between NORTH AMERICAN VACCINE, INC., a Canadian corporation
("Debtor") and BAXTER INTERNATIONAL, INC., a Delaware corporation ("Secured
Party").
Debtor and Secured Party hereby agree as follows:
SECTION 1 DEFINITIONS; INTERPRETATION.
(a) All capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned to them in the Reimbursement
Agreement.
(b) As used in this Agreement, the following terms shall have the
following meanings:
"BANK" means Bank of America, N.A.
"LOAN AGREEMENT" means the loan agreement dated November 1, 1999,
between Bank and Debtor, pursuant to which Bank has agreed to make certain
revolving loans to Debtor.
"COLLATERAL" has the meaning set forth in Section 2.
"DOCUMENTS" means the Reimbursement Agreement and all other documents,
agreements and instruments delivered to Secured Party in connection therewith or
with the Obligations.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
assignment, deposit arrangement, charge or encumbrance, lien, or other type of
preferential arrangement.
"REIMBURSEMENT AGREEMENT" means that certain Reimbursement Agreement
dated November 1, 1999 made by Debtor in favor of Secured Party, as amended,
modified, renewed, extended or replaced from time to time.
"OBLIGATIONS" means the indebtedness, liabilities and other obligations
of Debtor to Secured Party under or in connection with this Agreement and the
other Documents, including, without limitation, all amounts owing under the
Reimbursement Agreement and all fees and all other amounts payable by Debtor to
Secured Party thereunder or in connection therewith, whether now existing or
hereafter arising, and whether due or to become due, absolute or contingent,
liquidated or unliquidated, determined or undetermined.
<PAGE>
"PERMITTED LIEN" means (i) any Lien in favor of Secured Party; (ii) any
Lien that is subordinate to the Lien on the Collateral created by this
Agreement; (iii) any Lien in favor of Bank of America, N.A. under that certain
credit agreement dated as of November 1, 1999; (iv) any Liens existing as of the
date hereof and disclosed in writing to Secured Party.
"PERSON" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization, governmental agency or authority, or any
other entity of whatever nature.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York; PROVIDED, HOWEVER, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of New York, the term "UCC" shall mean the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection or priority and for purposes of definitions related
to such provisions.
(c) Where applicable and except as otherwise defined herein, terms used
in this Agreement shall have the meanings assigned to them in the UCC.
(d) In this Agreement, (i) the meaning of defined terms shall be
equally applicable to both the singular and plural forms of the terms defined;
and (ii) the captions and headings are for convenience of reference only and
shall not affect the construction of this Agreement.
SECTION 2 SECURITY INTEREST.
(a) As security for the payment and performance of the Obligations,
Debtor hereby pledges, assigns, transfers, hypothecates and sets over to Secured
Party, and hereby grants to Secured Party a security interest in, all of
Debtor's right, title and interest in, to and under the following property,
wherever located and whether now existing or owned or hereafter acquired or
arising (collectively, the "Collateral"):
(i) all accounts, accounts receivable, contract rights, rights to
payment, chattel paper, letters of credit, documents, securities, money and
instruments, and investment property, whether held directly or through a
securities intermediary, and other obligations of any kind owed to Debtor,
however evidenced;
(ii) all deposits and deposit accounts with any bank, savings and loan
association, credit union or like organization, and all funds and amounts
therein, and whether or not held in trust, or in custody or safekeeping, or
otherwise restricted or designated for a particular purpose;
(iii) all inventory, including, without limitation, all materials, raw
materials, parts, components, work in progress, finished goods, merchandise,
supplies, and all other goods which are held for sale, lease or other
disposition or furnished under contracts of service or consumed in Debtor's
2.
<PAGE>
business, including, without limitation, those held for display or demonstration
or out on lease or consignment;
(iv) all equipment, including, without limitation, all machinery,
furniture, furnishings, fixtures, trade fixtures, tools, parts and supplies,
automobiles, trucks, tractors and other vehicles, appliances, computer and other
electronic data processing equipment and other office equipment, computer
programs and related data processing software, and all additions, substitutions,
replacements, parts, accessories, and accessions to and for the foregoing;
excluding, however, the equipment collateral identified in the agreements
referred to in Schedule 4(c)(ii) of the Loan Agreement;
(v) all general intangibles and other personal property of Debtor,
including, without limitation, (A) all tax and other refunds, rebates or credits
of every kind and nature to which Debtor is now or hereafter may become
entitled; (B) all intellectual property and all rights therein of any type or
description, including, without limitation, all inventions and discoveries,
patents and patent applications, copyrights and applications for copyright
(together with the underlying works of authorship) whether or not registered,
together with any renewals and extensions thereof, trademarks, service marks and
trade names, and applications for registration of such trademarks, service marks
and trade names, trade secrets, trade dress, trade styles, logos, other source
of business identifiers, mask-works, mask-work registrations, mask-work
applications, software, confidential and proprietary information, customer
lists, other license rights, advertising materials, operating manuals, methods,
processes, know-how, algorithms, formulae, databases, quality control
procedures, product, service and technical specifications, operating, production
and quality control manuals, sales literature, drawings, specifications, blue
prints, descriptions, inventions, name plates and catalogs, and the entire
goodwill of or associated with the businesses now or hereafter conducted by
Debtor connected with and symbolized by any of the aforementioned properties and
assets, and all licenses relating to any of the foregoing, all reissuance,
continuations and continuations-in-part of the foregoing, all other rights
derived from or associated with the foregoing, including the right to sue and
recover for past infringement, and all income and royalties with respect
thereto; (C) all good will, choses in action and causes of action; (D) all
interests in limited and general partnerships and limited liability companies;
and (E) all indemnity agreements, guaranties, insurance policies, insurance
claims, and other contractual, equitable and legal rights of whatever kind or
nature;
(vi) all books, records and other written, electronic or other
documentation in whatever form maintained by or for Debtor in connection with
the ownership of the assets described in this Section 2 or the conduct of its
business or evidencing or containing information relating to the Collateral; and
(vii) all products and proceeds, including insurance proceeds, of any
and all of the foregoing.
(b) Anything herein to the contrary notwithstanding, (i) Debtor shall
remain liable under any contracts, agreements and other documents included in
the Collateral, to the extent set forth therein, to perform all of its duties
and obligations thereunder to the same extent as if this Agreement had not been
3.
<PAGE>
executed, (ii) the exercise by Secured Party of any of the rights hereunder
shall not release Debtor from any of its duties or obligations under such
contracts, agreements and other documents included in the Collateral, and (iii)
Secured Party shall not have any obligation or liability under any contracts,
agreements and other documents included in the Collateral by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of Debtor thereunder or to take any action to collect or
enforce any such contract, agreement or other document included in the
Collateral hereunder.
(c) Notwithstanding the foregoing provisions of this Section 2, the
grant of a security interest as provided herein shall not extend to, and the
term "Collateral" shall not include, (1) that certain U.S. Patent No. 5,425,946
which is covered by a security interest in favor of Bankers Trust Company as
evidenced by the filing in the U.S. Patent and Trademark Office (the "Excluded
Patent Collateral"), and (2) any general intangibles of Debtor (whether owned or
held as licensee or lessee, or otherwise), to the extent that (i) such general
intangibles are not assignable or capable of being encumbered as a matter of law
or under the terms of the license, lease or other agreement applicable thereto
(but solely to the extent that any such restriction shall be enforceable under
applicable law), without the consent of the licensor or lessor thereof or other
applicable party thereto and (ii) such consent has not been obtained; PROVIDED,
HOWEVER, that the foregoing grant of security interest shall extend to, and the
term "Collateral" shall include, (A) any general intangible which is an account
receivable or a proceed of, or otherwise related to the enforcement or
collection of, any account receivable, or goods which are the subject of any
account receivable, (B) any and all proceeds of any general intangibles which
are otherwise excluded to the extent that the assignment or encumbrance of such
proceeds is not so restricted, and (C) upon obtaining the consent of any such
licensor, lessor or other applicable party's consent with respect to any such
otherwise excluded general intangibles, such general intangibles as well as any
and all proceeds thereof that might have theretofore have been excluded from
such grant of a security interest and the term "Collateral."
(d) This Agreement shall create a continuing security interest in the
Collateral which shall remain in effect until terminated in accordance with
Section 19 hereof.
SECTION 3 FINANCING STATEMENTS, ETC. Debtor shall execute and deliver
to Secured Party concurrently with the execution of this Agreement, and at any
time and from time to time thereafter, all financing statements, assignments,
continuation financing statements, termination statements, account control
agreements, and other documents and instruments, in form reasonably satisfactory
to Secured Party, and take all other action, as Secured Party may reasonably
request, to perfect and continue perfected, maintain the priority of or provide
notice of the security interest of Secured Party in the Collateral and to
accomplish the purposes of this Agreement.
SECTION 4 REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants to Secured Party that:
4.
<PAGE>
(a) Debtor is a corporation duly organized, validly existing and in
good standing under the law of the jurisdiction of its incorporation and has all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) The execution, delivery and performance by Debtor of this Agreement
have been duly authorized by all necessary corporate action of Debtor, and this
Agreement constitutes the legal, valid and binding obligation of Debtor,
enforceable against Debtor in accordance with its terms, except in each case as
such enforceability may be limited by bankruptcy, insolvency reorganization,
liquidation, moratorium or other similar laws of general application and
equitable principles relating to or affecting creditors' rights.
(c) Except as otherwise disclosed in writing by Debtor to Secured
Party, no authorization, consent, approval, license, exemption of, or filing or
registration with, any governmental authority or agency, or approval or consent
of any other Person, is required for the due execution, delivery or performance
by Debtor of this Agreement.
(d) Debtor's chief executive office and principal place of business is
located at the address set forth in SCHEDULE 1; all other locations where Debtor
conducts business or Collateral is kept are set forth in SCHEDULE 1.
(e) Except as otherwise disclosed in writing by Debtor to Secured
Party, Debtor is the sole and complete owner of the Collateral, free from any
Lien other than Permitted Liens.
(f) Other than the Excluded Patent, Collateral; all of Debtor's U.S.
and foreign patents and patent applications, copyrights (whether or not
registered), applications for copyright, trademarks, service marks and trade
names (whether registered or unregistered), and applications for registration of
such trademarks, service marks and trade names, are set forth in SCHEDULE 2.
SECTION 5 COVENANTS. So long as any of the Obligations remain
unsatisfied, Debtor agrees that:
(a) Debtor shall appear in and defend any action, suit or proceeding
which may affect to a material extent its title to, or right or interest in, or
Secured Party's right or interest in, the Collateral, and shall do and perform
all reasonable acts that may be necessary and appropriate to maintain, preserve
and protect the Collateral.
(b) Debtor shall comply in all material respects with all laws,
regulations and ordinances, and all policies of insurance, relating in a
material way to the possession, operation, maintenance and control of the
Collateral.
(c) Debtor shall give prompt written notice to Secured Party (and in
any event not later than 30 days following any change described below in this
subsection) of: (i) any change in the location of Debtor's chief executive
office or principal place of business, (ii) any change in the locations set
forth in Schedule 1; (iii) any change in its name, (iv) any changes in,
additions to or other modifications of its trade names and trade styles set
forth in Schedule 1 or Schedule 2, and (v) any changes in its identity or
5.
<PAGE>
structure in any manner which might make any financing statement filed hereunder
incorrect or misleading.
(d) Debtor shall keep separate, accurate and complete books and records
with respect to the Collateral, disclosing Secured Party's security interest
hereunder.
(e) Debtor shall not surrender or lose possession of (other than to
Secured Party), sell, lease, rent, or otherwise dispose of or transfer any of
the Collateral or any right or interest therein, except in the ordinary course
of business; PROVIDED that no such disposition or transfer of Collateral
consisting of investment property or instruments shall be permitted while any
Event of Default exists.
(f) Debtor shall keep the Collateral free of all Liens except Permitted
Liens.
(g) Debtor shall pay and discharge all taxes, fees, assessments and
governmental charges or levies imposed upon it with respect to the Collateral
prior to the date on which penalties attach thereto, except to the extent such
taxes, fees, assessments or governmental charges or levies are being contested
in good faith by appropriate proceedings.
(h) Debtor shall maintain and preserve its corporate existence, its
rights to transact business and all other rights, franchises and privileges
necessary or desirable in the normal course of its business and operations and
the ownership of the Collateral, except in connection with any transactions
expressly permitted by the Documents.
(i) Upon the request of Secured Party, Debtor shall (i) immediately
deliver to Secured Party, or an agent designated by it, appropriately endorsed
or accompanied by appropriate instruments of transfer or assignment, all
documents and instruments, all certificated securities with respect to any
investment property, all letters of credit and all accounts and other rights to
payment at any time evidenced by promissory notes, trade acceptances or other
instruments, (ii) cause any securities intermediaries to show on their books
that Secured Party is the entitlement holder with respect to any investment
property, and/or obtain account control agreements in favor of Secured Party
from such securities intermediaries, in form and substance satisfactory to
Secured Party, with respect to any investment property, as requested by Secured
Party, (iii) mark all documents and chattel paper with such legends as Secured
Party shall reasonably specify, and (iv) obtain consents from any letter of
credit issuers with respect to the assignment to Secured Party of any letter of
credit proceeds.
(j) Debtor shall at any reasonable time and from time to time permit
Secured Party or any of its agents or representatives to visit the premises of
Debtor and inspect the Collateral and to examine and make copies of and
abstracts from the records and books of account of Debtor.
(k) Debtor shall: (i) with such frequency as Secured Party may require,
furnish to Secured Party such lists of customers and other information relating
to the accounts and other rights to payment as Secured Party shall reasonably
request; (ii) give only normal discounts, allowances and credits as to accounts
6.
<PAGE>
and other rights to payment, in the ordinary course of business, according to
normal trade practices utilized by Debtor, and enforce all accounts and other
rights to payment strictly in accordance with their terms, except that Debtor
may grant any extension of the time for payment or enter into any agreement to
make a rebate or otherwise to reduce the amount owing on or with respect to, or
compromise or settle for less than the full amount thereof, any account or other
right to payment, in the ordinary course of business, according to normal and
prudent trade practices utilized by Debtor; and (iii) upon the request of
Secured Party (A) at any time, notify all or any designated portion of the
account debtors and other obligors on the accounts and other rights to payment
of the security interest hereunder, and (B) upon the occurrence and during the
continuance of an Event of Default, notify the account debtors and other
obligors on the accounts and other rights to payment or any designated portion
thereof that payment shall be made directly to Secured Party or to such other
Person or location as Secured Party shall specify.
(l) Debtor shall (i) notify Secured Party of any material claim made or
asserted against the Collateral by any Person and of any change in the
composition of the Collateral or other event which could materially adversely
affect the value of the Collateral or Secured Party's Lien thereon; (ii) furnish
to Secured Party such statements and schedules further identifying and
describing the Collateral and such other reports and other information in
connection with the Collateral as Secured Party may reasonably request, all in
reasonable detail; and (iii) upon reasonable request of Secured Party make such
demands and requests for information and reports as Debtor is entitled to make
in respect of the Collateral.
(m) If and when Debtor shall obtain rights to any new patents,
trademarks, service marks, trade names or copyrights, or otherwise acquire or
become entitled to the benefit of, or apply for registration of, any of the
foregoing, Debtor (i) shall promptly notify Secured Party thereof and (ii)
hereby authorizes Secured Party to modify, amend, or supplement SCHEDULE 2 and
from time to time to include any of the foregoing and make all necessary or
appropriate filings with respect thereto.
(n) Debtor shall not enter into any agreement (including any license or
royalty agreement) pertaining to any of its patents, copyrights, trademarks,
service marks and trade names, except for non-exclusive licenses in the ordinary
course of business.
(o) Debtor shall give Secured Party immediate notice of the
establishment of any new deposit account and any new securities account with
respect to any investment property.
SECTION 6 COLLECTION OF ACCOUNTS. Until Secured Party exercises its
rights hereunder to collect the accounts and other rights to payment, Debtor
shall endeavor in the first instance diligently to collect all amounts due or to
become due on or with respect to the accounts and other rights to payment. At
the request of Secured Party, upon the occurrence and during the continuance of
any Event of Default, all remittances received by Debtor shall be held in trust
for Secured Party and, in accordance with Secured Party's instructions, remitted
to Secured Party or deposited to an account of Secured Party in the form
received (with any necessary endorsements or instruments of assignment or
transfer.) At the request of Secured Party, upon and after the occurrence of any
Event of Default, Secured Party shall be entitled to receive all distributions
7.
<PAGE>
and payments of any nature with respect to any investment property or
instruments, and all such distributions or payments received by the Debtor shall
be held in trust for Secured Party and, in accordance with Secured Party's
instructions, remitted to Secured Party or deposited to an account with Secured
Party in the form received (with any necessary endorsements or instruments of
assignment or transfer.) Following the occurrence of an Event of Default any
such distributions and payments with respect to any investment property held in
any securities account shall be held and retained in such securities account, in
each case as part of the Collateral hereunder. Additionally, Secured Party shall
have the right, upon the occurrence of an Event of Default, following prior
written notice to the Debtor, to vote and to give consents, ratifications and
waivers with respect to any investment property and instruments, and to exercise
all rights of conversion, exchange, subscription or any other rights, privileges
or options pertaining thereto, as if Secured Party were the absolute owner
thereof; PROVIDED that Secured Party shall have no duty to exercise any of the
foregoing rights afforded to it and shall not be responsible to the Debtor or
any other Person for any failure to do so or delay in doing so.
SECTION 7 AUTHORIZATION; SECURED PARTY APPOINTED ATTORNEY-IN-FACT.
Secured Party shall have the right to, in the name of Debtor, or in the name of
Secured Party or otherwise, upon notice to but without the requirement of assent
by Debtor, and Debtor hereby constitutes and appoints Secured Party (and any of
Secured Party's officers, employees or agents designated by Secured Party) as
Debtor's true and lawful attorney-in-fact, with full power and authority to: (i)
sign any of the financing statements and other documents and instruments which
must be executed or filed to perfect or continue perfected, maintain the
priority of or provide notice of Secured Party's security interest in the
Collateral (including any notices to or agreements with any securities
intermediary); (ii) assert, adjust, sue for, compromise or release any claims
under any policies of insurance; and (iii) execute any and all such other
documents and instruments, and do any and all acts and things for and on behalf
of Debtor, which Secured Party may deem reasonably necessary or advisable to
maintain, protect, realize upon and preserve the Collateral and Secured Party's
security interest therein and to accomplish the purposes of this Agreement.
Secured Party agrees that, except upon and during the continuance of an Event of
Default, it shall not exercise the power of attorney, or any rights granted to
Secured Party, pursuant to clauses (ii) and (iii). The foregoing power of
attorney is coupled with an interest and irrevocable so long as the Obligations
have not been paid and performed in full. Debtor hereby ratifies, to the extent
permitted by law, all that Secured Party shall lawfully and in good faith do or
cause to be done by virtue of and in compliance with this Section 7.
SECTION 8 EVENTS OF DEFAULT. Any of the following events which shall
occur and be continuing shall constitute an "Event of Default":
(a) Debtor shall fail to pay when due any amount payable hereunder or
under the Reimbursement Agreement or any other Document or in respect of the
Obligations or an "Event of Default" shall occur under the Loan Agreement.
(b) Any representation or warranty by Debtor under or in connection
with this Agreement any other Document shall prove to have been incorrect in any
material respect when made or deemed made.
8.
<PAGE>
(c) Debtor shall fail to perform or observe in any material respect any
other term, covenant or agreement contained in this Agreement, the Reimbursement
Agreement or any other Document on its part to be performed or observed and any
such failure shall remain unremedied for a period of 5 days from the occurrence
thereof.
(d) Any material impairment in the value of the Collateral or the
priority of Secured Party's Lien hereunder.
(e) Any levy upon, seizure or attachment of any of the Collateral.
(h) Any Event of Default shall occur under the Bank Credit Agreement.
SECTION 9 REMEDIES.
(a) Upon the occurrence and continuance of any Event of Default,
Secured Party may declare any of the Obligations to be immediately due and
payable and shall have, in addition to all other rights and remedies granted to
it in this Agreement, the Reimbursement Agreement or any other Document, all
rights and remedies of a secured party under the UCC and other applicable laws.
(b) For the purpose of enabling Secured Party to exercise its rights
and remedies under this Section 9 or otherwise in connection with this
Agreement, Debtor hereby grants to Secured Party an irrevocable, non-exclusive
and assignable license (exercisable without payment or royalty or other
compensation to Debtor) to use, license or sublicense any intellectual property
Collateral.
(c) The cash proceeds actually received from the sale or other
disposition or collection of Collateral, and any other amounts received in
respect of the Collateral the application of which is not otherwise provided for
herein, shall be applied FIRST, to the payment of the reasonable costs and
expenses of Secured Party in exercising or enforcing its rights hereunder and in
collecting or attempting to collect any of the Collateral, and to the payment of
all other amounts payable to Secured Party pursuant to Section 13 hereof; and
SECOND, to the payment of the Obligations. Any surplus thereof which exists
after payment and performance in full of the Obligations shall be promptly paid
over to Debtor or otherwise disposed of in accordance with the UCC or other
applicable law. Debtor shall remain liable to Secured Party for any deficiency
which exists after any sale or other disposition or collection of Collateral.
SECTION 10 CERTAIN WAIVERS. Debtor waives, to the fullest extent
permitted by law, (i) any right of redemption with respect to the Collateral,
whether before or after sale hereunder, and all rights, if any, of marshalling
of the Collateral or other collateral or security for the Obligations; (ii) any
right to require Secured Party (A) to proceed against any Person, (B) to exhaust
any other collateral or security for any of the Obligations, (C) to pursue any
remedy in Secured Party's power, or (D) to make or give any presentments,
demands for performance, notices of nonperformance, protests, notices of
protests or notices of dishonor in connection with any of the Collateral; and
(iii) all claims, damages, and demands against Secured Party arising out of the
repossession, retention, sale or application of the proceeds of any sale of the
Collateral.
9.
<PAGE>
SECTION 11 NOTICES. All notices or other communications hereunder
shall be in writing (including by facsimile transmission) and mailed, sent or
delivered to the respective parties hereto at or to their respective addresses
or facsimile numbers set forth below their names on the signature pages hereof,
or at or to such other address or facsimile number as shall be designated by any
party in a written notice to the other parties hereto. All such notices and
other communications shall be effective (i) if delivered by hand, when
delivered; (ii) if sent by mail, upon the earlier of the date of receipt or five
business days after deposit in the mail, first class [(or air mail, with respect
to communications to be sent to or from the United States)]; and (iii) if sent
by facsimile transmission, when sent.
SECTION 12 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of
Secured Party to exercise, and no delay in exercising, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights and remedies under this Agreement are cumulative
and not exclusive of any rights, remedies, powers and privileges that may
otherwise be available to Secured Party.
SECTION 13 COSTS AND EXPENSES.
(a) Subject to the terms of any other written fee agreement between
Debtor and Secured Party or Guarantor, Debtor agrees to pay on demand:
(i) [Intentionally omitted];
(ii) all audit, consulting, search, recording, filing and similar
costs, fees and expenses incurred or sustained by Secured Party in connection
with this Agreement or the Collateral; and
(iii) all costs and expenses of Secured Party, and the fees and
disbursements of counsel, in connection with the enforcement or attempted
enforcement of, and preservation of any rights or interests under, this
Agreement and the Reimbursement Agreement, including in any out-of-court workout
or other refinancing or restructuring or in any bankruptcy case, and the
protection, sale or collection of, or other realization upon, any of the
Collateral.
(b) Any amounts payable to Secured Party under this Section 13 or
otherwise under this Agreement if not paid upon demand shall bear interest from
the date of such demand until paid in full, at the default rate specified in the
Loan Agreement.
SECTION 14 BINDING EFFECT. This Agreement shall be binding upon, inure
to the benefit of and be enforceable by Debtor, Secured Party and their
respective successors and assigns.
SECTION 15 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York, except as
required by mandatory provisions of law and to the extent the validity or
10.
<PAGE>
perfection of the security interests hereunder, or the remedies hereunder, in
respect of any Collateral are governed by the law of a jurisdiction other than
New York.
SECTION 16 ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the
entire agreement of the parties with respect to the subject matter hereof and
shall not be amended except by the written agreement of the parties.
SECTION 17 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only to
the extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.
SECTION 18 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.
SECTION 19 TERMINATION. Upon payment and performance in full of all
Obligations, this Agreement shall terminate and Secured Party shall promptly
execute and deliver to Debtor such documents and instruments reasonably
requested by Debtor as shall be necessary to evidence termination of all
security interests given by Debtor to Secured Party hereunder; PROVIDED,
HOWEVER, that the obligations of Debtor under Section 13 hereof shall survive
such termination.
11.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
NORTH AMERICAN VACCINE, INC.
By: /s/ Lawrence J. Hineline
-------------------------------
Title: Vice President Finance
10150 Old Columbia Road
Columbia, Maryland 21046
-----------------------------------
Attn: Vice President
Fax: (410) 309-4077
BAXTER INTERNATIONAL INC.
By: /s/ Steven J. Meyer
-----------------------
Title: Corp. Treasurer
<PAGE>
SCHEDULE 1
to the Security Agreement
1. LOCATIONS OF CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS, INCLUDING OF
COLLATERAL
a. Chief Executive Office and Principal Place of Business:
North American Vaccine, Inc.
10150 Old Columbia Road
Columbia, Maryland 21046
b. Other locations where Debtor conducts business or any Collateral is
kept:
North American Vaccine, Inc.
9000 Virginia Manor Road
Suite 290
Beltsville, Maryland 20705
North American Vaccine, Inc.
12140 Indian Creek Court
Beltsville, Maryland 20705
AMVAX, Inc.
12040 Indian Creek Court
Beltsville, Maryland 20705
American Vaccine Corporation
1105 North Market Street, Suite 940
Wilmington, Delaware 19801
2. TRADE NAMES AND TRADE STYLES; OTHER CORPORATE, TRADE OR FICTITIOUS NAMES,
ETC.
See Schedule B attached hereto.
S-1.
<PAGE>
SCHEDULE 2
to the Security Agreement
1. PATENTS AND PATENT APPLICATIONS.
See Schedule A attached hereto.
2. COPYRIGHTS (REGISTERED AND UNREGISTERED) AND COPYRIGHT APPLICATIONS.
None.
3. TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND TRADEMARK, SERVICE MARK AND
TRADE NAME APPLICATIONS.
See Schedule B attached hereto.
S-2
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SCHEDULE A
- ------------------------------------------------------------------------------------------------------------------------------------
PATENTS AND PATENT APPLICATIONS OF ASSIGNOR
- ------------------------------------------------------------------------------------------------------------------------------------
ISSUED U.S. PATENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Method for the High Level Blake, et al. NVX 08/798,760 February 11, 1997 Notice of
Expression, Purification and (co-exclusive (Notice of Allowance Allowance issued
Refolding of the Outer Membrane license with PMC) issued Jan. 1999) January 1999
Group B Porin Proteins (fee paid April
1999)
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX & Rockefeller 5,439,808 August 8, 1995 Patent
Expression, Purification and University
Refolding of the Outer Membrane (co-exclusive
Group B Porin Proteins from license with PMC)
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX 5,747,287 May 5, 1998 Patent
Expression, Purification and (co-exclusive
Refolding of the Outer Membrane license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal Blake et al. NVX & Rockefeller 5,866,135 February 2, 1999 Patent
Polysaccharide Immunogenic University
Compositions and Methods
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX 5,879,686 March 9, 1999 Patent
Expression, Purification and (co-exclusive
Refolding of the Outer Membrane license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. PATENT APPLICATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Method for the High Level Tai, et al. NVX 08/096,181 July 23, 1993 Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Tai, et al. NVX 08/449,358 May 24, 1995 Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
- ------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus Michon, et al. NVX 08/481,883 June 7, 1995 Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
- ------------------------------------------------------------------------------------------------------------------------------------
Direct Methods for Molar-Mass Michon, D'Ambra NVX 08/753,242 November 22, 1996 Application
Determination of Fragments of
Haemophilus Type b Capsular
Polysaccharides and Vaccine
Preparation
- ------------------------------------------------------------------------------------------------------------------------------------
Cloning of Non-IgA FC Binding Tai, Blake NVX 08/923,992 September 5, 1997 Application
Forms of the Group B Streptococcal
Beta Antigens
- ------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus Michon, et al. NVX 09/025,225 February 18, 1998 Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Conjugates Comprising Blake, et al. NVX 09/118/180 July 17, 1998 Application
A Group B Meningococcal Porin and
an H. Influenzae Polysaccharide
- ------------------------------------------------------------------------------------------------------------------------------------
Modified Immunogenic Pneumolysin Minetti, et al. NVX 09/120,044 July 21, 1998 Application
Compositions as Vaccines
- ------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal Blake et al. NVX & 09/207,188 December 8, 1998 Application
Polysaccharide Immunogenic Rockefeller
Compositions and Methods University
- ------------------------------------------------------------------------------------------------------------------------------------
Procedures for the Extraction and Michon, Blake NVX 09/221,620 December 23, 1998 Application
Isolation of Bacterial Capsular
Polysaccharides for Use as
Vaccines or Linked to Proteins as
Conjugate Vaccines
- ------------------------------------------------------------------------------------------------------------------------------------
Gram Positive Bacterial Antigens Long-Rowe, Blake NVX 09/399,220 September 17, 1999 Application
and Methods of Purification of the
Streptococcal C-Beta Protein
- ------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Polysaccharide-Protein Michon et al. NVX 09/376,911 August 18, 1999 Application
Conjugate Useful as a Vaccine
Produced Via Conjugation Through a
CZ-3 N-Acyl Portion F A
Polysaccharide
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
SCHEDULE B
- ---------------------------------------------------------------------------------------------------------------------------
U.S. TRADEMARKS OF ASSIGNOR
- ---------------------------------------------------------------------------------------------------------------------------
MARK STATUS APPL NO./ APPL./REGIS. DATE OWNER OF RECORD
REGIS. NO.
- ---------------------------------------------------------------------------------------------------------------------------
REGISTERED U.S. TRADEMARKS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Globe Design Registered 1,932,111 October 31, 1995 North American Vaccine, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
AMVAX Registered 1,967,632 April 16, 1996 North American Vaccine, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
TRINAVACEL Registered 2,101,121 September 30, 1997 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
TRIVAX Registered 2,118,360 December 2, 1997 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
NAVA Registered 2,267,812 August 3, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
PENDING U.S. TRADEMARK APPLICATIONS
- ---------------------------------------------------------------------------------------------------------------------------
THE IMPORTANCE OF OUR WORK Pending 75/190,826 October 29, 1996 American Vaccine Corporation
GROWS BIGGER EVERY DAY
- ---------------------------------------------------------------------------------------------------------------------------
NEISVAC-C Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
NEISIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
MENCIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-2
PATENT AND TRADEMARK ASSIGNMENT AND SECURITY AGREEMENT
THIS PATENT AND TRADEMARK ASSIGNMENT AND SECURITY AGREEMENT (this
"Agreement"), dated as of November 1, 1999, is made between NORTH AMERICAN
VACCINE, INC., a Canadian corporation ("Assignor"), and BANK OF AMERICA, N.A.
("Assignee").
Assignor and Assignee are parties to a Security Agreement dated as
of November 1, 1999 (as amended, modified, renewed or extended from time to
time, the "Security Agreement"), which Security Agreement provides, among other
things, for the assignment by Assignor to Assignee, and grant by Assignor to
Assignee of a security interest in, certain of Assignor's property and assets,
including, without limitation, its patents and patent applications, its
trademarks, service marks and trade names, and its applications for registration
of such trademarks, service marks and trade names. Pursuant to the Loan
Agreement Assignor has agreed to execute and deliver this Agreement to Assignee
for filing with the United States Patent and Trademark Office (the "PTO") (and
any other relevant recording systems in any domestic or foreign jurisdiction),
and as further evidence of and to effectuate such assignment of and grant of a
security interest in such patents and patent applications, trademarks, service
marks and trade names, and applications for registration of such trademarks,
service marks and trade names, and the other general intangibles described
herein. Accordingly, Assignor and Assignee hereby agree as follows:
SECTION 1 DEFINITIONS; INTERPRETATION.
(a) All capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned to them in the Security
Agreement.
(b) In this Agreement, (i) the meaning of defined terms shall be
equally applicable to both the singular and plural forms of the terms defined;
and (ii) the captions and headings are for convenience of reference only and
shall not affect the construction of this Agreement.
SECTION 2 ASSIGNMENT AND GRANT OF SECURITY INTEREST.
(a) As security for the payment and performance of the
Obligations (as defined in the Security Agreement), Assignor hereby assigns,
transfers and conveys and grants a security interest in and mortgage to
Assignee, for security purposes, all of Assignor's right, title and interest in,
to and under the following property, whether now existing or owned or hereafter
acquired, developed or arising (collectively, the "Intellectual Property
Collateral"):
(i) all patents and patent applications, domestic or foreign,
all licenses relating to any of the foregoing and all income and royalties with
respect to any licenses (including, without limitation, such patents and patent
applications as described in SCHEDULE A hereto), all rights to sue for past,
present or future infringement thereof, all rights arising therefrom and
pertaining thereto and all reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof;
<PAGE>
(ii) all state (including common law), federal and foreign
trademarks, service marks and trade names, and applications for registration of
such trademarks, service marks and trade names, all licenses relating to any of
the foregoing and all income and royalties with respect to any licenses
(including, without limitation, such marks, names and applications as described
in SCHEDULE B hereto), whether registered or unregistered and wherever
registered, all rights to sue for past, present or future infringement or
unconsented use thereof, all rights arising therefrom and pertaining thereto and
all reissues, extensions and renewals thereof;
(iii) the entire goodwill of or associated with the businesses now
or hereafter conducted by Assignor connected with and symbolized by any of the
aforementioned properties and assets;
(iv) all general intangibles (as defined in the UCC) and all
intangible intellectual or other similar property of the Assignor of any kind or
nature, associated with or arising out of any of the aforementioned properties
and assets and not otherwise described above; and
(v) all products and proceeds of any and all of the foregoing.
(a) This Agreement shall create a continuing security interest
in the Intellectual Property Collateral which shall remain in effect until
terminated in accordance with Section 17 hereof.
(b) Notwithstanding the foregoing provisions of this Section 2,
the grant of a security interest as provided herein shall not extend to, and the
term "Intellectual Property Collateral" shall not include, (1) that certain U.S.
Patent No. 5,425,946 which is covered by a security interest in favor of Bankers
Trust Company as evidenced by the filing in the U.S. Patent and Trademark Office
(the "Excluded Patent Collateral"), and (2) any general intangibles of Debtor
(whether owned or held as licensee or lessee, or otherwise), to the extent that
(i) such general intangibles are not assignable or capable of being encumbered
as a matter of law or under the terms of the license, lease or other agreement
applicable thereto (but solely to the extent that any such restriction shall be
enforceable under applicable law), without the consent of the licensor or lessor
thereof or other applicable party thereto and (ii) such consent has not been
obtained; PROVIDED, HOWEVER, that the foregoing grant of security interest shall
extend to, and the term "Intellectual Property Collateral" shall include, (A)
any general intangible which is an account receivable or a proceed of, or
otherwise related to the enforcement or collection of, any account receivable,
or goods which are the subject of any account receivable, (B) any and all
proceeds of any general intangibles which are otherwise excluded to the extent
that the assignment or encumbrance of such proceeds is not so restricted, and
(C) upon obtaining the consent of any such licensor, lessor or other applicable
party's consent with respect to any such otherwise excluded general intangibles,
such general intangibles as well as any and all proceeds thereof that might have
theretofore have been excluded from such grant of a security interest and the
term "Intellectual Property Collateral."
SECTION 3 FURTHER ASSURANCES; APPOINTMENT OF ASSIGNEE AS
ATTORNEY-IN-FACT. Assignor at its expense shall execute and deliver, or
cause to be executed and delivered, to Assignee any and all documents and
2
<PAGE>
instruments, in form and substance satisfactory to Assignee, and take any
and all action, which Assignee may reasonably request from time to time, to
perfect and continue perfected, maintain the priority of or provide notice
of Assignee's security interest in the Intellectual Property Collateral and
to accomplish the purposes of this Agreement. Assignee shall have the right
to, in the name of the Assignor, or in the name of Assignee or otherwise,
without notice to or assent by the Assignor, and the Assignor hereby
irrevocably constitutes and appoints Assignee (and any of Assignee's
officers or employees or agents designated by Assignee) as the Assignor's
true and lawful attorney-in-fact with full power and authority, (i) to sign
the name of the Assignor on all or any of such documents or instruments and
perform all other acts that Assignee deems necessary or advisable in order
to perfect or continue perfected, maintain the priority or enforceability of
or provide notice of Assignee's security interest in, the Intellectual
Property Collateral, and (ii) to execute any and all other documents and
instruments, and to perform any and all acts and things for and on behalf of
the Assignor, which Assignee may deem necessary or advisable to maintain,
preserve and protect the Intellectual Property Collateral and to accomplish
the purposes of this Agreement, including (A) to defend, settle, adjust or
(after the occurrence of any Event of Default) institute any action, suit or
proceeding with respect to the Intellectual Property Collateral, and, after
the occurrence of any Event of Default, (B) to assert or retain any rights
under any license agreement for any of the Intellectual Property Collateral,
including without limitation any rights of the Assignor arising under
Section 365(n) of the Bankruptcy Code, and (C) after the occurrence of any
Event of Default, to execute any and all applications, documents, papers and
instruments for Assignee to use the Intellectual Property Collateral, to
grant or issue any exclusive or non-exclusive license or sub-license with
respect to any Intellectual Property Collateral, and to assign, convey or
otherwise transfer title in or dispose of the Intellectual Property
Collateral; PROVIDED, HOWEVER, that in no event shall Assignee have the
unilateral power, prior to the occurrence and continuation of an Event of
Default, to assign any of the Intellectual Property Collateral to any
Person, including itself, without the Assignor's written consent. The
foregoing shall in no way limit Assignee's rights and remedies upon or after
the occurrence of an Event of Default. The power of attorney set forth in
this Section 3, being coupled with an interest, is irrevocable so long as
this Agreement shall not have terminated in accordance with Section 17.
SECTION 4 FUTURE RIGHTS. Except as otherwise expressly agreed to
in writing by Assignee, if and when the Assignor shall obtain rights to any new
patentable inventions or any new trademarks, or become entitled to the benefit
of any of the foregoing, or obtain rights or benefits with respect to any
reissue, division, continuation, renewal, extension or continuation-in-part of
any patents or trademarks, or any improvement of any patent, the provisions of
Section 2 shall automatically apply thereto and the Assignor shall give to
Assignee prompt notice thereof. Assignor shall do all things deemed necessary or
advisable by Assignee to ensure the validity, perfection, priority and
enforceability of the security interests of Assignee in such future acquired
Intellectual Property Collateral. Assignor hereby authorizes Assignee to modify,
amend, or supplement the Schedules hereto and to reexecute this Agreement from
time to time on Assignor's behalf and as its attorney-in-fact to include any
such future Intellectual
3
<PAGE>
Property Collateral and to cause such reexecuted Agreement or such modified,
amended or supplemented Schedules to be filed with PTO.
SECTION 5 ASSIGNEE'S DUTIES. Notwithstanding any provision
contained in this Agreement, Assignee shall have no duty to exercise any of the
rights, privileges or powers afforded to it and shall not be responsible to the
Assignor or any other Person for any failure to do so or delay in doing so.
Except for the accounting for moneys actually received by Assignee hereunder or
in connection herewith, Assignee shall have no duty or liability to exercise or
preserve any rights, privileges or powers pertaining to the Intellectual
Property Collateral.
SECTION 6 REPRESENTATIONS AND WARRANTIES. Assignor represents and
warrants to Assignee that:
(a) A true and correct list of all of the existing Intellectual
Property Collateral consisting of U.S. patents and patent applications and/or
registrations owned by the Assignor, in whole or in part, and pledged as
collateral hereunder, is set forth in SCHEDULE A.
(b) A true and correct list of all of the existing Intellectual
Property Collateral consisting of U.S. trademarks, trademark registrations
and/or applications owned by the Assignor, in whole or in part, and pledged as
collateral hereunder is set forth in SCHEDULE B.
(c) All patents, trademarks, service marks and trade names of
Assignor are subsisting and have not been adjudged invalid or unenforceable in
whole or in part.
(d) All maintenance fees required to be paid on account of any
patents or trademarks of Assignor have been timely paid for maintaining such
patents and trademarks in force, and, to the best of Assignor's knowledge, each
of the patents and trademarks constituting part of the Intellectual Property
Collateral is valid and enforceable.
(e) To the best of Assignor's knowledge after due inquiry, no
material infringement or unauthorized use presently is being made of any
Intellectual Property Collateral by any Person.
(f) Except as otherwise disclosed in writing by Debtor to Secured
Party, Assignor is the sole and exclusive owner of the Intellectual Property
Collateral and the past, present and contemplated future use of such
Intellectual Property Collateral by Assignor has not, does not and will not
infringe or violate any right, privilege or license agreement of or with any
other Person.
SECTION 7 COVENANTS.
(a) Assignor will appear in and defend any action, suit or
proceeding which may affect to a material extent its title to, or Assignee's
rights or interest in, the Intellectual Property Collateral.
4
<PAGE>
(b) Assignor will not allow or suffer any Intellectual Property
Collateral to become abandoned, nor any registration thereof to be terminated,
forfeited, expired or dedicated to the public.
(c) Assignor will diligently prosecute all applications for patents
and trademarks, and file and prosecute any and all continuations,
continuations-in-part, applications for reissue, applications for certificate of
correction and like matters as shall be reasonable and appropriate in accordance
with prudent business practice, and promptly pay any and all maintenance,
license, registration and other fees, taxes and expenses incurred in connection
with any Intellectual Property Collateral.
SECTION 8 ASSIGNEE'S RIGHTS AND REMEDIES.
(a) Assignee shall have all rights and remedies available to it
under the Security Agreement, the other Documents and applicable law with
respect to the security interests in any of the Intellectual Property Collateral
or any other collateral. Assignor agrees that such rights and remedies include,
but are not limited to, the right of Assignee as a secured party to sell or
otherwise dispose of its collateral after default pursuant to the UCC. Assignor
agrees that Assignee shall at all times have such royalty free licenses, to the
extent permitted by law and to the extent of Assignor's rights therein, for any
Intellectual Property Collateral that shall be reasonably necessary to permit
the exercise of any of Assignee's rights or remedies upon or after the
occurrence of an Event of Default and shall additionally have the right to
license and/or sublicense any Intellectual Property Collateral upon or after the
occurrence of an Event of Default, whether general, special or otherwise, and
whether on an exclusive or a nonexclusive basis, any of the Intellectual
Property Collateral, throughout the world for such term or terms, on such
conditions, and in such manner, as Assignee in its sole discretion shall
determine. In addition to and without limiting any of the foregoing, upon the
occurrence and during the continuance of an Event of Default, Assignee shall
have the right but shall in no way be obligated to bring suit, or to take such
other action as Assignee deems necessary or advisable, in the name of the
Assignor or Assignee, to enforce or protect any of the Intellectual Property
Collateral, in which event the Assignor shall, at the request of Assignee, do
any and all lawful acts and execute any and all documents required by Assignee
in aid of such enforcement. To the extent that Assignee shall elect not to bring
suit to enforce such Intellectual Property Collateral, Assignor agrees to use
all reasonable measures and its diligent efforts, whether by action, suit,
proceeding or otherwise, to prevent the infringement, misappropriation or
violations thereof by others and for that purpose agrees diligently to maintain
any action, suit or proceeding against any Person necessary to prevent such
infringement, misappropriation or violation.
(b) The cash proceeds actually received from the sale or other
disposition or collection of Intellectual Property Collateral, and any other
amounts received in respect of the Intellectual Property Collateral the
application of which is not otherwise provided for herein, shall be applied as
provided in the Security Agreement.
SECTION 9 NOTICES. All notices or other communications hereunder
shall be in writing (including by facsimile transmission) shall be mailed, sent
or delivered in accordance with the Security Agreement at or to their respective
5
<PAGE>
addresses or facsimile numbers set forth below their names on the signature
pages hereof, or at or to such other address or facsimile number as shall be
designated by any party in a written notice to the other parties hereto. All
such notices and other communications shall be effective as provided in the
Security Agreement.
SECTION 10 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part
of Assignee to exercise, and no delay in exercising, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights and remedies under this Agreement are cumulative
and not exclusive of any rights, remedies, powers and privileges that may
otherwise be available to Assignee.
SECTION 11 COSTS AND EXPENSES; INDEMNITY.
(a) Assignor agrees to pay on demand all costs and expenses of
Assignee, including without limitation all attorneys' fees, in connection with
the enforcement or attempted enforcement of, and preservation of any rights or
interests under, this Agreement, and the assignment, sale or other disposal of
any of the Intellectual Property Collateral.
(b) Assignor hereby agrees to indemnify Assignee, any affiliate
thereof, and their respective directors, officers, employees, agents, counsel
and other advisors (each an "Indemnified Person") against, and hold each of them
harmless from, any and all liabilities, obligations, losses, claims, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, including, without limitation, reasonable attorneys'
fees and attorneys' fees incurred pursuant to 11 U.S.C., which may be imposed
on, incurred by, or asserted against any Indemnified Person, in any way relating
to or arising out of this Agreement, including in connection with any
infringement or alleged infringement with respect to any Intellectual Property
Collateral, or any action taken or omitted to be taken by it hereunder (the
"Indemnified Liabilities"); PROVIDED that Assignor shall not be liable to any
Indemnified Person for any portion of such Indemnified Liabilities to the extent
they are found by a final decision of a court of competent jurisdiction to have
resulted from such Indemnified Person's gross negligence or willful misconduct.
If and to the extent that the foregoing indemnification is for any reason held
unenforceable, Assignor agrees to make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
(c) Any amounts payable to Assignee under this Section 11 or
otherwise under this Agreement if not paid upon demand shall bear interest from
the date of such demand until paid in full, at the default rate of interest set
forth in the Loan Agreement.
SECTION 12 BINDING EFFECT. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by Assignor, Assignee and their
respective successors and assigns.
6
<PAGE>
SECTION 13 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York, except to
the extent that the validity or perfection of the assignment and security
interests hereunder in respect of any Intellectual Property Collateral are
governed by federal law and except to the extent that Assignee shall have
greater rights or remedies under federal law, in which case such choice of
New York law shall not be deemed to deprive Assignee of such rights and
remedies as may be available under federal law.
SECTION 14 AMENDMENT. This Agreement shall not be amended except by
the written agreement of the parties.
SECTION 15 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under all applicable laws and regulations. If, however, any provision of
this Agreement shall be prohibited by or invalid under any such law or
regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed
modified to conform to the minimum requirements of such law or regulation,
or, if for any reason it is not deemed so modified, it shall be ineffective
and invalid only to the extent of such prohibition or invalidity without
affecting the remaining provisions of this Agreement, or the validity or
effectiveness of such provision in any other jurisdiction.
SECTION 16 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the
same agreement.
SECTION 17 TERMINATION. Upon payment and performance in full of all
Obligations, this Agreement shall terminate and Assignee shall promptly
execute and deliver to Assignor such documents and instruments reasonably
requested by Assignor as shall be necessary to evidence termination of all
security interests given by Assignor to Assignee hereunder, including
cancellation of this Agreement by written notice from Assignee to the PTO;
PROVIDED, HOWEVER, that the obligations of Assignor under Section 11 hereof
shall survive such termination.
SECTION 18 SECURITY AGREEMENT. Assignor acknowledges that the
rights and remedies of Assignee with respect to the security interests in
the Intellectual Property Collateral granted hereby are more fully set forth
in the Security Agreement and all such rights and remedies are cumulative.
SECTION 19 NO INCONSISTENT REQUIREMENTS. Assignor acknowledges that
this Agreement and the Security Agreement may contain covenants and other
terms and provisions variously stated regarding the same or similar matters,
and the Assignor agrees that all such covenants, terms and provisions are
cumulative and all shall be performed and satisfied in accordance with their
respective terms.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
NORTH AMERICAN VACCINE, INC.
By /s/ Lawrence J. Hineline
-----------------------------
Title: Vice-President Finance
10150 Old Columbia Road
Columbia, Maryland 21046
Attn: Vice-President
Fax: (410) 309-4077
BANK OF AMERICA, N.A.
By /s/ Lawrence J. Gordon
-----------------------------
Title: Vice-President
Bank of America Center
700 Louisiana Street,
TX4-213-08-10
Houston, Texas 77002-2700
Attn: Lawrence J. Gordon
Fax: (713) 247-6719
8
<PAGE>
STATE OF Texas )
) ss
COUNTY OF Harris )
On November 2, 1999, before me, Beth L. Erwin, Notary Public,
personally appeared Larry J. Gordon, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Beth L. Erwin
-----------------
Signature
[SEAL]
9
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF _________________ )
On ___________ , before me, _____________, Notary Public, personally
appeared ___________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
____________________________________
Signature
[SEAL]
10
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
- ------------------------------------------------------------------------------------------------------------------------------------
PATENTS AND PATENT APPLICATIONS OF ASSIGNOR
- ------------------------------------------------------------------------------------------------------------------------------------
ISSUED U.S. PATENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Method for the High Level Blake, et al. NVX 08/798,760 February 11, 1997 Notice of
Expression, Purification and (co-exclusive (Notice of Allowance Allowance issued
Refolding of the Outer Membrane license with PMC) issued Jan. 1999) January 1999
Group B Porin Proteins (fee paid April
1999)
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX & Rockefeller 5,439,808 August 8, 1995 Patent
Expression, Purification and University
Refolding of the Outer Membrane (co-exclusive
Group B Porin Proteins from license with PMC)
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX 5,747,287 May 5, 1998 Patent
Expression, Purification and (co-exclusive
Refolding of the Outer Membrane license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal Blake et al. NVX & Rockefeller 5,866,135 February 2, 1999 Patent
Polysaccharide Immunogenic University
Compositions and Methods
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX 5,879,686 March 9, 1999 Patent
Expression, Purification and (co-exclusive
Refolding of the Outer Membrane license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. PATENT APPLICATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Method for the High Level Tai, et al. NVX 08/096,181 July 23, 1993 Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Tai, et al. NVX 08/449,358 May 24, 1995 Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
- ------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus Michon, et al. NVX 08/481,883 June 7, 1995 Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
- ------------------------------------------------------------------------------------------------------------------------------------
Direct Methods for Molar-Mass Michon, D'Ambra NVX 08/753,242 November 22, 1996 Application
Determination of Fragments of
Haemophilus Type b Capsular
Polysaccharides and Vaccine
Preparation
- ------------------------------------------------------------------------------------------------------------------------------------
Cloning of Non-IgA FC Binding Tai, Blake NVX 08/923,992 September 5, 1997 Application
Forms of the Group B Streptococcal
Beta Antigens
- ------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus Michon, et al. NVX 09/025,225 February 18, 1998 Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Conjugates Comprising Blake, et al. NVX 09/118/180 July 17, 1998 Application
A Group B Meningococcal Porin and
an H. Influenzae Polysaccharide
- ------------------------------------------------------------------------------------------------------------------------------------
Modified Immunogenic Pneumolysin Minetti, et al. NVX 09/120,044 July 21, 1998 Application
Compositions as Vaccines
- ------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal Blake et al. NVX & 09/207,188 December 8, 1998 Application
Polysaccharide Immunogenic Rockefeller
Compositions and Methods University
- ------------------------------------------------------------------------------------------------------------------------------------
Procedures for the Extraction and Michon, Blake NVX 09/221,620 December 23, 1998 Application
Isolation of Bacterial Capsular
Polysaccharides for Use as
Vaccines or Linked to Proteins as
Conjugate Vaccines
- ------------------------------------------------------------------------------------------------------------------------------------
Gram Positive Bacterial Antigens Long-Rowe, Blake NVX 09/399,220 September 17, 1999 Application
and Methods of Purification of the
Streptococcal C-Beta Protein
- ------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Polysaccharide-Protein Michon et al. NVX 09/376,911 August 18, 1999 Application
Conjugate Useful as a Vaccine
Produced Via Conjugation Through a
CZ-3 N-Acyl Portion F A
Polysaccharide
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
SCHEDULE B
- ---------------------------------------------------------------------------------------------------------------------------
U.S. TRADEMARKS OF ASSIGNOR
- ---------------------------------------------------------------------------------------------------------------------------
MARK STATUS APPL NO./ APPL./REGIS. DATE OWNER OF RECORD
REGIS. NO.
- ---------------------------------------------------------------------------------------------------------------------------
REGISTERED U.S. TRADEMARKS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Globe Design Registered 1,932,111 October 31, 1995 North American Vaccine, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
AMVAX Registered 1,967,632 April 16, 1996 North American Vaccine, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
TRINAVACEL Registered 2,101,121 September 30, 1997 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
TRIVAX Registered 2,118,360 December 2, 1997 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
NAVA Registered 2,267,812 August 3, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
PENDING U.S. TRADEMARK APPLICATIONS
- ---------------------------------------------------------------------------------------------------------------------------
THE IMPORTANCE OF OUR WORK Pending 75/190,826 October 29, 1996 American Vaccine Corporation
GROWS BIGGER EVERY DAY
- ---------------------------------------------------------------------------------------------------------------------------
NEISVAC-C Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
NEISIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
MENCIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-1
PATENT AND TRADEMARK ASSIGNMENT AND SECURITY AGREEMENT
THIS PATENT AND TRADEMARK ASSIGNMENT AND SECURITY AGREEMENT (this
"Agreement"), dated as of November 1, 1999, is made between NORTH AMERICAN
VACCINE, INC., a Canadian corporation ("Assignor") and BAXTER INTERATIONAL,
INC., a Delaware corporation ("Assignee").
Assignor and Assignee are parties to a Security Agreement dated as of
November 1, 1999 (as amended, modified, renewed or extended from time to time,
the "Security Agreement"), which Security Agreement provides, among other
things, for the assignment by Assignor to Assignee, and grant by Assignor to
Assignee of a security interest in, certain of Assignor's property and assets,
including, without limitation, its patents and patent applications, its
trademarks, service marks and trade names, and its applications for registration
of such trademarks, service marks and trade names. Pursuant to the Loan
Agreement Assignor has agreed to execute and deliver this Agreement to Assignee
for filing with the United States Patent and Trademark Office (the "PTO") (and
any other relevant recording systems in any domestic or foreign jurisdiction),
and as further evidence of and to effectuate such assignment of and grant of a
security interest in such patents and patent applications, trademarks, service
marks and trade names, and applications for registration of such trademarks,
service marks and trade names, and the other general intangibles described
herein. Accordingly, Assignor and Assignee hereby agree as follows:
SECTION 1 DEFINITIONS; INTERPRETATION.
(a) All capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned to them in the Security
Agreement.
(b) In this Agreement, (i) the meaning of defined terms shall be
equally applicable to both the singular and plural forms of the terms defined;
and (ii) the captions and headings are for convenience of reference only and
shall not affect the construction of this Agreement.
SECTION 2 ASSIGNMENT AND GRANT OF SECURITY INTEREST.
(a) As security for the payment and performance of the Obligations (as
defined in the Security Agreement), Assignor hereby assigns, transfers and
conveys and grants a security interest in and mortgage to Assignee, for security
purposes, all of Assignor's right, title and interest in, to and under the
following property, whether now existing or owned or hereafter acquired,
developed or arising (collectively, the "Intellectual Property Collateral"):
(i) all patents and patent applications, domestic or foreign, all
licenses relating to any of the foregoing and all income and royalties with
respect to any licenses (including, without limitation, such patents and patent
applications as described in SCHEDULE A hereto), all rights to sue for past,
present or future infringement thereof, all rights arising therefrom and
pertaining thereto and all reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof;
1.
<PAGE>
(ii) all state (including common law), federal and foreign trademarks,
service marks and trade names, and applications for registration of such
trademarks, service marks and trade names, all licenses relating to any of the
foregoing and all income and royalties with respect to any licenses (including,
without limitation, such marks, names and applications as described in SCHEDULE
B hereto), whether registered or unregistered and wherever registered, all
rights to sue for past, present or future infringement or unconsented use
thereof, all rights arising therefrom and pertaining thereto and all reissues,
extensions and renewals thereof;
(iii) the entire goodwill of or associated with the businesses now or
hereafter conducted by Assignor connected with and symbolized by any of the
aforementioned properties and assets;
(iv) all general intangibles (as defined in the UCC) and all
intangible intellectual or other similar property of the Assignor of any kind or
nature, associated with or arising out of any of the aforementioned properties
and assets and not otherwise described above; and
(v) all products and proceeds of any and all of the foregoing.
(a) This Agreement shall create a continuing security interest in the
Intellectual Property Collateral which shall remain in effect until terminated
in accordance with Section 17 hereof.
(b) Notwithstanding the foregoing provisions of this Section 2, the
grant of a security interest as provided herein shall not extend to, and the
term "Intellectual Property Collateral" shall not include, (1) that certain U.S.
Patent No. 5,425,946 which is covered by a security interest in favor of Bankers
Trust Company as evidenced by the filing in the U.S. Patent and Trademark Office
(the "Excluded Patent Collateral"), and (2) any general intangibles of Debtor
(whether owned or held as licensee or lessee, or otherwise), to the extent that
(i) such general intangibles are not assignable or capable of being encumbered
as a matter of law or under the terms of the license, lease or other agreement
applicable thereto (but solely to the extent that any such restriction shall be
enforceable under applicable law), without the consent of the licensor or lessor
thereof or other applicable party thereto and (ii) such consent has not been
obtained; PROVIDED, HOWEVER, that the foregoing grant of security interest shall
extend to, and the term "Intellectual Property Collateral" shall include, (A)
any general intangible which is an account receivable or a proceed of, or
otherwise related to the enforcement or collection of, any account receivable,
or goods which are the subject of any account receivable, (B) any and all
proceeds of any general intangibles which are otherwise excluded to the extent
that the assignment or encumbrance of such proceeds is not so restricted, and
(C) upon obtaining the consent of any such licensor, lessor or other applicable
party's consent with respect to any such otherwise excluded general intangibles,
such general intangibles as well as any and all proceeds thereof that might have
theretofore have been excluded from such grant of a security interest and the
term "Intellectual Property Collateral."
SECTION 3 FURTHER ASSURANCES; APPOINTMENT OF ASSIGNEE AS
ATTORNEY-IN-FACT. Assignor at its expense shall execute and deliver, or cause to
be executed and delivered, to Assignee any and all documents and instruments, in
2.
<PAGE>
form and substance satisfactory to Assignee, and take any and all action, which
Assignee may reasonably request from time to time, to perfect and continue
perfected, maintain the priority of or provide notice of Assignee's security
interest in the Intellectual Property Collateral and to accomplish the purposes
of this Agreement. Assignee shall have the right to, in the name of the
Assignor, or in the name of Assignee or otherwise, without notice to or assent
by the Assignor, and the Assignor hereby irrevocably constitutes and appoints
Assignee (and any of Assignee's officers or employees or agents designated by
Assignee) as the Assignor's true and lawful attorney-in-fact with full power and
authority, (i) to sign the name of the Assignor on all or any of such documents
or instruments and perform all other acts that Assignee deems necessary or
advisable in order to perfect or continue perfected, maintain the priority or
enforceability of or provide notice of Assignee's security interest in, the
Intellectual Property Collateral, and (ii) to execute any and all other
documents and instruments, and to perform any and all acts and things for and on
behalf of the Assignor, which Assignee may deem necessary or advisable to
maintain, preserve and protect the Intellectual Property Collateral and to
accomplish the purposes of this Agreement, including (A) to defend, settle,
adjust or (after the occurrence of any Event of Default) institute any action,
suit or proceeding with respect to the Intellectual Property Collateral, and,
after the occurrence of any Event of Default, (B) to assert or retain any rights
under any license agreement for any of the Intellectual Property Collateral,
including without limitation any rights of the Assignor arising under Section
365(n) of the Bankruptcy Code, and (C) after the occurrence of any Event of
Default, to execute any and all applications, documents, papers and instruments
for Assignee to use the Intellectual Property Collateral, to grant or issue any
exclusive or non-exclusive license or sub-license with respect to any
Intellectual Property Collateral, and to assign, convey or otherwise transfer
title in or dispose of the Intellectual Property Collateral; provided, however,
that in no event shall Assignee have the unilateral power, prior to the
occurrence and continuation of an Event of Default, to assign any of the
Intellectual Property Collateral to any Person, including itself, without the
Assignor's written consent. The foregoing shall in no way limit Assignee's
rights and remedies upon or after the occurrence of an Event of Default. The
power of attorney set forth in this Section 3, being coupled with an interest,
is irrevocable so long as this Agreement shall not have terminated in accordance
with Section 17.
SECTION 4 FUTURE RIGHTS. Except as otherwise expressly agreed to in
writing by Assignee, if and when the Assignor shall obtain rights to any new
patentable inventions or any new trademarks, or become entitled to the benefit
of any of the foregoing, or obtain rights or benefits with respect to any
reissue, division, continuation, renewal, extension or continuation-in-part of
any patents or trademarks, or any improvement of any patent, the provisions of
Section 2 shall automatically apply thereto and the Assignor shall give to
Assignee prompt notice thereof. Assignor shall do all things deemed necessary or
advisable by Assignee to ensure the validity, perfection, priority and
enforceability of the security interests of Assignee in such future acquired
Intellectual Property Collateral. Assignor hereby authorizes Assignee to modify,
amend, or supplement the Schedules hereto and to reexecute this Agreement from
time to time on Assignor's behalf and as its attorney-in-fact to include any
3.
<PAGE>
such future Intellectual Property Collateral and to cause such reexecuted
Agreement or such modified, amended or supplemented Schedules to be filed with
PTO.
SECTION 5 ASSIGNEE'S DUTIES. Notwithstanding any provision contained
in this Agreement, Assignee shall have no duty to exercise any of the rights,
privileges or powers afforded to it and shall not be responsible to the Assignor
or any other Person for any failure to do so or delay in doing so. Except for
the accounting for moneys actually received by Assignee hereunder or in
connection herewith, Assignee shall have no duty or liability to exercise or
preserve any rights, privileges or powers pertaining to the Intellectual
Property Collateral.
SECTION 6 REPRESENTATIONS AND WARRANTIES. Assignor represents and
warrants to Assignee that:
(a) A true and correct list of all of the existing Intellectual
Property Collateral consisting of U.S. patents and patent applications and/or
registrations owned by the Assignor, in whole or in part, and pledged as
collateral hereunder, is set forth in SCHEDULE A.
(b) A true and correct list of all of the existing Intellectual
Property Collateral consisting of U.S. trademarks, trademark registrations
and/or applications owned by the Assignor, in whole or in part, and pledged as
collateral hereunder is set forth in SCHEDULE B.
(c) All patents, trademarks, service marks and trade names of Assignor
are subsisting and have not been adjudged invalid or unenforceable in whole or
in part.
(d) All maintenance fees required to be paid on account of any patents
or trademarks of Assignor have been timely paid for maintaining such patents and
trademarks in force, and, to the best of Assignor's knowledge, each of the
patents and trademarks constituting part of the Intellectual Property Collateral
is valid and enforceable.
(e) To the best of Assignor's knowledge after due inquiry, no material
infringement or unauthorized use presently is being made of any Intellectual
Property Collateral by any Person.
(f) Except as otherwise disclosed in writing by Debtor to Secured
Party, Assignor is the sole and exclusive owner of the Intellectual Property
Collateral and the past, present and contemplated future use of such
Intellectual Property Collateral by Assignor has not, does not and will not
infringe or violate any right, privilege or license agreement of or with any
other Person.
SECTION 7 COVENANTS.
(a) Assignor will appear in and defend any action, suit or proceeding
which may affect to a material extent its title to, or Assignee's rights or
interest in, the Intellectual Property Collateral.
4.
<PAGE>
(b) Assignor will not allow or suffer any Intellectual Property
Collateral to become abandoned, nor any registration thereof to be terminated,
forfeited, expired or dedicated to the public.
(c) Assignor will diligently prosecute all applications for patents and
trademarks, and file and prosecute any and all continuations,
continuations-in-part, applications for reissue, applications for certificate of
correction and like matters as shall be reasonable and appropriate in accordance
with prudent business practice, and promptly pay any and all maintenance,
license, registration and other fees, taxes and expenses incurred in connection
with any Intellectual Property Collateral.
SECTION 8 ASSIGNEE'S RIGHTS AND REMEDIES.
(a) Assignee shall have all rights and remedies available to it under
the Security Agreement, the other Documents and applicable law with respect to
the security interests in any of the Intellectual Property Collateral or any
other collateral. Assignor agrees that such rights and remedies include, but are
not limited to, the right of Assignee as a secured party to sell or otherwise
dispose of its collateral after default pursuant to the UCC. Assignor agrees
that Assignee shall at all times have such royalty free licenses, to the extent
permitted by law and to the extent of Assignor's rights therein, for any
Intellectual Property Collateral that shall be reasonably necessary to permit
the exercise of any of Assignee's rights or remedies upon or after the
occurrence of an Event of Default and shall additionally have the right to
license and/or sublicense any Intellectual Property Collateral upon or after the
occurrence of an Event of Default, whether general, special or otherwise, and
whether on an exclusive or a nonexclusive basis, any of the Intellectual
Property Collateral, throughout the world for such term or terms, on such
conditions, and in such manner, as Assignee in its sole discretion shall
determine. In addition to and without limiting any of the foregoing, upon the
occurrence and during the continuance of an Event of Default, Assignee shall
have the right but shall in no way be obligated to bring suit, or to take such
other action as Assignee deems necessary or advisable, in the name of the
Assignor or Assignee, to enforce or protect any of the Intellectual Property
Collateral, in which event the Assignor shall, at the request of Assignee, do
any and all lawful acts and execute any and all documents required by Assignee
in aid of such enforcement. To the extent that Assignee shall elect not to bring
suit to enforce such Intellectual Property Collateral, Assignor agrees to use
all reasonable measures and its diligent efforts, whether by action, suit,
proceeding or otherwise, to prevent the infringement, misappropriation or
violations thereof by others and for that purpose agrees diligently to maintain
any action, suit or proceeding against any Person necessary to prevent such
infringement, misappropriation or violation.
(b) The cash proceeds actually received from the sale or other
disposition or collection of Intellectual Property Collateral, and any other
amounts received in respect of the Intellectual Property Collateral the
application of which is not otherwise provided for herein, shall be applied as
provided in the Security Agreement.
SECTION 9 NOTICES. All notices or other communications hereunder shall
be in writing (including by facsimile transmission) shall be mailed, sent or
5.
<PAGE>
delivered in accordance with the Security Agreement at or to their respective
addresses or facsimile numbers set forth below their names on the signature
pages hereof, or at or to such other address or facsimile number as shall be
designated by any party in a written notice to the other parties hereto. All
such notices and other communications shall be effective as provided in the
Security Agreement.
SECTION 10 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of
Assignee to exercise, and no delay in exercising, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights and remedies under this Agreement are cumulative
and not exclusive of any rights, remedies, powers and privileges that may
otherwise be available to Assignee.
SECTION 11 COSTS AND EXPENSES; INDEMNITY.
(a) Assignor agrees to pay on demand all costs and expenses of
Assignee, including without limitation all attorneys' fees, in connection with
the enforcement or attempted enforcement of, and preservation of any rights or
interests under, this Agreement, and the assignment, sale or other disposal of
any of the Intellectual Property Collateral.
(b) Assignor hereby agrees to indemnify Assignee, any affiliate
thereof, and their respective directors, officers, employees, agents, counsel
and other advisors (each an "Indemnified Person") against, and hold each of them
harmless from, any and all liabilities, obligations, losses, claims, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, including, without limitation, reasonable attorneys'
fees and attorneys' fees incurred pursuant to 11 U.S.C., which may be imposed
on, incurred by, or asserted against any Indemnified Person, in any way relating
to or arising out of this Agreement, including in connection with any
infringement or alleged infringement with respect to any Intellectual Property
Collateral, or any action taken or omitted to be taken by it hereunder (the
"Indemnified Liabilities"); provided that Assignor shall not be liable to any
Indemnified Person for any portion of such Indemnified Liabilities to the extent
they are found by a final decision of a court of competent jurisdiction to have
resulted from such Indemnified Person's gross negligence or willful misconduct.
If and to the extent that the foregoing indemnification is for any reason held
unenforceable, Assignor agrees to make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
(c) Any amounts payable to Assignee under this Section 11 or otherwise
under this Agreement if not paid upon demand shall bear interest from the date
of such demand until paid in full, at the default rate of interest set forth in
the Bank Loan Agreement.
SECTION 12 BINDING EFFECT. This Agreement shall be binding upon, inure
to the benefit of and be enforceable by Assignor, Assignee and their respective
successors and assigns.
6.
<PAGE>
SECTION 13 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York, except to the
extent that the validity or perfection of the assignment and security interests
hereunder in respect of any Intellectual Property Collateral are governed by
federal law and except to the extent that Assignee shall have greater rights or
remedies under federal law, in which case such choice of New York law shall not
be deemed to deprive Assignee of such rights and remedies as may be available
under federal law.
SECTION 14 AMENDMENT. This Agreement shall not be amended except by
the written agreement of the parties.
SECTION 15 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only to
the extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.
SECTION 16 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.
SECTION 17 TERMINATION. Upon payment and performance in full of all
Obligations, this Agreement shall terminate and Assignee shall promptly execute
and deliver to Assignor such documents and instruments reasonably requested by
Assignor as shall be necessary to evidence termination of all security interests
given by Assignor to Assignee hereunder, including cancellation of this
Agreement by written notice from Assignee to the PTO; PROVIDED, HOWEVER, that
the obligations of Assignor under Section 11 hereof shall survive such
termination.
SECTION 18 SECURITY AGREEMENT. Assignor acknowledges that the rights
and remedies of Assignee with respect to the security interests in the
Intellectual Property Collateral granted hereby are more fully set forth in the
Security Agreement [and the other Documents] and all such rights and remedies
are cumulative.
SECTION 19 NO INCONSISTENT REQUIREMENTS. Assignor acknowledges that
this Agreement and the Security Agreement may contain covenants and other terms
and provisions variously stated regarding the same or similar matters, and the
Assignor agrees that all such covenants, terms and provisions are cumulative and
all shall be performed and satisfied in accordance with their respective terms.
7.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
NORTH AMERICAN VACCINE, INC.
By /s/ Lawrence J. Hineline
---------------------------------
Title: Vice President Finance
10150 Old Columbia Road
Columbia, Maryland 21046
Attn: Vice President Finance
------------------------------
Fax: (410) 309-4077
------------------------------
BAXTER INTERNATIONAL, INC.
By /s/ Steven J. Meyer
---------------------------------
Title: Corp. Treasurer
8.
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF ____________________________)
On ___________ , before me, _____________, Notary Public, personally
appeared ___________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
------------------------------
Signature
[SEAL]
9.
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF _________________)
On ___________ , before me, _____________, Notary Public, personally
appeared ___________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
-------------------------------
Signature
[SEAL]
10.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
- ------------------------------------------------------------------------------------------------------------------------------------
PATENTS AND PATENT APPLICATIONS OF ASSIGNOR
- ------------------------------------------------------------------------------------------------------------------------------------
ISSUED U.S. PATENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Method for the High Level Blake, et al. NVX 08/798,760 February 11, 1997 Notice of
Expression, Purification and (co-exclusive (Notice of Allowance Allowance issued
Refolding of the Outer Membrane license with PMC) issued Jan. 1999) January 1999
Group B Porin Proteins (fee paid April
1999)
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX & Rockefeller 5,439,808 August 8, 1995 Patent
Expression, Purification and University
Refolding of the Outer Membrane (co-exclusive
Group B Porin Proteins from license with PMC)
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX 5,747,287 May 5, 1998 Patent
Expression, Purification and (co-exclusive
Refolding of the Outer Membrane license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal Blake et al. NVX & Rockefeller 5,866,135 February 2, 1999 Patent
Polysaccharide Immunogenic University
Compositions and Methods
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Blake, et al. NVX 5,879,686 March 9, 1999 Patent
Expression, Purification and (co-exclusive
Refolding of the Outer Membrane license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. PATENT APPLICATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Method for the High Level Tai, et al. NVX 08/096,181 July 23, 1993 Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
- ------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level Tai, et al. NVX 08/449,358 May 24, 1995 Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
- ------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus Michon, et al. NVX 08/481,883 June 7, 1995 Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
- ------------------------------------------------------------------------------------------------------------------------------------
Direct Methods for Molar-Mass Michon, D'Ambra NVX 08/753,242 November 22, 1996 Application
Determination of Fragments of
Haemophilus Type b Capsular
Polysaccharides and Vaccine
Preparation
- ------------------------------------------------------------------------------------------------------------------------------------
Cloning of Non-IgA FC Binding Tai, Blake NVX 08/923,992 September 5, 1997 Application
Forms of the Group B Streptococcal
Beta Antigens
- ------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus Michon, et al. NVX 09/025,225 February 18, 1998 Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Conjugates Comprising Blake, et al. NVX 09/118/180 July 17, 1998 Application
A Group B Meningococcal Porin and
an H. Influenzae Polysaccharide
- ------------------------------------------------------------------------------------------------------------------------------------
Modified Immunogenic Pneumolysin Minetti, et al. NVX 09/120,044 July 21, 1998 Application
Compositions as Vaccines
- ------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal Blake et al. NVX & 09/207,188 December 8, 1998 Application
Polysaccharide Immunogenic Rockefeller
Compositions and Methods University
- ------------------------------------------------------------------------------------------------------------------------------------
Procedures for the Extraction and Michon, Blake NVX 09/221,620 December 23, 1998 Application
Isolation of Bacterial Capsular
Polysaccharides for Use as
Vaccines or Linked to Proteins as
Conjugate Vaccines
- ------------------------------------------------------------------------------------------------------------------------------------
Gram Positive Bacterial Antigens Long-Rowe, Blake NVX 09/399,220 September 17, 1999 Application
and Methods of Purification of the
Streptococcal C-Beta Protein
- ------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Polysaccharide-Protein Michon et al. NVX 09/376,911 August 18, 1999 Application
Conjugate Useful as a Vaccine
Produced Via Conjugation Through a
CZ-3 N-Acyl Portion F A
Polysaccharide
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
SCHEDULE B
- ---------------------------------------------------------------------------------------------------------------------------
U.S. TRADEMARKS OF ASSIGNOR
- ---------------------------------------------------------------------------------------------------------------------------
MARK STATUS APPL NO./ APPL./REGIS. DATE OWNER OF RECORD
REGIS. NO.
- ---------------------------------------------------------------------------------------------------------------------------
REGISTERED U.S. TRADEMARKS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Globe Design Registered 1,932,111 October 31, 1995 North American Vaccine, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
AMVAX Registered 1,967,632 April 16, 1996 North American Vaccine, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
TRINAVACEL Registered 2,101,121 September 30, 1997 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
TRIVAX Registered 2,118,360 December 2, 1997 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
NAVA Registered 2,267,812 August 3, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
PENDING U.S. TRADEMARK APPLICATIONS
- ---------------------------------------------------------------------------------------------------------------------------
THE IMPORTANCE OF OUR WORK Pending 75/190,826 October 29, 1996 American Vaccine Corporation
GROWS BIGGER EVERY DAY
- ---------------------------------------------------------------------------------------------------------------------------
NEISVAC-C Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
NEISIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
MENCIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-1.
GUARANTY
FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, and,
in consideration of any credit and/or financial accommodation heretofore or
hereafter from time to time made or granted to North American Vaccine, Inc., a
Canadian corporation ("BORROWER"), by BANK OF AMERICA, N.A. and any other
subsidiaries or affiliates of BankAmerica Corporation and its successors and
assigns (collectively "LENDER"), BAXTER INTERNATIONAL INC., a Delaware
corporation (the "GUARANTOR") hereby furnishes its guaranty of the Guaranteed
Obligations (as hereinafter defined) as follows:
1. GUARANTY. Guarantor hereby absolutely and unconditionally guarantees,
as a guarantee of payment and not merely as a guarantee of collection, prompt
payment when due, whether at stated maturity, upon acceleration or otherwise,
and at all times thereafter, of any and all existing and future indebtedness and
liabilities of every kind, nature and character, direct or indirect, absolute or
contingent, liquidated or unliquidated, voluntary or involuntary, of Borrower to
Lender arising under that certain letter loan agreement dated November 1, 1999
between Borrower and Lender (the "BORROWER CREDIT AGREEMENT") and all
instruments, agreements and other documents (including without limitation the
Security Agreement and the IP Security Agreement) of every kind and nature now
or hereafter executed in connection with the Borrower Credit Agreement
(including all renewals, extensions and modifications thereof and all costs,
structuring fees, attorneys' fees and expenses incurred by Lender in connection
with the collection or enforcement thereof) (collectively, the "GUARANTEED
OBLIGATIONS"). Lender's books and records showing the amount of the Guaranteed
Obligations shall be admissible in evidence in any action or proceeding, and
shall be binding upon Guarantor and serve as a rebuttable presumption in favor
of Lender for the purpose of establishing the amount of the Guaranteed
Obligations, subject only to manifest error. This Guaranty shall not be affected
by the genuineness of the Borrower Credit Agreement or the validity, regularity
or enforceability of the Guaranteed Obligations or any instrument or agreement
evidencing any Guaranteed Obligations, or by the existence, validity,
enforceability, perfection, or extent of any collateral therefor, or by any fact
or circumstance relating to the Guaranteed Obligations which might otherwise
constitute a defense to the obligations of Guarantor under this Guaranty. The
obligations of Guarantor hereunder shall be limited to an aggregate amount equal
to the largest amount that would not render its obligations hereunder subject to
avoidance under Section 548 of the Bankruptcy Code (Title 11, United States
Code) or any comparable provisions of any applicable state law.
2. NO DEDUCTIONS. All payments by Guarantor hereunder shall be paid in
full, without setoff or counterclaim or any deduction or withholding whatsoever,
including, without limitation, for any and all present and future taxes. In the
event that Guarantor or Lender is required by law to make any such deduction or
withholding, Guarantor agrees to pay on behalf of Lender such amount directly to
the appropriate person or entity, or if the Guarantor cannot legally comply with
the foregoing, Guarantor shall pay to Lender such additional amounts as will
result in the receipt by Lender of the full amount payable hereunder. Guarantor
shall promptly provide Lender with evidence of payment of any such amount made
on Lender's behalf.
<PAGE>
3. NO TERMINATION. This Guaranty is a continuing and irrevocable guaranty
of all Guaranteed Obligations now or hereafter existing and shall remain in full
force and effect until all Guaranteed Obligations and any other amounts payable
under this Guaranty are indefeasibly paid and performed in full and any
commitments of Lender or facilities provided by Lender with respect to the
Guaranteed Obligations are terminated.
4. WAIVER OF NOTICES. Guarantor waives notice of the acceptance of this
Guaranty and of the extension or continuation of the Guaranteed Obligations or
any part thereof, subject to the provisions of Section 6. Guarantor further
waives presentment, protest, notice, dishonor or default, demand for payment and
any other notices to which Guarantor might otherwise be entitled as a condition
to the satisfaction of its obligations hereunder; provided that Lender shall
provide notice of any Event of Default (as defined in the Borrower Credit
Agreement) in accordance with the terms of Section 23 hereof.
5. SUBROGATION. Guarantor shall exercise no right of subrogation,
contribution or similar rights with respect to any payments it makes under this
Guaranty until (a) all of the Guaranteed Obligations and any amounts payable
under this Guaranty are indefeasibly paid and performed in full and any
commitments of Lender or facilities provided by Lender with respect to the
Guaranteed Obligations are terminated or (b) Guarantor exercises Guarantor's
Call Option (or Lender exercises Lender's Put Option) in accordance with and as
more specifically described in Section 23 hereof. If any amounts are paid to
Guarantor in violation of the foregoing limitation, then such amounts shall be
held in trust for the benefit of Lender and shall forthwith be paid to Lender to
reduce the amount of the Guaranteed Obligations, whether matured or unmatured.
6. WAIVER OF SURETYSHIP DEFENSES. Guarantor agrees that Lender may, at
any time and from time to time, and without notice to Guarantor, make any
agreement with Borrower or with any other person or entity liable on any of the
Guaranteed Obligations or providing collateral as security for the Guaranteed
Obligations, for the extension, renewal, payment, compromise, discharge or
release of the Guaranteed Obligations, or for any modification or amendment of
the terms thereof or of any instrument or agreement evidencing the Guaranteed
Obligations or the provision of collateral, all without in any way impairing,
releasing, discharging or otherwise affecting the obligations of Guarantor under
this Guaranty; provided that Lender shall not (a) extend the final maturity date
of the Guaranteed Obligations or any portion thereof, (b) reduce the rate or
extend the time for payment of interest, (c) waive the principal amount of any
Loan, (d) increase the Commitment or (e) release all or substantially all of any
collateral given to secure the Guaranteed Obligations, without in each case the
written consent of Guarantor. Guarantor waives any defense arising by reason of
any disability or other defense of Borrower or any other guarantor, or the
cessation from any cause whatsoever of the liability of Borrower, or any claim
that Guarantor's obligations exceed or are more burdensome than those of
Borrower and waives the benefit of any statute of limitations affecting the
liability of Guarantor hereunder. Guarantor waives any right to enforce any
remedy which Lender now has or may hereafter have against Borrower and waives
any benefit of and any right to participate in any security now or hereafter
held by Lender, subject to the provisions of Sections 23 and 24 hereof. Further,
Guarantor consents to the taking of, or failure to take, any action which might
in any manner or to any extent vary the risks of Guarantor under this Guaranty
2
<PAGE>
or which, but for this provision, might operate as a discharge of Guarantor.
7. EXHAUSTION OF OTHER REMEDIES NOT REQUIRED. The obligations of
Guarantor hereunder are those of primary obligor, and not merely as surety, and
are independent of the Guaranteed Obligations. Guarantor waives diligence by
Lender and action on delinquency in respect of the Guaranteed Obligations or any
part thereof, including, without limitation any provisions of law requiring
Lender to exhaust any right or remedy or to take any action against Borrower,
any other guarantor or any other person, entity or property before enforcing
this Guaranty against Guarantor.
8. REINSTATEMENT. Notwithstanding anything in this Guaranty to the
contrary, this Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any portion of the Guaranteed
Obligations is revoked, terminated, rescinded or reduced or must otherwise be
restored or returned upon the insolvency, bankruptcy or reorganization of
Borrower or any other person or entity or otherwise, as if such payment had not
been made and whether or not Lender is in possession of or has released this
Guaranty and regardless of any prior revocation, rescission, termination or
reduction.
9. SUBORDINATION. Guarantor hereby subordinates the payment of all
obligations and indebtedness of Borrower owing to Guarantor, whether now
existing or hereafter arising, including but not limited to any obligation of
Borrower to Guarantor as subrogee of Lender or resulting from Guarantor's
performance under this Guaranty, to the indefeasible payment in full of all
Guaranteed Obligations. If Lender so requests, any such obligation or
indebtedness of Borrower to Guarantor shall be enforced and performance received
by Guarantor as trustee for Lender and the proceeds thereof shall be paid over
to Lender on account of the Guaranteed Obligations, but without reducing or
affecting in any manner the liability of Guarantor under this Guaranty.
10. INFORMATION. Guarantor agrees to furnish promptly to Lender any and
all financial or other information regarding Guarantor or its property as Lender
may reasonably request in writing; provided, Guarantor shall not be obligated to
furnish or deliver information to Lender in addition to the requirements set
forth in the Existing Credit Agreement (as defined in Section 20 hereof).
11. STAY OF ACCELERATION. In the event that acceleration of the time for
payment of any of the Guaranteed Obligations is stayed, upon the insolvency,
bankruptcy or reorganization of Borrower or any other person or entity, or
otherwise, all such amounts shall nonetheless be payable by Guarantor
immediately upon demand by Lender.
12. EXPENSES. Guarantor shall pay on demand all out-of-pocket expenses
(including reasonable attorneys' fees and expenses and the allocated cost and
disbursements of internal legal counsel) in any way relating to the enforcement
or protection of Lender's rights under this Guaranty, including any incurred in
the preservation, protection or enforcement of any rights of Lender in any case
commenced by or against Guarantor under the Bankruptcy Code (Title 11, United
3
<PAGE>
States Code) or any similar or successor statute. The obligations of Guarantor
under the preceding sentence shall survive termination of this Guaranty.
13. AMENDMENTS. No provision of this Guaranty may be waived, amended,
supplemented or modified, except by a written instrument executed by Lender and
Guarantor.
14. NO WAIVER. No failure by Lender to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law or in equity. The unenforceability or invalidity of
any provision of this Guaranty shall not affect the enforceability or validity
of any other provision herein.
15. ASSIGNMENT; GOVERNING LAWS; JURISDICTION. This Guaranty shall (a) bind
Guarantor and its successors and assigns, PROVIDED that Guarantor may not assign
its rights or obligations under this Guaranty without the prior written consent
of Lender (and any attempted assignment without such consent shall be void), (b)
inure to the benefit of Lender and its successors and assigns and Lender may,
without notice to Guarantor and without affecting Guarantor's obligations
hereunder, assign or sell participations in the Guaranteed Obligations and this
Guaranty, in whole or in part, and (c) be governed by the internal laws of the
State of New York. Guarantor hereby irrevocably (i) submits to the non-exclusive
jurisdiction of any United States Federal or State court sitting in New York,
New York in any action or proceeding arising out of or relating to this
Guaranty, and (ii) waives to the fullest extent permitted by law any defense
asserting an inconvenient forum in connection therewith. Service of process by
Lender in connection with such action or proceeding shall be binding on
Guarantor if sent to Guarantor by registered or certified mail at its address
specified below. Guarantor agrees that Lender may disclose to any prospective
purchaser and any purchaser of all or part of the Guaranteed Obligations any and
all information in Lender's possession concerning Guarantor, this Guaranty and
any security for this Guaranty.
16. CONDITION OF BORROWER. Guarantor acknowledges and agrees that it has
the sole responsibility for, and has adequate means of, obtaining from Borrower
such information concerning the financial condition, business and operations of
Borrower as Guarantor requires, and that Lender has no duty, and Guarantor is
not relying on Lender at any time to disclose to Guarantor any information
relating to the business, operations or financial condition of Borrower.
17. SETOFF. If and to the extent any payment is not made when due
hereunder, Lender may setoff and charge from time to time any amount so due
against any or all of Guarantor's accounts or deposits with Lender.
18. OTHER GUARANTEES. Unless otherwise agreed by Lender and Guarantor in
writing, this Guaranty is not intended to supersede or otherwise affect any
other guaranty now or hereafter given by Guarantor for the benefit of Lender or
any term or provision thereof.
4
<PAGE>
19. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants that
(i) it is duly organized and in good standing under the laws of the jurisdiction
of its organization and has full capacity and right to make and perform this
Guaranty, and all necessary authority has been obtained; (ii) this Guaranty
constitutes its legal, valid and binding obligation enforceable in accordance
with its terms; (iii) the making and performance of this Guaranty does not and
will not violate the provisions of any applicable law, regulation or order, and
does not and will not result in the breach of, or constitute a default or
require any consent under, any agreement, instrument, or document to which it is
a party or by which it or any of its property may be bound or affected; (iv) all
consents, approvals, licenses and authorizations of, and filings and
registrations with, any governmental authority required under applicable law and
regulations for the making and performance of this Guaranty have been obtained
or made and are in full force and effect; (v) by virtue of its relationship with
Borrower, the execution, delivery and performance of this Guaranty is for the
direct benefit of Guarantor and it has received adequate consideration for this
Guaranty; and (vi) the financial information that has been delivered to Lender
by or on behalf of Guarantor is complete and correct in all respects and
accurately presents the financial condition and the operational results of
Guarantor and since the date of the most recent financial statements delivered
to Lender, there has been no material adverse change in the financial or
operational condition of Guarantor.
20. INCORPORATION OF COVENANTS. Reference is made to that certain Credit
Agreement (Facility A) dated as of November 24, 1998 (as amended or modified
prior to the date of the Guaranty, the "EXISTING CREDIT AGREEMENT") among
Guarantor, the financial institutions named therein, Bank of America, N.A.
(formerly Bank of America National Trust and Saving Association) and The Chase
Manhattan Bank, as Co-Arrangers, and The First National Bank of Chicago, as
administrative agent. Reference is further made to the covenants contained in
Article VIII of the Existing Credit Agreement (hereinafter referred to as the
"INCORPORATED COVENANTS"). So long as principal of and interest on any Loan (as
defined in the Borrower Credit Agreement) or any other amount payable under the
Borrower Credit Agreement or under any other Loan Document remains unpaid or
unsatisfied or the Commitment (as defined in the Borrower Credit Agreement) has
not been terminated, Guarantor shall comply with the Incorporated Covenants, it
being agreed that such covenants and agreements shall survive any termination,
cancellation or discharge of the Existing Credit Agreement. Guarantor agrees
with Lender that the Incorporated Covenants (and all other relevant provisions
of the Existing Credit Agreement related thereto, including without limitation
all exhibits, schedules and the defined terms contained in Section 1.01 thereof,
which are used in the Incorporated Covenants) are hereby incorporated by
reference into this Guaranty to the same extent and with the same effect as if
set forth fully herein and shall inure to the benefit of Lender, without giving
effect to any waiver, amendment, modification or replacement of the Existing
Credit Agreement or any term or provision of the Incorporated Covenants
occurring subsequent to the date of this Guaranty, except to the extent
otherwise specifically provided for in the following paragraph of this Section.
In the event a waiver is granted under the Existing Credit Agreement or an
amendment or modification is executed with respect to the Existing Credit
Agreement, and such waiver, amendment and/or modification affects the
5
<PAGE>
Incorporated Covenants, then such waiver, amendment or modification shall be
effective with respect to the Incorporated Covenants as incorporated by
reference into this Guaranty only if consented to in writing by the Lender. In
the event of any replacement of the Existing Credit Agreement with a similar
credit facility (the "NEW FACILITY") the covenants contained in the New Facility
which correspond to the covenants contained in Sections 8.01 and 8.02,
respectively, of the Existing Credit Agreement shall become the Incorporated
Covenants hereunder only if consented to in writing by Lender and, if such
consent is not granted or if the Existing Credit Agreement is terminated and not
replaced, then covenants contained in Sections 8.01 and 8.02, respectively, of
the Existing Credit Agreement (together with any modifications or amendments
approved in accordance with this paragraph) shall continue to be the
Incorporated Covenants hereunder.
21. GUARANTY EVENTS OF DEFAULT. Each of the following shall be a "Guaranty
Event of Default" for purposes of this Guaranty:
(a) Any "Event of Default" specified in Section 9.01 of the
Existing Credit Agreement occurs and is continuing, without
giving effect to any waiver thereof pursuant to the Existing
Credit Agreement; or
(b) Guarantor fails to perform or observe any other covenant or
agreement (not specified in (a) above) contained in this
Guaranty or any Loan Document (as defined in the Borrower Credit
Agreement) on its part to be performed or observed (including,
without limitation, the failure of Guarantor to comply with any
of its payments obligations in accordance with and under the
terms of this Guaranty); or
(c) Any representation or warranty in this Guaranty or in any
certificate, agreement, instrument or other document made or
delivered by Guarantor pursuant to or in connection with this
Guaranty or the Borrower Loan Agreement proves to have been
incorrect when made or deemed made.
22. WAIVER OF JURY TRIAL; FINAL AGREEMENT. TO THE EXTENT ALLOWED BY
APPLICABLE LAW, GUARANTOR AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO
ANY ACTION, CLAIM, SUIT OR PROCEEDING ON OR ARISING OUT OF THIS GUARANTY. THIS
GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
23. CALL/PUT PROVISIONS.
(a) GUARANTOR'S CALL OPTION. Guarantor (or any Affiliate identified by
Guarantor) shall have the right, upon three Business Days' prior written
notice to Lender, to purchase all (but not less than all) of Lender's
rights, interests and obligations in and to the Borrower Credit Agreement
at par value and subject in all cases to the representations, warranties
6
<PAGE>
and disclaimers set forth in Section 24 hereof (as set forth herein,
"GUARANTOR'S CALL OPTION"). Notwithstanding (I) Guarantor's exercise of
its call option pursuant to this section or (II) any other provision of
this Guaranty to the contrary, the Guaranty shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of any
portion of the Guaranteed Obligations received by Lender is (x) revoked,
terminated, rescinded or reduced or (y) subject to a request or an action
filed by Borrower, or any of its successors in bankruptcy (including a
trustee or any official committee), seeking the return or restoration of
any or all of such payment pursuant to the avoidance provisions of the
United States Bankruptcy Code, specifically including but not limited to
11 U.S.C. ss.ss. 544, 547, 548 and 550, as if such payment had not been
made and whether or not Lender is in possession of or has released this
Guaranty and regardless of any prior revocation, rescission, termination
or reduction. Guarantor shall be responsible for all costs and expenses
(including without limitation Breakage Costs) associated with Guarantor's
exercise of its rights hereunder.
(b) LENDER'S PUT OPTION. Upon the occurrence of any Event of Default and
written notice thereof provided by Lender to Guarantor, Lender shall sell
to Guarantor all (but not less than all) of Lender's rights, interests and
obligations in and to the Borrower Credit Agreement at par value and
subject in all cases to the representations, warranties and disclaimers
set forth in Section 24 hereof (as set forth herein, "LENDER'S PUT
OPTION"). Notwithstanding (I) Lender's exercise of its put option pursuant
to this section or (II) any other provision of this Guaranty to the
contrary, the Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any portion of the
Guaranteed Obligations is (x) revoked, terminated, rescinded or reduced or
(y) subject to a request or an action filed by Borrower, or any of its
successors in bankruptcy (including a trustee or any official committee),
seeking the return or restoration of any or all of such payment pursuant
to the avoidance provisions of the United States Bankruptcy Code,
specifically including but not limited to 11 U.S.C. ss.ss. 544, 547, 548
and 550, as if such payment had not been made and whether or not Lender is
in possession of or has released this Guaranty and regardless of any prior
revocation, rescission, termination or reduction. Guarantor shall be
responsible for all costs and expenses (including without limitation
Breakage Costs) associated with Lender's exercise of its rights hereunder.
PROVIDED, HOWEVER, that, (a) notwithstanding Borrower's and Guarantor's
good faith efforts, if the Guarantor and Borrower do not execute a definitive
agreement for the North American Vaccine Acquisition on or prior to November 16,
1999, and (b) between the date hereof and November 16, 1999, Borrower has not,
directly or indirectly solicited, initiated or encouraged (including by way of
furnishing or disclosing nonpublic information) any inquiries or the making or
any proposal or offer (including, without limitation, any offer to its
stockholders), with any third party other than Guarantor relating to any Company
Competing Transaction or knowingly encouraged or otherwise entered into or
maintained any discussions or negotiations with respect to any Company Competing
Transaction, or agreed or endorsed any agreement, arrangement or understanding
with respect to a Company Competing Transaction, or authorized or permitted any
representative of Borrower to take any such action, then Guarantor agrees that
it shall not, in connection with the exercise of Guarantor's Call Option or the
7
<PAGE>
exercise of Lender's Put Option, commence the exercise of remedies set forth in
the Borrower Credit Agreement if Borrower repays all amounts owing under or in
connection with the Borrower Credit Agreement and any related agreements within
20 days thereafter. For purposes of this Guaranty, a "Company Competing
Transaction" shall mean any of the following involving Borrower:
(i) any merger, consolidation, share exchange, recapitalization,
business combination, material issuance of equity or other similar transaction;
(ii) any sale, lease, exchange, transfer or other disposition of
10% or more of the assets of Borrower and its subsidiaries taken as a whole in a
single transaction or series of related transactions;
(iii) any license, sublicense, sale or similar transaction,
arrangement or agreement with respect to any material patents, trademarks, trade
secrets, patent applications, know how or other intellectual property of
Borrower or any of its subsidiaries;
(iv) any tender offer or exchange offer for any of the outstanding
voting securities of Borrower;
(v) any acquisition by any person or group of persons of 10% or
more of the voting securities (or securities convertible or exchangeable
therefor)of Borrower; or
(vi) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing.
24. ASSIGNMENT PROVISIONS. To the extent that Borrower's obligations under
the Borrower Credit Agreement are secured by a lien or pledge of collateral to
Lender in Borrower's property or assets (of whatever nature) (collectively,
"BORROWER COLLATERAL"), Lender hereby agrees that upon payment in full by
Guarantor of the Guaranteed Obligations (as determined by Lender), Lender shall,
if requested in writing by Guarantor, assign to Guarantor or its designee all or
a portion of Lender's rights (if any, and of whatever nature) in and to such
Borrower Collateral. Lender does not make, shall not be obligated to make nor
shall be deemed to have made any representation or warranty of any kind as to
the value of the Borrower Collateral or any portion thereof, including but not
limited to any representation or warranty with respect to the value of Lender's
Lien in such Borrower Collateral or the attachment, perfection or priority of
Lender's Lien with respect thereto. Lender hereby specifically disclaims any
such representations or warranties. Lender shall not warrant nor be obligated to
defend Lender's Lien or the attachment, perfection or priority of such Lien.
GUARANTOR HEREBY SPECIFICALLY ACKNOWLEDGES AND AGREES THAT LENDER DOES NOT MAKE,
SHALL NOT BE OBLIGATED TO MAKE NOR SHALL BE DEEMED TO HAVE MADE ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO THE BORROWER COLLATERAL, INCLUDING
WITHOUT LIMITATION THE ATTACHMENT, PERFECTION OR PRIORITY OF LENDER'S LIEN WITH
RESPECT THERETO. Lender agrees to reasonably cooperate with Guarantor to execute
UCC assignments and such other legal documentation as may be necessary to effect
8
<PAGE>
the purposes of this paragraph. Guarantor shall be responsible for the costs and
expenses (including without limitation reasonable attorneys' fees and expenses
and the allocated cost and disbursements of internal legal counsel) associated
with the assignment and/or transfer by Lender of its rights with respect to the
Borrower Collateral in accordance with the terms hereof.
25. DEFINED TERMS. Capitalized terms used herein but not otherwise defined
shall have the respective meaning set forth in the Borrower Credit Agreement.
9
<PAGE>
Duly executed and delivered under seal this 1st day of November, 1999.
BAXTER INTERNATIONAL INC.
By: /s/ Steven J. Meyer
-----------------------
Name: Steven J. Meyer
Title: Corp. Treasurer
Acknowledged and Agreed:
BANK OF AMERICA, N.A.
By: /s/ Lawrence J. Gordon
----------------------
Name: Lawrence J. Gordon
Title: Vice President
Acknowledged and Agreed:
NORTH AMERICAN VACCINE, INC.
By: /s/ Randal Chase
-----------------------
Name: Randal Chase, Ph.D.
-------------------
Title: Chief Executive Officer & President
-----------------------------------
10
REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT (this "Agreement") dated as of November 1,
1999, is made by and among NORTH AMERICAN VACCINE, INC., a Canadian corporation
("Borrower"), and BAXTER INTERNATIONAL INC., a Delaware corporation ("Baxter").
R E C I T A L S
A. Borrower and Bank of America, N.A. ("Bank") are party to that
certain loan agreement dated as of November 1, 1999 (as amended, modified or
restated from time to time the "Loan Agreement"), pursuant to which Bank has
agreed to make a revolving credit facility available to Borrower. Borrower's
obligations under the Loan Agreement are secured, in part, by liens on the
collateral described in that certain Security Agreement dated as of November 1,
1999, and that certain Patent and Trademark Assignment and Security Agreement
dated as of November 1, 1999 (collectively, the "Bank Security Agreements"). The
Loan Agreement, Bank Security Agreements, notes, financing statements and other
collateral documents related thereto are referred to herein as the "Loan
Documents."
C. Borrower has requested in connection with such financing that Baxter
guaranty certain obligations of Borrower under the Loan Agreement. Baxter has
entered into that certain Guaranty dated as of November 1, 1999, in favor of
Bank (the "Guaranty") to guarantee such obligations of Borrower.
D. Borrower and Baxter have a substantial business relationship
independent of the Guaranty and Baxter anticipates obtaining continued benefits
from that relationship as a result of Borrower's access to financing under the
Loan Documents.
E. In consideration of Baxter entering into the Guaranty, Borrower has
agreed to indemnify and reimburse Baxter if Baxter is required to pay any
amounts under or in connection with the Guaranty. The obligations of the
Borrower pursuant to this Agreement shall be secured by certain collateral
described in that certain Security Agreement dated as of November 1, 1999, and
that certain Patent and Trademark Assignment and Security Agreement dated as of
November 1, 1999 (collectively, the "Baxter Security Agreements").
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. INDEMNIFICATION BY BORROWER.
1.
<PAGE>
1.1 Borrower undertakes (to the fullest extent permitted by
applicable law) to indemnify Baxter and its affiliates and their respective
directors, officers, employees and agents (collectively, the "Indemnified
Parties") from, and hold said Indemnified Parties harmless against, any and all
losses, liabilities, claims, actions, proceedings, suits, damages, costs and
expenses of any nature whatsoever in connection with or arising out of the
Guaranty (collectively, "Losses"), including, without limitation, the reasonable
attorneys' fees and disbursements (other than attorneys' fees and disbursements
incurred in connection with the preparation of the Guaranty and related
documents) (the "Indemnified Matters").
1.2 If any Indemnified Party is presented with any claim in
writing or any action or proceeding is formally commenced against an Indemnified
Party which may give rise to a right of indemnification hereunder, such
Indemnified Party shall promptly give written notice thereof to Borrower.
Borrower may, by delivery of written notice to such Indemnified Party within
thirty (30) days following receipt of such notice, elect to contest such claim,
action or proceeding in such manner as it deems necessary or advisable, and each
Indemnified Party shall cooperate with Borrower in connection therewith.
Notwithstanding Borrower's election to contest any such claim, action or
proceeding, if the Indemnified Party reasonably determines that it needs its own
counsel (separate from Borrower's counsel), the Indemnified Party shall have the
right to participate in its own defense and to have legal counsel of its choice
and participate in such defense, at the Indemnified Party's cost and expense
(unless such legal counsel is retained as a result of a representation conflict
with Borrower's counsel), without in any way impairing Borrower's obligations
under this Section 1 to indemnify and hold harmless such Indemnified Party from
all Indemnified Matters. In the event of any payment by an Indemnified Party
under the Guaranty, Borrower shall immediately upon demand by the relevant
Indemnified Party reimburse the Indemnified Party for such payment, plus
interest from the date of payment by Indemnified Party to the date of
reimbursement at an annual rate equal to _____________ percent or, if lower, the
highest rate permitted by law. Nothing in this Agreement shall restrict any
Indemnified Party from making any payment under the Guaranty without contesting
the necessity of such payment if the Indemnified Party in good faith believes
that such payment is due, and any such payment by an Indemnified Party shall be
subject to reimbursement by Borrower as provided above.
2. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants as follows:
2.1 ORGANIZATIONAL STATUS. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Canada.
2.2 POWER AND AUTHORITY. Borrower has full power and authority to
enter into this Agreement and perform all of its obligations hereunder. The
execution, delivery and performance by Borrower of this Agreement do not
contravene Borrower's charter or bylaws or violate any provision of any statute,
law, rule, regulation, judgment, order or decree and will not conflict with, or
constitute a breach or default under, any indenture, loan agreement, contract or
other agreement or instrument to which Borrower is a party or by which Borrower
or any of its property is bound.
2.
<PAGE>
2.3 GOVERNMENTAL AUTHORIZATION. No authorization, consent or
approval or other action by, and no notice to or other filing with, any
governmental authority or regulatory body is required for the due execution and
delivery by Borrower of this Agreement or the performance by Borrower of any of
its obligations hereunder.
3. COVENANTS. Borrower covenants that until Baxter is fully released
from the Guaranty and all indemnity obligations of Borrower under Section 1
above have been met with respect to then existing Losses, Borrower will comply
with Sections 3 and 4 of the Loan Agreement and, if for any reason the Loan
Agreement is terminated or otherwise ceases to be in effect, to comply with the
provisions of Sections 3 and 4 thereof as last in effect.
4. EXPENSES. Borrower will on demand pay to Baxter the amount of any
and all reasonable costs and expenses, including but not limited to the
reasonable fees and disbursements of its counsel and of any experts or agents,
which Baxter may incur in connection with (i) the exercise or enforcement by
Baxter of any of its rights or remedies hereunder, or (ii) any failure by
Borrower to perform any of its obligations hereunder.
5. ASSIGNMENT. Without the other party's prior written consent, no
party may assign or delegate any of its rights or obligations hereunder, except
that Baxter may assign its rights (including indemnity rights under Section 1)
as part of any merger, consolidation or restructuring of Baxter or as part of a
transfer of a substantial portion of Baxter's assets. If at any time or times by
sale, assignment, negotiation, pledge or otherwise, Baxter transfers any of the
Obligations (as defined in the Loan Agreement), such transfer shall carry with
it Baxter's rights and remedies under this Agreement with respect to the
Obligations transferred, and the transferee shall become vested with such rights
and remedies whether or not they are specifically referred to in the transfer.
If and to the extent Baxter retains any other Obligations, Baxter shall continue
to have the rights and remedies herein set forth with respect thereto.
6. NOTICES. Any notice or other communication required or desired to
be served, given or delivered hereunder shall be in writing to the parties at
the addresses set forth below and shall be deemed to have been validly served,
given or delivered if given in accordance with the notice provisions of the Loan
Agreement as then in effect or, if the Loan Agreement is not then in effect, in
accordance with the notice provisions of the Loan Agreement last in effect.
7. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York applicable to contracts made and to be
performed in the State of New York. This Agreement shall be given a fair and
reasonable construction in accordance with the intention of the parties and
without regard to, or aid of, any provision of law which provides that an
agreement shall be construed against the drafter thereof.
8. SECURITY. Borrower's obligations under this Agreement shall be
secured by each of the Baxter Security Agreements.
9. MISCELLANEOUS. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. This Agreement shall be binding upon
3.
<PAGE>
Borrower and its successors and assigns, and all persons claiming under or
through Borrower or any of its successors or assigns, and shall inure to the
benefit of and be enforceable by Baxter and its successors and assigns.
4.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
NORTH AMERICAN VACCINE, INC.
By /s/ Randal Chase
-------------------------------
Name: Randal Chase, Ph.D.
-------------------
Title: Chief Executive Officer & President
-----------------------------------
BAXTER INTERNATIONAL, INC.
By: /s/ Steven J. Meyer
---------------------------
Name: Steven J. Meyer
---------------------------
Title: Corp. Treasurer
---------------------------
[Signature Page to Reimbursement Agreement]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000856573
<NAME> North American Vaccine, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,917
<SECURITIES> 0
<RECEIVABLES> 1,729
<ALLOWANCES> 0
<INVENTORY> 4,457
<CURRENT-ASSETS> 8,913
<PP&E> 59,948
<DEPRECIATION> 38,872
<TOTAL-ASSETS> 37,037
<CURRENT-LIABILITIES> 18,735
<BONDS> 100,326
0
6,538
<COMMON> 90,473
<OTHER-SE> (180,237)
<TOTAL-LIABILITY-AND-EQUITY> 37,037
<SALES> 3,589
<TOTAL-REVENUES> 7,626
<CGS> 0
<TOTAL-COSTS> 36,233
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,857
<INCOME-PRETAX> (34,066)
<INCOME-TAX> 0
<INCOME-CONTINUING> (34,066)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,066)
<EPS-BASIC> (1.05)
<EPS-DILUTED> (1.05)
</TABLE>
