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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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 No. 0-19153
VIMRX PHARMACEUTICALS INC.
(Exact name of Registrant as specified in its charter)
Delaware 06-1192468
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2751 Centerville Road, Wilmington, Delaware 19808
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(302) 998-1734
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock (Common Stock, $.001 par
value) held by non-affiliates of the Registrant was approximately $54,821,883
on, March 29, 1999 based on the closing sale price of the Common Stock on such
date.
The aggregate number of outstanding shares of Common Stock, $.001 par
value, of Registrant was 69,566,089 on March 29, 1999.
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Documents incorporated by reference: None
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PART I
ITEM 1. BUSINESS.
Disclosure Regarding Forward Looking Statements
This Report on Form 10-K contains certain statements that are "Forward
Looking Statements" within the meaning of Section 27A of the Securities Act of
1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as
amended. Those statements include, among other things, the discussions of the
Company's business strategy and expectations contained in "Item 1 Business" and
"Item 7 Management's Discussion and Analysis of Financial Condition and Results
of Operations." Although the Company believes that the expectations reflected
in Forward Looking Statements are reasonable, Management can give no assurance
that such expectations will prove to have been correct. Generally, these
statements relate to business plans or strategies, projected or anticipated
benefits or other consequences of such plans or strategies, or projections
involving anticipated revenues, expenses, earnings, levels of capital
expenditures, liquidity or indebtedness or other aspects of operating results or
financial position. All phases of the operations of the Company are subject to
a number of uncertainties, risks and other influences, many of which are outside
the control of the Company and any one of which, or a combination of which,
could materially affect the results of the Company's operations and whether the
Forward Looking Statements made by the Company ultimately prove to be accurate.
General
VIMRX is a biotechnology company that focuses on innovative technologies to
improve human health. VIMRX's principal subsidiary, Nexell Therapeutics Inc., is
developing products utilizing cell separation technology in cell therapy for
cancer and other life-threatening diseases. Nexell currently sells such
products outside the United States, and is seeking FDA approval to market its
products in the United States. VIMRX also has two compounds in development:
VIMRxyn(R), chemically synthesized hypericin, which is in clinical trials for
treating a type of cancer and as a topically applied therapy for certain skin
diseases, and VM301, a wound healing agent.
Nexell
Business of Nexell
Nexell is engaged in the development, manufacture, marketing and
distribution of specialized instruments, biologicals, reagents, sterile plastics
sets and related products used in ex vivo cell research and therapies. Nexell's
cell processing instruments are used in combination with biological reagents and
other instruments to provide integrated systems for manipulation of cells
extracted from patients. Nexell provides cell-processing instruments used in the
clinical treatment of disease, principally various forms of cancer.
Nexell currently markets Isolex(R) Cell Selection systems that consist of
automated, sterile path instruments along with companion reagents/biologicals
and sterile plastic disposable sets. These systems are used for the positive
clinical separation of specific cell populations from blood and bone marrow
(positive cell selection). In positive cell selection, a targeted cell
population is captured and retained for reinfusion or for further biological
manipulation. Nexell offers three versions of the Isolex(R) Cell Selection
instrument: the smaller scale Isolex(R) 50 Cell Separator for research use; the
clinical scale semi-automated Isolex(R) 300 Cell Separator; and the fully
automated Isolex(R) 300i Cell Separator. All three versions are currently
marketed for therapeutic and/or research purposes in Europe. As of the
beginning of 1999, Nexell began introducing an improved version of the Isolex(R)
300i (2.0 version) which allows positive cell selection (capturing cells that
are desired) and negative selection (eliminating cells that are not wanted) in a
single procedure. As Nexell has not yet received regulatory approval of these
instruments for therapeutic purposes in the United States and Japan, sales in
such countries are limited to research laboratories and institutions on a cost
recovery basis. Nexell has, however, received a letter from the FDA advising
that the Isolex(R) 300 and 300i devices are "approvable" for therapeutic use in
the United States; the Company anticipates final approval in the near future.
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In addition to the positive selection Isolex(R) Cell Separator, Nexell
markets the MaxSep(R) System. The semi-automated MaxSep(R) System is a negative
selection system in which undesired cells are removed from a diverse population
of cells. The MaxSep(R) System is currently marketed for therapeutic purposes in
Europe.
Nexell also markets various ancillary products that are utilized in the
cell processing cycle. These products include the following: Cryocyte(TM)
containers used in the freezing of blood components; Lifecell(R) tissue culture
flasks which provide a closed system environment for culturing cells; CFU stem
cell kits used to measure stem cell colony formation in samples of bone marrow,
peripheral blood, cord blood, or selected CD3 cells; the Solution Transfer Pump,
an automated, programmable pump for filling bags and splitting cell cultures;
and Harvester(TM), a cell collection device used primarily to reduce large cell
volumes.
Proposed Acquisition of Baxter's Interest in Nexell
The Company currently owns 80.5% of Nexell, its principal business unit,
which it acquired through acquisition of certain assets from Baxter Healthcare
corporation ("Baxter") in December 1997 in exchange for (1) 11,000,000 shares of
Common Stock, (2) 66,304 shares of Series A Convertible Preferred Stock with a
liquidation value of $1,000 per share, (3) 19.5% of Nexell's outstanding common
stock, (4) a warrant to purchase an additional 6% of Nexell's common stock for
$6,000,000, and (5) the right to receive payments from Nexell upon the
occurrence of certain milestone events, which could aggregate $21,000,000 if all
the milestones are achieved. In addition, for $30,000,000 to Nexell, Baxter
received $30,000,000 of Nexell's 6 1/2% convertible subordinated debentures
convertible into Nexell's common stock upon a public offering of common stock by
Nexell.
The acquisition of Baxter's interests in Nexell, other than its right to
milestone payments, is to be effected through an exchange of Baxter's interests
in Nexell for an equivalent value of interests directly in the Company (the
"Acquisition"). The Company and Baxter have agreed to exchange Baxter's
interests in Nexell (common stock, warrant and convertible subordinated
debentures, but excluding its right to milestone payments) for:
. 3,000,000 shares of Common Stock,
. an adjustment of the conversion price of the 70,282 outstanding shares of
Series A Preferred Stock owned by Baxter from $5.50 per share to $2.75
per share, (the 3,978 share increase from the 66,304 shares originally
issued are a result of dividends payable in kind),
. a warrant to purchase 5,200,000 shares of Common Stock at a price of
$1.15 per share, and
. approximately $33,000,000 principal amount of 6 1/2% Convertible
Subordinated Debentures (replacing the $30,000,000 principal amount of
Nexell's 6 1/2% convertible subordinated debentures plus accrued interest
through the closing date of the Acquisition) convertible, commencing
November 30, 2002, into Common Stock at a conversion price equal to 95%
of the average of the closing prices of the Common Stock on the Nasdaq
Stock Market for the 30 consecutive trading days preceding the date of
conversion.
Following consummation of the Acquisition, Nexell will be a wholly-owned
subsidiary of the Company and Baxter will own outright slightly less than 20% of
the Company's Common Stock. Baxter's ownership will increase to approximately
42% of the Common Stock (fully diluted ) upon the automatic conversion of the
Series A Preferred Stock into Common Stock on December 17, 2004, assuming
Baxter's exercise of its warrant, plus a further indeterminate percentage in the
event Baxter converts any portion of the 6 1/2% Convertible Subordinated
Debentures.
The Company is seeking stockholder approval of the Acquisition at the
1999 Annual Meeting of Shareholders.
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Acquisition of CellPro Assets
On January 29, 1999, Nexell consummated an agreement (the "CellPro
Acquisition Agreement") with CellPro Incorporated ("CellPro"), formerly one of
Nexell's principal competitors, to purchase substantially all the intellectual
property assets of CellPro, together with certain related tangible and
intangible assets in exchange for 1,882,215 shares of VIMRX's common stock
valued by the parties at $3,000,000.
CellPro, had developed, and the FDA approved, CellPro's Ceprate(R) SC Stem
Cell Concentration System (the "Ceprate(R) System") for use in autologous (i.e.,
self-donated) bone marrow and stem cell transplantation, and was developing
additional potential applications for the Ceprate(R) System. The Ceprate(R)
technology utilized the CD34+ monoclonal antibody and purified stem cell
technology, which are patented technologies originally licensed to Baxter") in
the therapeutic field, directly or indirectly, by Becton, Dickenson and Company
("Becton Dickenson") and Johns Hopkins University ("Johns Hopkins"). Baxter
sublicensed these technologies to Nexell in December, 1997.
In the course of patent infringement litigation brought against CellPro by
Becton Dickenson, Johns Hopkins and Baxter, CellPro filed a "citizen's petition"
before the FDA seeking to require the FDA to adopt certain procedures in its
review of Nexell's premarket approval application for the Isolex cell separation
systems which could have delayed or prevented FDA approval of the application
and also filed a petition before the Department of Health and Human Services
("HHS") requesting the exercise of so-called "march-in rights," a form of
compulsory licensing, with respect to the patents underlying the CD34+
sublicense. CellPro was found to have infringed the patents underlying the
CD34+ technology, was ordered to pay damages and was enjoined from manufacturing
and selling the Ceprate(R) System. A limited stay of that injunction was
granted allowing CellPro to continue supplying the Ceprate System to transplant
centers in the U.S. pending approval of the Isolex(R) System (or another stem
cell selection device), provided that it paid a court-ordered royalty to Johns
Hopkins and its licensees.
Pursuant to the CellPro Acquisition Agreement, CellPro filed a petition for
reorganization under Chapter 11 of the Federal Bankruptcy Code on October 28,
1998. Among other things, the Acquisition Agreement required CellPro (1) to
withdraw its citizen's petition(s) before the FDA, and otherwise to refrain from
attacking Nexell's premarket approval application for the Isolex cell separation
systems, and (2) to withdraw its petition before the Department of Health and
Human Services requesting the exercise of so-called "march-in rights" with
respect to the patents underlying the CD34+ sublicense.
In a related transaction, Baxter acquired the right to distribute the
disposable kits used in connection with CellPro's Ceprate(R) cell processing
equipment. CellPro agreed to maintain its technical support and continue to
perform its regulatory reporting and compliance responsibilities for a limited
period of time after the closing.
The intellectual property and other assets acquired by Nexell consists of
patents (granted and pending), license agreements, antibodies and related master
cell banks and working cell banks for such antibodies, clinical and research
protocols, copyrights, copyright registration applications, trademarks and
trademark applications, software, supply agreements, marketing materials and
books and records. Some of the monoclonal antibody lines included in the
purchased assets may expand the potential range of diseases for which therapies
utilizing the Isolex(R) technology may be developed. Similarly, the data from
clinical trials conducted by CellPro, the rights to which were acquired by
Nexell, could lead to additional diseases or other medical indications which
could be treated using the Isolex(R) technology. Additionally, included in the
assets are rights to two diagnostic kits related to the detection and
enumeration of certain types of cancer cells. Nexell anticipates it will begin
marketing the first of these kits by mid-year 1999.
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Hypericin
General
VIMRxyn(R) is the Company's chemically synthesized hypericin product.
Hypericin is an aromatic polycyclic dione found in the stem and petals of the
common Saint John's wort, a plant which has been used as a folk remedy since the
Middle Ages. Plant extracts containing hypericin continue to be used as lay
treatments for various disorders. The Company is investigating using VIMRxyn(R)
as a treatment for glioblastoma multiforme, a serious form of brain cancer, and
as a treatment for various hyperproliferative disorders of the skin including
psoriasis, warts, and cutaneous T-cell lymphoma ("CTCL"). The Company has a
worldwide exclusive license to commercialize and exploit synthetic hypericin
compounds for enumerated purposes acquired from New York University and YEDA
Research and Development Co., Ltd., an Israeli corporation engaged in the
commercial exploitation of scientific developments by scientists at the Weizmann
Institute of Science in Israel (New York University and YEDA, collectively, the
"Hypericin Licensors").
Glioblastoma (Brain Tumors)
Pre-clinical studies by Dr. William Couldwell and his colleagues suggested
that hypericin selectively inhibited the growth of human glioblastoma cells in
culture. In October 1996, the Company initiated a Phase I/II clinical study
under the direction of Dr. Couldwell to evaluate the efficacy and tolerability
of VIMRxyn(R) for treatment of glioblastoma multiforme, an invasive and deadly
form of brain tumor. The trial took place at five medical centers in the
United States and Canada and was completed in October, 1998. Initial results
from the clinical trial indicate that VIMRxyn(R) may have a beneficial effect in
some patients in the treatment of brain gliomas. The results of the study
further indicated that VIMRxyn(R) is well-tolerated at the doses studied, and
that an antiglioma effect was observed in several of the patients in the small
study. VIMRX is now developing a protocol for a larger Phase II, multi-center
study to determine more definitively the efficacy of the compound.
Topical Phototherapy for Hyperproliferative Skin Disorders
It has been known for some time that hypericin sensitizes many types of
cells to light exposure. Work in the laboratories of Drs. Alain Rook and Floyd
Fox of the Department of Dermatology at the University of Pennsylvania Medical
School indicated that hypericin was able to kill cancerous cells from a patient
with cutaneous T-cell lymphoma ("CTCL") selectively relative to normal cells
when the hypericin-treated cells were exposed to fluorescent light. Based on
this work, the Company has completed an initial Phase I safety study in normal
volunteers for topical administration of hypericin, followed by exposure to
controlled doses of fluorescent light. A safe dose that resulted in a consistent
biological response was established in this study. In early 1998, the Company
initiated pilot Phase I/II studies under Dr. Rook's supervision to evaluate the
efficacy of topically applied, light-activated hypericin in patients suffering
from three hyperproliferative skin disorders: psoriasis, cutaneous T-cell
lymphoma and warts. This study is being conducted at three university hospital
medical centers, two located in Philadelphia, Pennsylvania, and one in
Cleveland, Ohio.
VM301; Agent For Wound Healing
On May 16, 1997, VIMRX acquired the exclusive, worldwide rights to develop
OAS1000, a drug candidate which was being evaluated by OsteoArthritis Sciences,
Inc. for topical anti-inflammatory and wound healing indications. The agent,
designated VM301 by VIMRX, has shown promising wound healing activity in
preclinical studies when applied topically.
A Phase I clinical trial, designed to evaluate the safety of VM301 when
applied to broken and unbroken skin of human subjects, was conducted at a
university hospital medical center in New York. No clinical volunteers
participating in the study experienced any adverse results. Beginning in 1999,
the Company is planning to conduct Phase II clinical trials designed to
establish the efficacy of VM301.
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VGI/Ventiv BioGroup
VIMRX and its 90% owned subsidiary, VIMRX Genomics, Inc (d/b/a Ventiv
BioGroup, Inc., "VGI"), had been negotiating a restructuring of their
relationship with Columbia University under the Research Agreement dated March
7, 1998 ("Research Agreement") and several related agreements. The restructuring
negotiations were unsuccessful and on November 11, 1998, VIMRX, Columbia and VGI
terminated their relationship and released all claims arising from that
relationship on the following terms and conditions:
. VIMRX paid Columbia $900,000;
. Columbia transferred its interest in VGI to VIMRX; and
. The Research Agreement, the License Agreements relating to Blood Factor
IXai (VM201), the BCL-6 and MUM-1 genes, and the Shareholder's Agreement
between VIMRX and Columbia relating to VGI were terminated, with no
further obligations by the parties thereunder. All intellectual property
licensed to VIMRX or VGI under the agreements reverted to Columbia (or,
in the case of the BCL-6 license, to Columbia and a co-licensor).
Additionally, VGI vacated its premises at Columbia's Audubon Building in
New York City.
Innovir
VIMRX has completed its funding commitments to Innovir under its December
31, 1997 agreement, and has determined not to provide any further funding to
Innovir. Innovir's common stock was delisted from the Nasdaq Small-Cap Market
and now trades on the OTC Bulletin Board. Innovir closed its Cambridge, England
operations on or about November 30, 1998, and closed its remaining operations,
located in Gottingen, Germany and New York, New York, on December 31, 1998.
Innovir's management is seeking strategic alliances and/or buyers for its
various assets.
Patents and Licenses
Nexell
Nexell's intellectual property estate is arranged into four general patent
families:
1. Selection systems;
2. Bioreactor and culture systems;
3. Reagents for use in selection; and
4. Culturing cell compositions.
The selection system encompasses the Isolex(R) Cell Separator and similar
instruments. This patent family includes patents and patent applications
directed to the basic selection device having two magnets for capturing the
paramagnetic beads and patents and applications directed to the specific device
configuration. The disposable set for the Isolex(R) 300i Cell Separator
incorporates a spinning membrane technology, used for cell washing, the patent
rights to which are owned by Baxter.
At the time of the acquisition of Nexell, Baxter granted to Nexell
sublicenses of substantially all of Baxter's rights under four license
agreements, and Nexell assumed substantially all of Baxter's obligations as
licensee thereunder, including payment of all royalties, annual maintenance fees
and other required payments. Two of the sublicenses are under licenses to
Baxter from Becton Dickenson and relate, respectively, to (i) CD34+ technology
for use in applications other than diagnostic applications and (ii) certain
antibodies which attach to CD20+ and CD10+ B cells. A third sublicense is under
a non-exclusive license from Cetus Oncology Corporation, d/b/a Chiron
Therapeutics, and relates to the manufacture, use and sale of specific
antibodies and cell lines for the ex vivo therapeutic treatment of human cancer.
The fourth sublicense is under a non-exclusive license from Professor Bernd
Dorken and
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relates to certain cell lines for the production of antibodies to be used in the
extracorporeal therapeutic treatment or diagnosis of Non-Hodgkins lymphoma and
other specified malignancies.
In August, 1998, the United States Patent and Trademark Office (the "Patent
Office") allowed Nexell's patent application relating to peptide release for
CD34+ antibody, which is a critical component of the Isolex(R) system. The
patent allowance relates to the method of using a peptide to compete for the
binding site of a cell-capturing antibody, thereby displacing the antibody and
releasing the target cells essentially free of contamination by any of the
reagents used in the cell selection process. These released cells can then be
used for transplantation, cell therapy, or as target cells for gene therapy.
The Patent Office recently allowed (in June and October of 1998) two
patents relating to the infusion of neutrophil (white blood cells responsible
for fighting bacterial infections) precursor cells for the treatment of
neutropenia (a common side effect of high dose chemotherapy characterized by a
deficiency of neutrophils and an increased susceptibility to infection). Human
neutrophil precursor cells are a type of immature blood cell which mature into
neutrophils.
Hypericin
Pursuant to an agreement dated June 1, 1988, as amended, between the
Company and the Hypericin Licensors, the Hypericin Licensors granted the Company
a worldwide exclusive license to commercialize and exploit natural hypericin and
synthetic hypericin compounds to inactivate viruses and retroviruses, as a
therapeutic or preventative for viral or retroviral diseases, and for anti-
glioma (brain tumor) indications. The agreement provides for the payment of
royalties based on net sales and certain other revenues related to hypericin,
and provides for a $100,000 minimum annual royalty.
VM301
The patent rights to VM301 are owned by the Company.
Manufacturing
Nexell has no manufacturing capability and has contracted with Baxter to
manufacture and package its Isolex(R) and MaxSep(R) products as well as supplies
used by those products.
VIMRX has no manufacturing capability. VIMRX has contracted with outside
suppliers to develop, produce, and package therapeutic formulations of a
synthesized form of hypericin for its human clinical trials. VIMRX intends to
contract with outside suppliers to develop, produce and package any needed
quantities of VM301 and any other substances that may be needed.
Government Regulation
The Company has acquired or developed technologies which are intended to
lead to drugs and medical devices. The Company's products are currently
undergoing, or will be required to undergo, the difficult and costly approval
process for testing, manufacturing and sale established by the FDA, and may be
subject as well to state and foreign regulation.
In order for drug products to obtain pre-market approval from the FDA, the
Company must conduct pre-clinical studies, including animal studies, to generate
preliminary information on the product's efficacy and safety. An
investigational new drug application must then be filed and approved in order to
proceed with human clinical trials. These clinical trials, which are done in
three phases, normally take two to five years to complete. If the clinical
trials are successful, the Company will file a new drug application to receive
approval to market the product. This process requires substantial expense, time
and effort and there is no guarantee that approval will be granted.
Medical devices follow a similar process for approval although the length
and difficulty of the process varies with the controls which the FDA determines
are necessary to insure their stability and effectiveness. Based on these
controls, the devices are put into three classes, i.e., Class I, Class II, Class
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III. Two types of approval are granted on devices. A 501(K) clearance is given
if the device is deemed to be "substantially" equivalent to a legally marketed
Class I or Class II device, or a Class III device that was not required to
obtain a PMA application. A PMA application requires valid scientific evidence
to demonstrate the safety and effectiveness of the device and usually requires
tests similar to a filing for a drug product including clinical trials. A
501(K) clearance generally requires 6 months to a year to obtain, while the PMA
can take one to three years and possibly longer.
The Company presently has two devices (Isolex(R) 300 SA and Isolex(R) 300i)
awaiting approval of a PMA, and two drug products (VIMRxyn(R) and VM301) are in
clinical trials.
Nexell filed a supplemental application for premarket approval ("PMA") of
the Isolex(R)300i with the FDA on February 3, 1998; Baxter, as Nexell's
predecessor in interest, had filed an application for PMA of the Isolex(R)300SA
on February 24, 1997. On July 2, 1998, the FDA notified Nexell that certain data
and other information would be required before the PMA for both devices could be
approved. Nexell submitted the requested information in late August, 1998. The
FDA advised Nexell in a letter dated January 7, 1999, that the PMA application
for the Isolex(R) 300SA, and the PMA supplement for the fully automated
Isolex(R) 300i, are approvable subject to the submission of additional
information needed primarily to finalize labeling and the inspection of
manufacturing facilities by the FDA. On February 9, 1999, Nexell submitted all
requested information and all inspections of manufacturing were completed by
March 25, 1999. Responses have been submitted to the FDA for all observations
noted in the inspections. Nexell intends to respond to any additional questions
that may arise from the pre-insepction audits.
Competition
The biomedical industry is highly competitive. Competition in each of the
fields in which the Company is engaged is intense and expected to increase as
knowledge and interest in the technology and products being developed by the
Company increase. The Company faces competition from biotechnology companies,
large pharmaceutical companies, academic institutions, government agencies and
public and private research organizations, many of which have extensive
resources and experience in research and development, clinical testing,
manufacturing, regulatory affairs, distribution and marketing. Some of these
entities have significant research and development activities in areas upon
which the Company's programs focus. Many of the Company's competitors possess
substantially greater research and development, financial, technical, marketing
and human resources than the Company and may be in a better position to develop,
manufacture and market products. Forms of hypericin extracted from plants are
being used as lay treatments for a variety of disorders. The Company is
similarly subject to substantial competition from pharmaceutical, chemical and
biotechnology firms seeking to develop therapeutics for brain cancer (glioma),
hyperproliferative skin disorders and wound healing.
In general, Nexell may face competition from cell processing device
companies. Like Nexell, there are several product-focused companies attempting
to develop turn-key devices for cell processing. Although the sale of CellPro's
intellectual property to Nexell effectively eliminated CellPro as a competitor
in the cell separation market, other competitors or potential competitors
remain, including Miltenyi Biotec GmbH, Novartis/SyStemix, Amgen Corp. and
Aastrom Biosciences Inc. in collaboration with Cobe BCT, Inc. Nexell's
competitive position will be determined in part by which cell selection products
are ultimately approved for sale by regulatory authorities. See "Government
Regulation" above.
Employees
VIMRX has ten full-time employees. In connection with the proposed
consolidation of the Company's operations at Nexell's Irvine, California
offices, the employment of eight Delaware-based VIMRX employees will be
terminated. The Company is currently negotiating severance terms with the
affected employees.
Nexell has approximately 104 full-time U.S. employees. VIMRX believes that
Nexell's relations with its employees are satisfactory.
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Consultants
The Company is dependent on third parties for significant aspects of its
research and development operations. In certain cases, consultants are used to
perform or supervise such activities. Consultants have also been retained to
assist in supervising the FDA regulatory process, monitoring the human clinical
trials and establishing the toxicology tests for hypericin.
The Company has retained a number of consultants as part of conducting
human clinical trials in connection with the hypericin and VM301 programs. The
Company also retains financial consultants.
The Company's consultants generally are employed by and/or have consulting
agreements with entities other than the Company, some of which may conflict or
compete with the Company, and generally devote only a portion of their time to
the affairs of the Company.
Regulations or policies now in effect or adopted in the future by their
respective employers may limit the ability of such persons to consult with the
Company. The loss of the services of certain of such persons may adversely
affect the Company.
Directors and Executive Officers of VIMRX
Dr. Jerome Groopman resigned as a director of VIMRX, effective August 3,
1998. Dr. Richard Kouri resigned as Vice-President, Research, and as President
and Chief Executive Officer of VIMRX Genomics, Inc. effective November 6, 1998
in connection with the termination of the Columbia University Genomics
collaboration. See "Business VGI/Ventiv BioGroup."
ITEM 2. PROPERTIES.
The Company occupies 5,581 square feet of office space at 2751 Centerville
Road, Suite 210, Wilmington, Delaware under a lease at a monthly rent of
$10,095. The lease expires on August 31, 1999, with an option to renew for five
years. The Company does not intend to renew the existing lease.
Nexell occupies a building consisting of approximately 59,600 square feet,
under a lease which provides for current monthly rental of $40,500 plus real
estate taxes and operating costs, expires November, 30, 2004 and contains two
five-year renewal options.
ITEM 3. LEGAL PROCEEDINGS.
The Company has brought an action against a former employee who is alleged
by the Company to have misappropriated funds in 1996. The former employee has
counterclaimed for damages in excess of $40 million. Management believes these
counterclaims are totally without merit and will vigorously defend against them.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable
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PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED
STOCKHOLDER MATTERS.
Market Price of Common Stock
The Company's Common Stock is traded on The Nasdaq National Market System
under the symbol VMRX. The following table sets forth for the Company's Common
Stock the high and low closing sales prices for each calendar quarter from
January 1, 1996 through December 31, 1998. Prior to December 31, 1996, the
Company's Common Stock traded on The Nasdaq Small-Cap Market.
<TABLE>
<CAPTION>
High Low
---- ---
1996
----
<S> <C> <C>
First Quarter 3.03 1.13
Second Quarter 6.25 2.78
Third Quarter 4.94 3.00
Fourth Quarter 3.81 2.28
1997
----
First Quarter 3.50 2.47
Second Quarter 3.63 1.88
Third Quarter 3.63 1.56
Fourth Quarter 2.88 1.75
1998
----
First Quarter 2.06 1.28
Second Quarter 1.88 1.13
Third Quarter 1.44 0.94
Fourth Quarter 1.47 0.97
</TABLE>
On March 26, 1998, there were approximately 18,000 shareholders of the
Company's Common Stock, including beneficial owners of shares registered in
nominee or street name.
The Company has not paid a cash dividend and does not anticipate the
payment of cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
On April 9, 1998, the Company issued certificates representing 404,120
shares of Common Stock to Lazard Freres in consideration of financial advisory
services rendered in connection with the acquisition of Nexell in December 1997.
The shares were issued as of December 17, 1997, the closing date of the Nexell
acquisition, at which time Lazard Freres had become fully entitled to the
shares.
On August 3, 1998, Lindsay A. Rosenwald and certain other individuals
associated with Paramount Capital Inc. exercised options to purchase an
aggregate of 1,978,332 shares of the Company's common stock. The exercise was
accomplished by the withholding of 1,050,989 shares in payment of the purchase
price of the options and the issuance of 927,343 shares to the optionholders.
All of such shares were taken for investment by the recipients, the stock
certificates were legended to reflect their restricted status, and the issuance
of such shares was exempt from registration under the Securities Act of 1933, as
amended, under Section 4(2) thereof.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data have been derived from the Company's
audited financial statements. The Statements of Operations Data relating to the
fiscal years 1994 through 1998 and the Balance Sheets Data at December 31, 1997
and 1998 should be read in conjunction with the Company's audited financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," included elsewhere in this Annual Report on Form 10-K.
Statements of Operations Data:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue $ 13,443,000 $ 5,002,000 -- -- --
Cost of Goods Sold 8,166,000 4,630,000 -- -- --
------------ ------------ ------------ ----------- -----------
Gross Profit 5,277,000 372,000 -- -- --
Operating expenses:
Research and development 24,427,000 14,507,000 2,950,000 2,840,000 1,463,000
Purchased research and development -- 39,862,000 14,484,000 -- --
General administrative and
goodwill amortization 13,823,000 7,627,000 4,300,000 2,272,000 1,646,000
Selling and marketing 3,625,000 61,000 -- -- --
Restructuring costs 2,625,000 -- -- -- --
------------ ------------ ------------ ----------- -----------
Total operating expense 44,500,000 62,057,000 21,734,000 5,112,000 3,109,000
------------ ------------ ------------ ----------- -----------
Operating (loss) (39,223,000) (61,685,000) (21,734,000) (5,112,000) (3,109,000)
Other (income) expense:
Royalty expense (income) (176,000) 150,000 100,000 100,000 100,000
Interest (income) (2,972,000) (2,216,000) (1,792,000) (160,000) (189,000)
Interest expense 2,036,000 121,000 329,000 2,000 --
Contract settlement 900,000 -- -- -- --
Minority interest in net loss of
consolidated subsidiaries (4,161,000) (3,474,000) (116,000) -- --
Other net 113,000 (67,000) (395,000) 186,000 589,000
------------ ------------ ------------ ----------- -----------
Total other (income) expenses (4,260,000) (5,486,000) (1,874,000) 128,000 500,000
Net (loss) (34,963,000) (56,199,000) (19,860,000) (5,240,000) (3,609,000)
------------ ------------ ------------ ----------- -----------
Preferred stock dividend (3,988,000) (166,000) -- -- --
------------ ------------ ------------ ----------- -----------
Net loss applicable to common stock $(38,951,000) $(56,365,000) $(19,860,000) $(5,240,000) $(3,609,000)
============ ============ ============ =========== ===========
Basic and diluted (loss) per share $(0.58) $(1.02) $(0.50) $(0.27) $(0.19)
============ ============ ============ =========== ===========
Weighted average number of shares of 67,284,000 55,457,000 39,399,000 19,748,000 19,067,000
Common Stock outstanding ============ ============ ============ =========== ===========
</TABLE>
Balance Sheets Data:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Working capital $ 32,017,000 $ 61,354,000 $ 44,848,000 $ 391,000 $ 4,742,000
Total assets 87,601,000 121,947,000 51,692,000 2,958,000 5,249,000
Total liabilities 38,786,000 34,239,000 3,01,000 2,698,000 116,000
Minority interest in Subsidiary -- 4,161,000 2,381,000 -- --
Retained deficit (133,533,000) (98,570,000) (42,371,000) (13,662,000) (22,511,000)
Shareholders' equity 48,815,000 83,547,000 46,210,000 260,000 5,134,000
</TABLE>
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Years Ended December 31, 1998 and 1997
Operating loss for the year ended December 31, 1998 decreased
$22,462,000 or 36% from the year ended December 31, 1997. The decrease in the
operating loss was principally due to purchased research and development charged
to expense in 1997 resulting from various purchases of technology in that year
(predominantly the Nexell purchase in December 1997 resulting in a $37,712,000
charge to expense). There was no purchased research and development charged to
expense in 1998. This was offset by increased operating loss principally due to
the first full year of operations of Nexell. During that year, sales increased
$8,441,000 or 168%, cost of goods sold increased $3,536,000 or 76% resulting in
an increase in the gross profit of $4,905,000. Operating expenses decreased due
to the decrease in purchased research and development discussed above offset by
research and development expenses which increased $9,920,000 or 68%, general and
administrative increased $6,196,000 or 81%, selling expense was effectively
recorded for the first time in 1998 at $3,625,000 and one-time restructuring
costs amounting to $2,625,000 were recorded.
The increase in revenues and the related cost of goods sold resulted
from the inclusion of a full year of sales in 1998 compared to sales recorded
after the Nexell acquisition in December 1997 reflecting the initial purchase of
inventory by Nexell's sole distributor, Baxter. The gross profit percentage was
39% in 1998 as compared to 7% in 1997. This difference resulted principally
from adjustments made in 1997 to record the Nexell acquisition on the "purchase
method."
The Company recorded a write-off of purchased in-process technology of
$39.9 million in 1997 principally related to the acquisition of the
Immunotherapy Division of the Biotech Business Group of Baxter Healthcare
Corporation. This amount represented an allocation of purchase price to projects
that primarily were aimed at the approval of the Nexell's Isolex products in the
United States and certain foreign countries. Such amount was charged to expense
because the projects related to research and development that had not reached
technological feasibility and for which there was no alternative future use.
The research and development expense increase of $9,920,000 or 68%
resulted from an increase due to the inclusion of a full year of activity for
Nexell $15,658,000 offset by decreases in spending in VGI ($3,464,000),
VIMRX ($856,000) and Innovir ($1,418,000).
General and administrative expenses and amortization of Goodwill
increased by $6,196,000 or 81% is due principally to the inclusion of Nexell
($8,512,000) offset by decreases in expenses in VIMRX and Innovir.
Selling and marketing expenses were incurred by Nexell as it ramped up
marketing efforts in Europe and prepared for approval of its products by the FDA
in the United States.
Restructuring costs include expenses related to the shutdown of
Innovir's facilities (see footnote 4).
Interest income increased $756,000 or 34% due to an increase in the
average funds available for investment. Interest expense increased $1,915,000
principally due to the interest in the long-term debt due to a related party.
Minority interest in net loss of a consolidated subsidiary increased
$687,000 or 20% due principally to the inclusion of Nexell in 1998, offset by a
decrease in the participation of the minority interest in the losses of Innovir.
The foregoing resulted in a $21,236,000 or 38% decrease in the net loss
for the year ended December 31, 1998.
Years Ended December 31, 1997 and 1996
Total operating expenses increased by $40,323,000 or 186% due
principally to a $25,378,000 or 175% increase in purchased research and
development. The $39,862,000 purchased research and development charge recorded
in 1997 was principally due to the acquisition of the Immunotherapy Division of
the Biotech Business Group of Baxter Healthcare Corporation (Nexell). In
addition, research and development increased $11,557,000 or 392% and general and
administration expense increased $2,915,000 or 68%.
12
<PAGE>
The increase in research and development expense from $2,950,000 in 1996 to
$14,507,000 in 1997 was principally due, to costs incurred by VGI in its
collaboration with Columbia ($5,904,000) expenses incurred at Innovir, which was
purchased in December, 1996, (therefore, the first full year of expenses was
1997) ($4,137,000) and increased spending on VIMRX's research programs
($1,382,000).
The increase in general and administrative expense from $4,300,000 in 1996
to $7,215,000 in 1997 was due principally to a full year of costs related to
Innovir which increased $2,869,000 over the $506,000 incurred in 1996.
Minority interest in net loss of consolidated subsidiary increased
$3,358,000 due to the losses incurred by Innovir and VGI.
Revenue and cost of goods sold resulting in a gross profit of $372,000 in
1997 are a result of the operations of Nexell which acquired the assets and
operations of Baxter's Immunotherapy Division in December 1997.
The foregoing resulted in an increase in the net loss of $36,339,000.
Liquidity And Capital Resources
Before fiscal 1997 the Company had not realized any operating revenues and
has financed its operations through the sale of its securities.
The Company had $33,091,000 in cash and cash equivalents as of December 31,
1998 as compared to $57,830,000 in cash and cash equivalents as of December 31,
1997 and working capital of $32,017,000 at December 31, 1998 as compared to
$61,354,000 at December 31, 1997. Most of the decrease in cash and working
capital positions resulted from the cash used in the operations of the Company
of approximately $25,000,000.
Cash used in operating activities increased approximately $8,100,000 or 48%
over the cash used in operating activities in the year ended December 31, 1997
due principally to the inclusion of Nexell and the step up of Nexell operations
offset by the curtailment of operations in Innovir, VGI and VIMRX development
programs.
The Company expects to incur substantial expenditures in the foreseeable
future for the research and development and commercialization of its proposed
products. Based on current projections, which are subject to change, the
Company's management believes that the present balance of cash and cash
equivalents is sufficient to fund its operations for over one and one-half
years, assuming no capital infusions are received. Thereafter, the Company will
require additional funds, which it may seek to raise through public or private
equity or debt financings, collaborative or other arrangements with corporate
sources, or through other sources of financing.
Year 2000 Issues
The Company is aware of and has addressed many of the "Year 2000" issues
associated with both information technology ("IT") and non-IT systems which
could cause problems and network failures should the systems fail to recognize
year designations after 1999.
The Company has reviewed its own computer, communication, software and
operating systems and is satisfied they are Year 2000 compliant. Furthermore,
the Company has taken proactive measures to ensure the systems are Year 2000
compliant by upgrading all server and workstation operating systems. All system
servers and workstations' BIOS have been reprogrammed and are Year 2000
compliant (the BIOS are responsible for starting the computer by providing a
basic set of instructions. It performs all the tasks which need to be done at
start-up time).
13
<PAGE>
The Company has upgraded all productivity, communication and accounting
software to meet Year 2000 compliance. The Company has tested the accounting
systems with the Year 2000 date and feels confident they are compliant.
The Company will plan system-wide testing in the first and second quarters
of 1999. Any system failures will be addressed at that time. The Company feels
its Year 2000 risks are minimal. The Company has spent approximately $750,000
to upgrade its systems which brought the Company into Year 2000 readiness.
The Company will continue to contact critical suppliers, collaborators,
partners and vendors to determine if their operations, as they relate to the
Company, are Year 2000 compliant.
Although the Company will take all practical measures to prevent problems
related with the Year 2000 programming issue, such problems and failures may
occur which could seriously affect the Company's progress. Because of the
unprecedented nature of such problems, the extent of the effect on the Company's
progress cannot be certain.
New Accounting Pronouncements
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("Statement 98-1"). Once the
capitalization criteria of Statement 98-1 have been met, external directs costs
of materials and services consumed in developing or obtaining internal-use
computer software; payroll and payroll-related costs for employees who are
directly associated with and who devote time to the internal-use computer
software project (to the extent of the time spent directly on the project); and
interest costs incurred when developing computer software for internal use
should be capitalized. Training costs and data conversion costs, should be
expensed as incurred. Statement 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998, with earlier application
encouraged. The Adoption of this standard is not expected to have a material
impact on the Company's earning or financial position.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, Reporting on the Costs of Start-Up Activities (the
"Statement").The Statement requires costs of start-up activities, including
organizational costs, to be expensed as incurred. Start-up activities are
defined as those one-time activities related to opening a new facility,
introducing a new product or service, conducting businesses in a new territory,
conducting business with a new process in an existing facility, or commencing a
new operation. The Statement is effective for fiscal years beginning after
December 15, 1998. The adoption of this Standard is not expected to have a
material impact on the Company's earning or financial position.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No.133, Accounting for Derivative Instruments and Hedging Activities
("Statement133"). Statement 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. Statement 133 requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure the instrument at fair value. The
accounting changes in the fair value of a derivative depends on the intended use
of the derivative and the resulting designation. This Statement is effective for
all fiscal quarters beginning after June 15, 1999. The Company intends to adopt
this accounting standard as required. The adoption of this standard is not
expected to have a material impact on the Company's earnings or financial
position.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company maintains excess cash in a mutual fund, the "BlackRock Low
Duration Bond Portfolio", (the fund) which invests in asset backed securities,
bonds and various other commercial obligations. The fund may, from time to time,
use certain derivatives in its investment strategy.
Two of the main risk disclosed by the fund are interest rate risk and
credit risk. Typically, when interest rates rise, there is a corresponding
decline in the market value of bonds such as those held by the fund. Credit risk
refers the possibility that the issues of the bond will not be able to make
principal and interest payments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Financial Statements on page F-1.
No financial statement schedules are required because they are not
applicable or the information is disclosed in the financial statements or
related notes.
14
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Changes in Registrant's Certifying Accountant
Prior to fiscal year 1997, the independent auditors of the Company were
Richard A. Eisner & Company, LLP, who have been replaced upon recommendation of
the Audit Committee effective May 15, 1997. At no time did any report on the
financial statements of the Company by Richard A. Eisner & Company, LLP contain
an adverse opinion or a disclaimer of opinion, or a qualification or
modification as to uncertainty, audit scope or accounting principles. The
decision to change accountants was occasioned by the developments in 1996 and
early 1997, and not by any disagreement or advice given on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. In particular, in light of the Company's acquisition of a
controlling interest in Innovir Laboratories Inc., the Audit Committee concluded
in 1997 that it would be most efficient and in the best interests of both
Innovir and the Company for the same auditors to audit both companies. The
Company solicited proposals from four auditing firms, including Richard A.
Eisner & Company, LLP. KPMG LLP was chosen as a result of this process, and was
engaged by the Company as its principal auditors on May 15, 1997.
15
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The directors and executive officers of VIMRX are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Richard L. Dunning 53 President and Chief Executive Officer
L. William McIntosh 53 President and Chief Executive Officer, Nexell
Therapeutics, Inc.
David A. Jackson, Ph.D. 56 Executive Vice President and Chief Scientific
Officer
Francis M. O'Connell 53 Vice President, Finance and Controller
Alfonso J. Tobia, Ph.D. 56 Vice President, Research and Development
Donald G. Drapkin 51 Director (1)
Laurence D. Fink 49 Director (2)
Linda G. Robinson 46 Director (2)
Eric A. Rose, M.D. 48 Director (1)
Lindsay A. Rosenwald, M.D. 43 Director (1)
Michael Weiner, M.D. 52 Director (2)
Victor W. Schmitt 50 Director (3)
</TABLE>
___________________________
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Mr. Schmitt was elected to the Board of Directors pursuant to a provision
of the Asset Purchase Agreement, dated December 17, 1997, with Baxter,
pursuant to which the Company agreed to nominate and recommend to the
stockholders of the Company until such time as Baxter shall cease to own at
least 3% of the issued and outstanding capital stock of VIMRX, the election
to the Board of a designee of Baxter in future Stockholder meetings at
which directors are elected.
RICHARD L. DUNNING has been President and Chief Executive Officer of the
Company since April 1996. Prior to joining the Company, Mr. Dunning served as
Executive Vice President and Chief Financial Officer of the DuPont Merck
Pharmaceutical Company (now DuPont Life Sciences) from 1991. Mr. Dunning also
serves as a director of the following corporations which file reports pursuant
to the Exchange Act: Epoch Pharmaceuticals, Inc. and Endorex Corp.
L. WILLIAM McINTOSH, has served since March 1, 1998 as President and Chief
Executive Officer of Nexell. From May, 1997 through February, 1998, he served
as Senior Vice President, Business Development and Finance and Chief Financial
Officer of the Company. Prior to joining VIMRX, Mr. McIntosh served as Senior
Vice President Business Development, Commercial Operations for Zynaxis, a
biotechnology company with both drug delivery and diagnostic technologies and
was an independent industry consultant who, for some time, worked exclusively
for SmithKline Beecham.
DAVID A. JACKSON, Ph.D., has served as Executive Vice President and Chief
Scientific Officer of VIMRX Pharmaceuticals Inc. since September 1996. Prior to
joining VIMRX, Dr. Jackson
16
<PAGE>
was with DuPont Merck Pharmaceutical Company (now DuPont Life Sciences) since
1991, most recently serving as Senior Director, Cancer, Virology and Molecular
Biology Research.
FRANCIS M. O'CONNELL, CPA, has served as Chief Financial Officer of the
Company from February 1995, to May, 1997; he has served as Vice President-
Finance of the Company since May, 1997 and as the Chief Financial Officer of
Innovir since February, 1997. Prior to joining the Company, Mr. O'Connell was
Director of Litigation Support in the New York office of J.H. Cohn & Company, a
CPA firm, from June 1994 to February 1995, and was Vice-President of Hickok
Associates Inc., a financial consulting company, from March 1992 to June 1994,
and for 17 years prior thereto, was a partner with KPMG Peat Marwick (formerly
KMG Main Hurdman).
ALFONSO J. TOBIA, Ph.D. was elected an executive officer of the Company in
March 1995, having joined the Company as Vice President, Research and
Development in June 1994. Prior to joining VIMRX, Dr. Tobia served as Vice
President of Scientific Affairs at Great Valley Pharmaceuticals, a
biopharmaceutical company, from April 1993 to June 1994. From 1990 to 1991, Dr.
Tobia served as Senior Director of R.W. Johnson Pharmaceutical Research
Institute; from 1985 to 1990, as Director of Pharmacology at Johnson & Johnson's
Ortho Pharmaceutical Corporation; and from 1974 to 1977 as Senior Scientist at
SmithKline Laboratories.
DONALD G. DRAPKIN was elected Chairman of the Board of Directors in March
1996 and has served as a director of the Company since November 17, 1995. Mr.
Drapkin has been a director and Vice Chairman of MacAndrews & Forbes Holdings
Inc. and various of its affiliates since 1997 and was a partner in the law firm
of Skadden, Arps, Slate, Meagher & Flom in New York City for more than five
years prior thereto. Mr. Drapkin also serves as a director of the following
corporations which file reports pursuant to the Securities Exchange Act of 1934:
Algos Pharmaceutical Corporation, Anthracite Capital, Inc., BlackRock Asset
Investors, Cardio Technologies, Inc., The Molson Companies Limited, Playboy
Enterprises, Inc., Revlon, Inc., Revlon Consumer Products Corporation and Weider
Nutrition International, Inc.
LAURENCE D. FINK was elected a director of the Company in June 1996. Mr.
Fink has been Chairman and Chief Executive Officer and Director of BlackRock
Financial Management (investment advisor) since 1988. Mr. Fink is a director of
Innovir Laboratories, Inc. and of the closed end funds for which BlackRock
serves as investment advisor.
LINDA G. ROBINSON was elected a director of the Company in June 1996. Ms.
Robinson has been Chairman, and Chief Executive Officer of Robinson Lerer &
Montgomery, LLC, a strategic communications consulting firm that serves major
corporations in the United States and abroad, since May 1996. For more than
five years prior to that she was Chairman and Chief Executive Officer of
Robinson Lerer Sawyer Miller Group, or its predecessors. Ms. Robinson is a
director of the following corporation which files reports pursuant to the
Exchange Act: Revlon, Inc.
ERIC A. ROSE, M.D. was elected a director of the Company in November 1995.
Dr. Rose is Surgeon-In-Chief at Columbia Presbyterian Medical Center in New
York, a position he has held since August 1994. Dr. Rose is a past president of
the International Society for Heart and Lung Transplantation.
LINDSAY A. ROSENWALD, M.D. is an investment banker, venture capitalist and
investment manager. Dr. Rosenwald is the co-founder of and has served as the
Chairman of the board of directors of Paramount Capital, Inc., an NASD member
broker dealer, since 1992, Paramount Capital Investments, LLC a merchant and
investment bank, since 1995, and Paramount Capital Asset Management, Inc., since
June 1994, Paramount Capital Asset Management, Inc. serves as the general
partner of the Aries Domestic Fund, L.P. and the investment manager of The Aries
Master Fund, a Cayman Island exempted company, each of which is a fund that
specializes in the biotechnology sector. Dr. Rosenwald serves as a member of the
Board of Directors of Interneuron Pharmaceuticals, Inc. BioCryst
Pharmaceuticals, Inc., Sparta Pharmaceuticals, Inc. and Neose Technologies, Inc,
each a publicly traded company. Dr. Rosenwald is also the President of the
Rosenwald Foundation, a charitable foundation based in New York which assists
outstanding scientists in their continued research and development in order to
further the advancement of biotechnology. Dr. Rosenwald received his medical
doctorate from Temple University School of Medicine and his bachelor of science
degree in finance from Pennsylvania State University.
VICTOR W. SCHMITT was elected a director of the Company in January 1998.
Mr. Schmitt has been President, Venture Management, Baxter Healthcare
Corporation since 1994. Prior to this position,
17
<PAGE>
he held the operating position of President, Baxter Biotech Europe. Mr. Schmitt
joined Baxter from a 16- year career with the American Red Cross Blood Services
where he held positions in marketing and operations. Mr. Schmitt holds a B.S.
from the University of Virginia and an M.B.A. from the University of Maryland.
He serves on the Board of Directors of a number of development-stage biotech
companies.
MICHAEL WEINER, M.D. was elected a director of the Company in June 1996.
Dr. Weiner has been the Hellinger Professor of Clinical Pediatrics at Columbia
University College of Physicians and Surgeons since January 1996 and has been an
attending pediatrician at Columbia Presbyterian Medical Center since January
1996. Dr. Weiner has served as Associate Director of Pediatrics
Hematology/Oncology and Associate Attending Physician of Hackensack Medical
Center and an Associate Attending Pediatrician UMDNJ Division of Pediatric
Hematology/Oncology, since 1987.
____________________________
All directors hold office until the next annual meeting of shareholders and
until their successors are elected and qualified. Officers are elected annually
and serve at the pleasure of the Board of Directors, subject to rights, if any,
under contracts of employment.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers, directors and holders of more than 10% of the
Common Stock (collectively, "Reporting Persons") file reports of their holdings
and transactions in the Common Stock with the Securities and Exchange
Commission. Based on a review of Section 16 forms filed by the Reporting
Persons during the last fiscal year, the Company believes that the Reporting
Persons timely complied with all applicable Section 16 filing requirements,
except that Dr. Lindsay A. Rosenwald was delinquent in reporting the exercise,
on August 3, 1998, of certain options to purchase Common Stock.
18
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Compensation Summary
Summary Compensation Table
The following table sets forth a summary of the compensation for each of
the three years ended December 31, 1998 earned by the Company's principal
executive officer and by each executive officer whose compensation exceeded
$100,000 during 1998:
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
Name and ---------------------------------------------- ------ Other
Principal Position Year Salary Bonus (1) Options (2) Compensation
------------------ ---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Richard L. Dunning 1998 $250,000 -- 200,000 $ 8,950 (3)(4)
President and Chief 1997 $200,000 $120,000 -- $ 9,090 (3)(4)
Executive Officer 1996 $134,000 $135,000 800,000 $ 4,500
David A. Jackson, Ph.D. 1998 $200,000 -- 135,000 $ 5,000
Vice President, 1997 $175,000 $100,000 -- $ 3,938
Research & 1996 $ 48,000 $110,000 500,000 --
Development, Chief
Scientific Officer
L. William McIntosh 1998 $216,000 $ 11,000 525,000 $10,614 (3)(5)
President and Chief 1997 $ 99,000 $115,000 400,000 (6) --
Executive Officer,
Nexell Therapeutics,
Inc.
Francis M. O'Connell 1998 $146,000 -- 25,000 $ 4,363 (3)
Vice President-Finance 1997 $139,000 $ 35,000 -- $ 3,128 (3)
and Controller 1996 $124,000 $ 45,000 -- --
Alfonso J. Tobia, Ph.D. 1998 $156,000 -- -- $ 4,665 (3)
Executive Vice 1997 $150,000 $ 35,000 -- $ 3,375 (3)
President 1996 $147,000 $ 55,000 -- --
</TABLE>
________________
(1) Bonus amounts are shown for the year in which earned and, except for
signing bonuses ($40,000 to each of Mr. Dunning and Dr. Jackson in 1996
and to Mr. McIntosh for 1997) were paid in the following year.
(2) Number of shares of Common Stock purchasable. See Option Grant Table
below for exercise prices and expiration dates.
(3) Includes Company's matching contribution to the named executive's account
in the Company's 401(k) retirement plan.
(4) Amounts shown for 1998 and 1997, respectively, include reimbursement of
personal medical and health care insurance in the amount of $6,000.
(5) Amount shown includes reimbursement of relocation expenses.
(6) Options to purchase 190,000 of such shares were cancelled in connection
with the executive's appointment as President and Chief Executive Officer
of Nexell. See "Executive Compensation, Compensation Summary, Option
Repricing."
19
<PAGE>
Option Grant Table
The following table sets forth certain information concerning options
granted in 1998 to the individuals named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Number of Potential Realizable
Shares % of Total Value at Assumed
Underlying Options Exercise Annual Rates of Stock Price
Options Granted to Price Expiration Appreciation
Name Granted Employees Per Share Date For Option Term
---- ------- --------- --------- ---- ---------------
<S> <C> <C> <C> <C> <C> <C>
@5% @10%
-------- --------
Richard L. Dunning 200,000 5.3% $1.630 1/15/08 $205,019 $519,560
David A. Jackson, Ph.D. 135,000 3.6% $1.630 1/15/08 $138,388 $350,703
L. William McIntosh 90,000 2.4% $1.630 1/15/08 $ 92,259 $230,802
375,000 (1) 9.9% $1.670 1/1/08 $393,845 $998,081
60,000 (1) 1.6% $0.001 1/1/08 $163,155 $259,832
Francis M. O'Connell 25,000 0.7% $1.630 1/15/08 $ 25,627 $ 64,945
</TABLE>
____________________
(1) Granted in connection with the executive's appointment as President and
Chief Executive Officer of Nexell; concurrently, options to purchase
190,000 shares granted in 1997 were cancelled. See "Executive
Compensation, Compensation Summary, Option Repricing."
Option Exercises and Value Table
The following table sets forth certain information concerning options
exercised during 1998, and the number of unexercised options as at December 31,
1998 held by the individuals named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Number of Unexercised
Shares Options at December 31, Value of Unexercised
Acquired on Value 1998 Exercisable (E) / In-the-Money Options at
Name Exercise Realized(1) Unexercisable (U) December 31, 1998(1)
- ---- -------- ----------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Richard L. Dunning -- -- 492,677 (U) --
-- -- 507,323 (E) --
David A. Jackson -- -- 422,925 (U) --
-- -- 212,075 (E) --
L. William McIntosh -- -- 622,500 (U) --
-- -- 52,500 (E) --
-- -- 60,000 (U) $65,580
Francis M. O'Connell -- -- 50,000 (U) $16,500
-- -- 75,000 (E) $49,500
Alfonso J. Tobia, Ph.D. -- -- 150,000 (E) $60,563
</TABLE>
_______________
(1) Based upon the $1.094 closing sale price of the Common Stock on The Nasdaq
Stock Market on December 31, 1998.
20
<PAGE>
Option Repricing
In connection with his employment as Senior Vice President, Business
Development and Finance, and Chief Financial Officer in 1997, Mr. McIntosh was
granted non-incentive options to purchase 238,000 shares of Common Stock at
$1.906 per share, the per share market value on May 1, 1997, the date he
accepted the Company's offer of employment, and incentive options to purchase
162,000 shares at $2.469 per share, the per share market value on May 19, 1997,
the date he commenced employment. In January 1998 Mr. McIntosh was granted
additional non-incentive options to purchase 90,000 shares at $1.625 per share,
the per share market value on the date of grant. As a result of such grants, Mr.
McIntosh held options to purchase an aggregate of 490,000 shares of Common Stock
at a weighted average exercise price of $ 2.04 per share.
In May 1998, upon Mr. McIntosh's appointment as President and Chief
Executive Officer of Nexell (see "Employment Arrangements," below), his option
package was restructured. Mr. McIntosh was awarded non-incentive options to
purchase (i) 125,000 shares of Nexell's common stock at $5.00 per share (which
will automatically convert into non-incentive options to purchase 375,000 shares
of the Company's Common Stock at $1.67 per share upon consummation of the
Company's acquisition of Baxter's minority interest in Nexell), and (ii) 60,000
shares of the Company's Common Stock at $.001 per share. Concurrently, Mr.
McIntosh was required to cancel outstanding options to purchase an aggregate of
190,000 shares of the Company's Common Stock. As a result of the restructuring
and after giving effect to the automatic conversion of his options to purchase
Nexell's common stock (assuming consummation of the Company's acquisition of
Baxter's minority interest in Nexell), Mr. McIntosh would hold options to
purchase an aggregate of 735,000 shares of the Company's Common Stock at an
average exercise price of $1.59 per share. At the time of the restructuring, the
price of the Company's Common Stock was $1.34 per share.
The following table sets forth certain information concerning the repricing
of Mr. McIntosh's options:
<TABLE>
<CAPTION> Number of
Shares Market Exercise Length of Original
Underlying Price at Price at New Option
Date Options Time of Time of Exercise Term Remaining
Name Repriced Repriced Repricing Repricing Price at Date of Repricing
---- -------- -------- --------- --------- ----- --------------------
<S> <C> <C> <C> <C> <C> <C>
L. William McIntosh 5/28/98 60,000 $1.344 $2.469 $0.001 9 years
5/28/98 102,000 $1.344 $2.469 $1.667 9 years
5/28/98 28,000 $1.344 $1.906 $1.667 9 years
</TABLE>
Employment Arrangements
- -----------------------
Mr. Dunning serves as President and Chief Executive Officer of the Company
under a restated employment agreement which provides for a base annual salary of
$200,000 and an annual cash bonus based on performance criteria. Mr. Dunning is
entitled to four weeks' vacation and to participate in the Company's employee
benefit programs. Mr. Dunning's employment may be terminated for cause, or
without cause upon 60 days' notice. In the event Mr. Dunning's employment is
terminated by the Company without cause, or he terminates his employment
following certain actions by the Company (such as a material reduction in Mr.
Dunning's duties or a relocation of the Company's principal executive offices),
Mr. Dunning would be entitled to a severance payment equal to six months of his
base salary, payable in monthly installments. The agreement contains non-
competition and confidentiality provisions, and provides that the Company may
obtain "key man" life insurance on the life of Mr. Dunning for the Company's
benefit.
On March 1, 1998 Mr. L. William McIntosh, then Senior Vice President,
Business Development and Finance and Chief Financial Officer of the Company, was
named the President and CEO of the Company's majority-owned subsidiary, Nexell.
In light of his new position, Mr. McIntosh, the Company and Nexell renegotiated
Mr. McIntosh's employment arrangement effective as of March 1,
21
<PAGE>
1998. The renegotiated agreement provides for a base annual salary of $225,000,
an annual cash bonus based on performance criteria, targeted to be at least 25%
of Mr. McIntosh's base compensation, a $25,000 signing bonus and reimbursement
of relocation expenses. Mr. McIntosh is entitled to four weeks' vacation and to
participate in Nexell's employee benefit programs. Mr. McIntosh's renegotiated
employment contract may be terminated by Nexell for cause, or without cause upon
60 days' notice. In the event Mr. McIntosh's employment is terminated by Nexell
without cause, or in the event Mr. McIntosh terminates his employment following
certain actions by Nexell (such as a material reduction in his duties), Mr.
McIntosh would be entitled to a severance payment equal to twelve months of his
base salary, payable in monthly installments. The agreement contains non-
competition and confidentiality provisions, and provides that Nexell may obtain
"key man" life insurance on the life of Mr. McIntosh for Nexell's benefit. See
"Summary Compensation Option Repricing," above.
Dr. Jackson serves as Vice President - Research and Development and Chief
Scientific Officer of the Company under an employment agreement which provides
for a base annual salary of $175,000 and an annual cash bonus based on
performance criteria. Dr. Jackson is entitled to four weeks' vacation and to
participate in the Company's employee benefit programs. Dr. Jackson's
employment may be terminated for cause, or without cause upon 60 days' notice.
In the event Dr. Jackson's employment is terminated by the Company without
cause, or in the event Dr. Jackson terminates his employment following certain
actions by the Company (such as a material reduction in his duties or a
relocation of the Company's principal executive offices), Dr. Jackson would be
entitled to a severance payment equal to twelve months of his base salary,
payable in monthly installments. The agreement contains non-competition and
confidentiality provisions, and provides that the Company may obtain "key man"
life insurance on the life of Dr. Jackson for the Company's benefit.
Dr. Tobia serves as Senior Vice President of the Company under an
employment agreement which provides for a base annual salary of $150,000 and
eligibility for a discretionary bonus up to $25,000. Dr. Tobia is eligible to
participate in the Company's benefit programs, which currently include a medical
program, dental insurance and group life insurance.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 17, 1999, information with
respect to the beneficial ownership of the Common Stock by (i) each person known
by the Company to own beneficially five percent or more of the outstanding
Common Stock, together with their respective addresses, (ii) each director and
nominee for election as a director, (iii) each executive officer named in the
Summary Compensation Table in "Item 11. Executive Compensation," and (iv) all
executive officers and directors as a group:
<TABLE>
<CAPTION>
Shares Percent
Name Beneficially Owned of Outstanding
- ---- ------------------ ---------------
<S> <C> <C>
Richard L. Dunning 834,404 (1)(2) 1.2%
Francis M. O'Connell 120,753 (1)(3) *
Alfonso J. Tobia, Ph.D. 154,828 (1)(4) *
David A. Jackson, Ph.D. 251,460 (1)(4) *
L. William McIntosh 247,590 (1)(5) *
Donald G. Drapkin 887,500 (6)(7) 1.3%
Laurence D. Fink 550,000 (6)(8) *
Linda G. Robinson 250,000 (6)(9) *
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Shares Percent
Name Beneficially Owned of Outstanding
- ---- ------------------ ---------------
<S> <C> <C>
Eric A. Rose, M.D. 959,900 (6)(10) 1.4%
Lindsay A. Rosenwald, M.D. 5,152,655 (6)(11) 7.3%
Victor W. Schmitt 0 0
Michael Weiner, M.D. 62,410 (6) *
Paramount Capital Asset Management, Inc. 4,204,999 (12) 6.0%
787 Seventh Avenue, New York, NY 10019
Baxter Healthcare Corporation 11,000,000 15.7%
One Baxter Parkway, Deerfield, IL 60015
All directors and executive officers as a group (12 9,471,500 (13) 12.8%
persons)
</TABLE>
____________________
* Less than one percent.
(1) Includes shares held by the Company's 401(k) retirement plan for the
benefit of the officer.
(2) Includes currently exercisable options to purchase 827,650 shares owned
by Mr. Dunning, 2,095 shares owned by a daughter of Mr. Dunning, and
500 shares owned by each of Mr. Dunning's spouse, son and another
daughter, respectively. Mr. Dunning disclaims beneficial ownership of
the shares held by his spouse, son and daughters.
(3) Includes currently exercisable options to purchase 106,250 shares.
(4) Consists of currently exercisable options.
(5) Consists of currently exercisable options, assuming consummation of the
acquisition of Baxter's minority interest in Nexell. See "Executive
Compensation, Compensation Summary, Option Repricing".
(6) Includes 100,000 vested restricted shares held by Mr. Drapkin and
50,000 vested restricted shares held by each of Mr. Fink, Ms. Robinson,
Dr. Rose, Dr. Rosenwald and Dr. Weiner.
(7) Includes currently exercisable options to purchase 687,500 shares.
(8) Includes warrants to purchase 133,333 shares owned directly by Mr. Fink
and 66,666 shares and warrants to purchase 33,333 shares owned by a
family trust for the benefit of Mr. Fink's children. Mr. Fink disclaims
beneficial ownership of the shares and warrants held by the family
trust.
(9) Includes warrants to purchase 66,666 shares.
(10) Includes currently exercisable options to purchase 587,500 shares.
(11) Includes 4,204,999 shares beneficially owned by Paramount Capital Asset
Management, Inc. ("PCAM", see note (12) below), of which Dr. Rosenwald
is Chairman and the sole shareholder. Dr. Rosenwald disclaims
beneficial ownership of such shares except to the extent of his
pecuniary interest, if any.
(12) Information is from a Form 4 dated November 6, 1998 filed by Dr.
Rosenwald reporting the open market purchase of 155,000 shares of
Common Stock by The Aries Master Fund, a Cayman Islands exempted
company, (the "Fund") and the general partner of Aries Domestic Fund,
L.P. (the "Partnership"), and confirming (i) the ownership of 2,614,700
shares and warrants to purchase 225,000 shares by the Fund and of
1,206,966 shares and warrants to purchase 158,333 shares by the
Partnership, and (ii) the status of PCAM as the general partner of the
Partnership and the investment manager of the Fund, with shared power
to vote and dispose of the securities owned by the partnership and the
Fund. PCAM and Dr.
23
<PAGE>
Rosenwald disclaim beneficial ownership of the
securities owned by the Fund and the Partnership, except to the extent
of their respective pecuniary interest, if any.
(13) See notes (1) - (12).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In March 1997 the Company entered into a research agreement relating to the
discovery, mapping, sequencing and validation of disease-related genes with
Columbia University. The agreement provided for VIMRX Genomics, Inc. ("VGI")
d/b/a Ventiv BioGroup, a majority-owned subsidiary of the Company, to provide
$30 million in funding to the Columbia Genome Center over a 5-year period and
for VGI to receive an exclusive license to develop, manufacture, use, sell or
market products resulting from any invention, research information and
biological materials developed by the Center and funded under the agreement.
VGI sought technology collaborations with pharmaceutical and/or diagnostic
companies and solicited equity investments in VGI from potential technology
partners and other investors, but was unable to consummate any such transactions
on reasonable terms. As a result, VGI attempted to restructure its relationship
with Columbia but was unable to agree on the terms of a restructuring. On
November 11, 1998 the Company and Columbia entered into a Termination Agreement
pursuant to which all further obligations of the Company and VGI to Columbia
under the March 1997 research agreement and under the Blood Factor IXai Research
Agreement dated March 28, 1997 between Columbia and the Company were terminated,
and all claims related thereto released, in consideration of the payment of
$900,000 by the Company to Columbia. The Termination Agreement also provided for
termination of the licenses granted to VGI and the Company pursuant to the
research agreement and the Factor IX agreement and the return to Columbia of all
intellectual property delivered to, or developed by, the Company or VGI pursuant
to those licenses. Eric A. Rose, M.D., a director of the Company, is a Surgeon-
In-Chief at Columbia Presbyterian Medical Center in New York, an affiliate of
Columbia, and has served as Chairman of the Department of Surgery at the College
of Physicians and Surgeons of Columbia since 1994 and as a Director of the
Division of Cardiothoracic Surgery of the Department since 1990. Michael
Weiner, M.D., a director of the Company, is the Hettinger Professor of Clinical
Pediatrics at Columbia's College of Physicians and Surgeons, Director of
Pediatric Oncology, and is an attending physician at Columbia Presbyterian
Medical Center.
On December 24, 1998, the Company purchased an aggregate of 2,500,000
shares of Innovir Laboratories, Inc. Common Stock from the Aries Funds for one
cent per share, or a total purchase price of $25,000. Lindsay A. Rosenwald,
M.D., a director of the Company, serves as President and is the sole shareholder
of the investment manager of the Aries Trust, and serves as President and is the
sole shareholder of the general partner of the Aries Limited Partnership.
In March 1999 the Company terminated its 1996 Non-Employee Director Stock
Award Plan under which, in June 1996, it had issued restricted shares of Common
Stock to all non-employee directors, other than Mr. Victor W. Schmitt. The
restricted shares vested cumulatively at the rate of 25% per year and were
subject to a non-lapsing right of first refusal to the Company to repurchase the
shares at market value, minus $4.25, in the event the director desired to
transfer the shares. In April 1999 the Company will change the terms of the
restricted shares by vesting the 50,000 unvested restricted shares held by Mr.
Drapkin and the 25,000 unvested restricted shares held by each of Messrs. Fink,
Rose, Rosenwald and Weiner and Ms. Robinson and eliminating the Company's right
of first refusal.
24
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) Lists.
1. See Index to Financial Statements on page F-1.
2. See Item 8 regarding financial statement schedules.
3. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2.4 Copy of Asset Purchase Agreement dated October 10, 1997 by and
among Baxter Healthcare Corporation ("Baxter"), the Company and
Nexell (1)
2.5 Copy of Acquisition Agreement dated February 18, 1999, by and among
Baxter, the Company and Nexell.
3.1(a) Copy of the Company's Amended and Restated Certificate of
Incorporation dated July 10, 1990. (2)
3.1(b) Copy of the Certificate of Amendment of Amended and Restated
Certificate of Incorporation of the Company dated June 12, 1993.
(2)
3.1(c) Copy of the Certificate of Amendment of Amended and Restated
Certificate of Incorporation of the Company dated June 20, 1996.
(2)
3.1(d) Copy of the Certificate of Change of Registered Agent and
Registered office of the Company dated March 10, 1997. (2)
3.1(e) Copy of the Certificate of Amendment of the Certificate of
Incorporation of the Company dated December 16, 1997. (3)
3.2 Copy of the Company's By-Laws, dated March 27, 1995. (2)
4.4 Copy of Warrant Agreement dated June 17, 1996 between the Company
and American Stock Transfer & Trust Company. (4)
4.5 Copy of the Certificate of Amendment of the Certificate of
Incorporation of the Company dated December 16, 1997 creating the
Class A Preferred Stock (described in Exhibit 3.1(e) above).
10.3 Copy of the Company's Amended and Restated 1990 Incentive and Non-
Incentive Stock Option Plan, as amended through February 27, 1997.
(4)
10.9 Copy of Employment letter agreement dated June 21, 1994 between the
Company and Alfonso J. Tobia.* (5)
10.11 Copy of the Company's 1995 Outside Directors Stock Option Plan.*
(6)
10.12 Copy of letter agreement dated August 7, 1995 between the Company
and Lindsay A. Rosenwald, M.D. (6)
10.13 Copy of Stock Option Agreement dated August 7, 1995 between
Registrant and Lindsay A. Rosenwald, M.D. (6)
10.14 Copy of Consulting and Stock Option Agreement dated November 17,
1995 between the Company and Eric A. Rose, M.D. (6)
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.15 Copy of Stock Option Agreement dated November 17, 1995 between the
Company and Donald G. Drapkin. (6)
10.16 Copy of the Company's 1996 Non-Employee Director Restricted Stock
Award Plan.* (6)
10.18 Copy of Research Agreement dated as of March 7, 1997 among the
Company, The Trustees of Columbia University in the City of New
York and VIMRX Genomics, Inc. (7)
10.19 Copy of the Company's 1997 Incentive and Non-Incentive Stock Option
Plan, together with forms of stock option agreements.*(4)
10.19(a) Resolutions of the Board of Directors and Stockholders authorizing
an increase in the number of shares issuable under the Company's
1997 Incentive and Non-Incentive Stock Option Plan.
10.20 Copy of Employment Agreement dated October 30, 1996 between the
Registrant and Richard L. Dunning. (4)*
10.21 Copy of Employment Agreement dated August 26, 1996 between the
Registrant and David A. Jackson, Ph.D. (4) *
10.22 Copy of Factor IX Research Agreement dated March 28, 1997 between
Registrant and the Trustees of Columbia University in the City of
New York. (8)
10.24 Copy of Employment Agreement dated May 19, 1997 between the Company
and L. William McIntosh (9) *
10.24(a) Copy of Letter Agreement dated May 28, 1998 between Nexell and L.
William McIntosh. *
10.24(b) Copy of Letter Agreement dated May 28, 1998 between the Company and
L. William McIntosh.*
10.25 Hardware and Disposables Manufacturing Agreement between Nexell
Baxter, dated as of December 17, 1997. (10)
10.26 Antibody Manufacturing and Storage Agreement between Nexell and
Baxter, dated as of December 17, 1997. (11)
10.27 Hardware and Disposables Supply Agreement between Nexell and
Baxter, dated as of December 17, 1997. (12)
10.28 Marketing, Sale and Distribution Agreement between Nexell and
Baxter, dated as of December 17, 1997. (13)
10.29 Non-Competition and Confidentiality Agreement between the Company
and Baxter, dated as of December 17, 1997. (14)
10.30 Sublicense (Chiron) between Nexell and Baxter, dated as of December
17, 1997. (15)
10.31 Sublicense (Dorken) between Nexell and Baxter, dated as of December
17, 1997. (16)
10.32 Sublicense (First Becton-Dickinson) between Nexell and Baxter,
dated as of December 17, 1997. (17)
10.33 Sublicense (Second Becton-Dickinson) between Nexell and Baxter,
dated as of December 17, 1997. (18)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.34 Warrant, dated December 31, 1997, issued by Innovir to VIMRX. (2)
10.35 Agreement, dated December 31, 1997, between VIMRX and Innovir
relating to future equity purchases. (2)
10.36 Employment Agreement, effective as of October 1, 1997, by and between
Innovir, Thomas R. Sharpe and the Company. (19)
10.37 Termination Agreement dated November 11, 1998 between the Company,
VGI and Columbia. (20)
10.38 Asset Purchase Agreement, dated October 28, 1998, between CellPro, Incorporated
and Nexell.
16 Letter of Richard A. Eisner & Co., LLP (21)
21 List of Subsidiaries. (2)
23(a) Consent of KPMG, LLP
23(b) Consent of Richard A. Eisner & Co., LLP
</TABLE>
__________
* Denotes management contract or compensatory plan or arrangement required to
be filed as an exhibit to this Annual Report on Form 10-K.
(1) Filed as the same numbered Exhibit to the Company's Current Report on Form
8-K (Commission File No. 0-19153) filed January 2, 1998 and incorporated
herein by reference thereto.
(2) Filed as the same numbered Exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1997 (Commission File No. 0-19153) and
incorporated herein by reference thereto.
(3) Filed as Exhibit 3.1 to the Company's Current Report on Form 8-K
(Commission File No. 0-19153) filed January 2, 1998 and incorporated herein
by reference thereto.
(4) Filed as the same numbered Exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1996 (Commission File No. 0-19153) and
incorporated herein by reference thereto.
(5) Filed as the same numbered Exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1994 (Commission File No. 0-19153) and
incorporated herein by reference.
(6) Filed as the same numbered Exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 (Commission File No. 0-19153) and
incorporated herein by reference.
(7) Filed as the same numbered Exhibit to the Company's Current Report on Form
8-K (Commission File No. 0-19153) filed March 21, 1997 and incorporated
herein by reference thereto.
(8) Filed as the same numbered Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 (Commission File No. 0-
19153) and incorporated herein by reference.
(9) Filed as the same numbered Exhibit to the Company's Quarterly Report on
Form 10-Q (Commission File No. 0-19153) filed November 14, 1997 and
incorporated herein by reference thereto.
27
<PAGE>
(10) Filed as Exhibit number 10.1 to the Company's Current Report on Form 8-K
(Commission File No. 0-19153) filed January 2, 1998 and incorporated herein
by reference thereto.
(11) Filed as Exhibit number 10.2 to the Company's Current Report on Form 8-K
(Commission File No. 0-19153) filed January 2, 1998 and incorporated herein
by reference thereto.
(12) Filed as Exhibit number 10.3 to the Company's Current Report on Form 8-K
(Commission File No. 0-19153) filed January 2, 1998 and incorporated herein
by reference thereto.
(13) Filed as Exhibit number 10.4 to the Company's Current Report on Form 8-K
(Commission File No. 0-19153) filed January 2, 1998 and incorporated herein
by reference thereto.
(14) Filed as Exhibit number 10.5 to the Company's Current Report on Form 8-K
(Commission File No. 0-19153) filed January 2, 1998 and incorporated herein
by reference thereto.
(15) Filed as Exhibit number 10.6 to the Company's Current Report on Form 8-K
(Commission File No. 0-19153) filed January 2, 1998 and incorporated herein
by reference thereto.
(16) Filed as Exhibit number 10.7 to the Company's Current Report on Form 8-K
(Commission File No. 0-19153) filed January 2, 1998 and incorporated herein
by reference thereto.
(17) Filed as Exhibit number 10.8 to the Company's Current Report on Form 8-K
(Commission File No. 0-19153) filed January 2, 1998 and incorporated herein
by reference thereto.
(18) Filed as Exhibit number 10.9 to the Company's Current Report on Form 8-K
(Commission File No. 0-19153) filed January 2, 1998 and incorporated herein
by reference thereto.
(19) Filed as the same number Exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998 (Commission File No. 0-19153)
filed August 14, 1998 and incorporated herein by reference thereto.
(20) Filed as the same number Exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998 (Commission File No. 0-
19153) filed November 13, 1998 and incorporated herein by reference
thereto.
(21) Filed as the same number Exhibit to the Company's Current Report on Form 8-
K (Commission File No. 0-19153) filed May 21, 1997 and incorporated herein
by reference thereto.
(b) Reports on Form 8-K.
On January 3, 1998, the Company filed a current report on Form 8-K
announcing the acquisition of the assets of the Immunology Division of the
Biotech Business Group of Baxter Healthcare Corporation.
28
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Index to Financials
Consolidated Financial Statements
Independent Auditor's Report F-2
Independent Auditor's Report F-3
Consolidated Balance Sheets at December 31, 1998 and 1997 F-4
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1998, 1997 and 1996 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996. F-7
Notes to Consolidated Financial Statements F-8 to F-26
F-1
<PAGE>
Independent Auditors Report
The Board of Directors and Shareholders
VIMRX Pharmaceuticals Inc:
We have audited the accompanying consolidated balance sheets of VIMRX
Pharmaceuticals Inc. and subsidiaries ("VIMRX"), as of December 31, 1998 and
1997, and the related statements of operations changes in shareholders' equity
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit. The accompanying financial statements of VIMRX as of and for the year
ended December 31, 1996 were audited by other auditors whose report thereon
dated March 14, 1997, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1998 and 1997 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of VIMRX
as of December 31, 1998 and 1997, and the results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles.
KPMG LLP
Philadelphia, Pennsylvania
March 26, 1999
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
VIMRx Pharmaceuticals Inc.
Wilmington, Delaware
We have audited the accompanying consolidated statements of operations, changes
in shareholders' equity and cash flows for the year ended December 31, 1996 of
VIMRx Pharmaceuticals Inc. and subsidiaries. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements of VIMRx Pharmaceuticals Inc. and
subsidiaries enumerated above present fairly. In all material respects, the
consolidated results of operations and consolidated cash flows for the year
ended December 31, 1996 in conformity with generally accepted accounting
principles.
Richard A. Eisner & Company, LLP
New York, New York
March 14, 1997
F-3
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
December 31,
-----------------------------------------
Assets 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 33,091,000 $ 57,830,000
Receivables from related party 2,450,000 4,235,000
Inventory 2,389,000 2,227,000
Other current assets 842,000 922,000
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 38,772,000 65,214,000
- ---------------------------------------------------------------------------------------------------------------------------
Fixed assets, net 10,942,000 15,464,000
Intangible assets, net 37,635,000 40,773,000
Other assets 252,000 496,000
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $ 87,601,000 $121,947,000
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 3,943,000 $ 853,000
Accrued expenses 2,544,000 2,527,000
Long-term debt current portion 96,000 130,000
Capital leases current portion 172,000 350,000
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 6,755,000 3,860,000
Long-term debt 32,031,000 30,171,000
Capital leases -- 208,000
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 38,786,000 34,239,000
- ---------------------------------------------------------------------------------------------------------------------------
Minority interest in subsidiaries -- 4,161,000
Commitments and contingencies and other matters (note 12)
Shareholders' equity:
Class A convertible preferred stock; $.001, par value
150,000 shares authorized; 70,282 and 66,304 issued and
Outstanding at December 31, 1998 and December 31, 1997 100 100
(liquidation value $70,458,000 and $66,304,000)
Common stock; $.001 par value, 120,000,000 shares authorized,
67,830,000 and 66,898,000 shares issued and outstanding at
December 31, 1998 and December 31, 1997, respectively 68,000 67,000
Additional paid-in capital 182,537,900 182,538,900
Unearned compensation (278,000) (449,000)
Accumulated other comprehensive income (loss) 20,000 (40,000)
Accumulated deficit (133,533,000) (98,570,000)
- ---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 48,815,000 83,547,000
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 87,601,000 $121,947,000
- ---------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-4
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 13,443,000 $ 5,002,000 $ --
Cost of goods sold 8,166,000 4,630,000 --
- ---------------------------------------------------------------------------------------------------------------------------------
Gross profit 5,277,000 372,000 --
Operating expenses:
Research and development 24,427,000 14,507,000 2,950,000
Purchased research and development (net of gain on sale
of subsidiary of $2,889,000 in 1996) 39,862,000 14,484,000
General and administrative 10,221,000 7,215,000 4,300,000
Goodwill and intangible amortization 3,602,000 412,000 --
Selling and marketing 3,625,000 61,000 --
Restructuring Costs 2,625,000 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 44,500,000 62,057,000 21,734,000
- ---------------------------------------------------------------------------------------------------------------------------------
Operating loss (39,223,000) (61,685,000) (21,734,000)
Other (income) expenses:
Royalty (176,000) 150,000 100,000
Minority interest in net loss of consolidated subsidiaries (4,161,000) (3,474,000) (116,000)
Interest income (2,972,000) (2,216,000) (1,792,000)
Interest expense 2,036,000 121,000 329,000
Contract settlement 900,000 -- --
Other, net 113,000 (67,000) (395,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Total other (income) expenses (4,260,000) (5,486,000) (1,874,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Net loss (34,963,000) (56,199,000) (19,860,000)
Preferred stock dividends (3,988,000) (166,000) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net (loss) applicable to common stock $(38,951,000) $(56,365,000) $(19,860,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Basic loss per share $(0.58) $(1.02) $(0.50)
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares of common stock outstanding 67,284,000 55,457,000 39,399,000
- ---------------------------------------------------------------------------------------------------------------------------------
Diluted loss per share $(0.58) $(1.02) $(0.50)
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares of common stock and
dilutive equivalent shares outstanding 67,284,000 55,457,000 39,399,000
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
-----------------------------------------------
Shares Amount Shares Amount paid-in capital
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1996 -- -- 19,894,576 $20,000 $ 23,243,000
Exercise of warrants ($1.50 per share
net of $712,000 expense) -- -- 13,907,015 14,000 20,135,000
Exercise of warrants ($2.25 per share
net of $1,275,000 expense) -- -- 14,210,315 14,000 30,684,000
Issuance of common stock in private placement
($1.50 per unit net of $142,000 expense) -- -- 2,799,991 3,000 4,055,000
Issuance of warrants in connection with
Acquisition of Ribonetics -- -- -- -- 1,562,000
Exercise of options ($.50 - $1.16 per share) -- -- 217,990 -- 195,000
Issuance of restricted stock to nonemployee
Directors -- -- 400,000 -- 400,000
Issuance of shares in connection with acquisition
of Innovir ($3 per share) -- -- 3,000,000 3,000 8,997,000
Compensatory stock options -- -- -- 207,000
Total comprehensive loss -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1996 -- -- 54,429,887 54,000 89,478,000
Exercise of directors' options
($.75 - $.94 per share) -- -- 520,000 1,000 417,000
Issuance of common stock to
Columbia University -- -- 200,000 -- 700,000
Exercise of warrants ($1.50 per share) -- -- 200,000 -- 299,000
Exercise of directors' options -- -- 12,500 -- 17,000
Issuance of shares in connection with
Acquisition of Ribonetics -- -- 121,339 -- --
Exercise of consultant options -- -- 15,000 -- 8,000
Issuance of shares in connection with
Acquisition of Immunotherapy 66,304 100 11,400,000 12,000 91,619,900
Amortization of options -- -- -- -- --
Total comprehensive loss -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1997 66,304 100 66,898,726 67,000 182,538,900
Issuance of shares in connection with
Acquisition of Immunotherapy -- -- 4,120 -- --
Exercise of special options -- -- 927,343 1,000 (1,000)
Amortization of options -- -- -- -- --
Preferred dividends 3,978 -- -- -- --
Total comprehensive loss -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1998 70,282 100 67,830,189 68,000 $182,537,900
- -------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Consolidated Statement of Changes Shareholders' Equity, Continued
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Accumulated
Unearned Other
Compensation Comprehensive Income Retained Deficit
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance - January 1, 1996 $(493,000) -- $(22,511,000)
Exercise of warrants ($1.50 per share
net of $712,000 expense) -- -- --
Exercise of warrants ($2.25 per share
net of $1,275,000 expense) -- -- --
Issuance of common stock in private placement
($1.50 per unit net of $142,000 expense) -- --
Issuance of warrants in connection with
acquisition of Ribonetics -- -- --
Exercise of options ($.50 - $1.16 per share) -- -- --
Issuance of restricted stock to non-employee directors (347,000) -- --
Issuance of shares in connection with acquisition
of Innovir ($3 per share) -- -- --
Compensatory stock options 40,000
Total comprehensive loss -- (151,000) (19,860,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1996 (800,000) (151,000) (42,371,000)
Exercise of directors' options
($.75 - $.94 per share) -- -- --
Issuance of common stock to
Columbia University -- -- --
Exercise of warrants ($1.50 per share) -- -- --
Exercise of directors' options -- -- --
Issuance of shares in connection with
acquisition of Ribonetics -- -- --
Exercise of consultant options -- -- --
Issuance of shares in connection with
acquisition of Immunotherapy -- -- --
Amortization of options 351,000
Total comprehensive loss -- 111,000 (56,199,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1997 (449,000) (40,000) (98,570,000)
Issuance of shares in connection with
acquisition of Immunotherapy -- -- --
Exercise of special options -- -- --
Amortization of options 171,000 -- --
Preferred dividends -- -- --
Total comprehensive loss -- 60,000 (34,963,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1998 $(278,000) $ 20,000 $(133,533,000)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-6
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $(34,963,000) $(56,199,000) $(19,860,000)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Depreciation and amortization 6,611,000 1,232,000 155,000
Amortization of debt discount -- 198,000
Research and development expenses to be settled
through issuance of stock -- -- (464,000)
(Gain) on sale of subsidiaries -- -- (2,889,000)
Noncash compensation 170,000 430,000 481,000
Purchased in process research and development -- 39,862,000 17,374,000
Loss from disposal of equipment -- -- 12,000
Closure of facilities and related costs 2,265,000 -- --
Deferred financing cost -- -- 310,000
Minority interest in net loss (4,161,000) (3,474,000) (116,000)
Changes in operating assets and liabilities:
(Increase) decrease in other current assets and other 2,114,000 (100,000) (103,000)
assets
Increase (decrease) in accounts payable and
accrued expenses 2,745,000 1,190,000 (265,000)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash (used in) operating activities (25,219,000) (17,059,000) (5,167,000)
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net (purchases) sales of short-term investment -- 38,300,000 (38,279,000)
Payment for acquisition, net of cash acquired -- -- (2,011,000)
Purchase of marketable securities -- 214,000 (450,000)
Purchases of equipment (1,128,000) (683,000) (802,000)
Proceeds from sale of equipment -- -- 12,000
Cash acquired in acquisition -- 28,138,000 --
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (1,128,000) 65,969,000 (41,530,000)
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from sales of preferred and common stock, net -- -- 4,058,000
Proceeds from issuance of common stock in connection with
the exercise of warrants/options -- 742,000 51,042,000
Accrued interest on long-term debt 1,956,000 -- --
Repayment of capital leases (386,000) (503,000) --
Repayment of bridge loans -- -- (2,000,000)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,570,000 239,000 53,100,000
- ---------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 38,000 70,000 (11,000)
Net increase in cash and cash equivalents (24,739,000) 49,219,000 6,392,000
Cash and cash equivalents at beginning of period 57,830,000 8,611,000 2,219,000
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 33,091,000 $ 57,830,000 $ 8,611,000
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures:
Cash paid for interest $ 79,000 $ 121,000 $ 124,000
- ---------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-7
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(1) The Business
Operations
VIMRX Pharmaceuticals Inc. and subsidiaries ("The Company") is a
biopharmaceutical company focused on identifying, evaluating, acquiring,
and commercializing scientific technologies to be developed by the Company
in partnership with others. The Company has an 80.5% interest in Nexell
Therapeutics, Inc. ("Nexell"), the former Immunotherapy Division of the
Biotech Business Group of Baxter Healthcare Corporation ("Baxter"). Nexell
is developing and selling products to support cell therapy for cancer and
other serious diseases. The Company also owns approximately 85% of the
capital stock of Innovir Laboratories, Inc., ("Innovir"). Innovir was
engaged in the research and development of oligozymes, a new class of
biopharmaceutical agents for use in identifying, characterizing, and
validating pharmaceutical drug discovery targets (target validation). The
company is also engaged in developing therapeutic products from synthetic
hypericin, principally for the treatment of brain cancer and certain
hyperproliferative skin diseases and to enhance wound healing. Prior to
1997 the Company was considered to be a development stage enterprise.
Risks
The Company is subject to those risks associated with any biopharmaceutical
company which has substantial expenditures for research and development.
There can be no assurance that the Company's research and development
projects will be successful, that products developed will obtain necessary
regulatory approval, or that any approved product will be commercially
viable. In addition, the Company operates in an environment of rapid
technological change, and is largely dependent on the services of its
employees and consultants.
(2) Summary of Significant Accounting Policies
Basis of Presentation
The financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company has sustained operating
losses and negative cash flows from operations since inception, however,
management believes that existing liquid assets will enable the Company to
continue to operate for the foreseeable future. Prior to 1997 the Company
was a development stage enterprise. As a result of the acquisition of
Nexell, described in note 3, the Company has products which have
appropriate regulatory approval, are manufactured and sold, and therefore
the Company is no longer considered a development stage enterprise.
Consolidation
The accompanying consolidated financial statements include the accounts of
VIMRX, Innovir, Nexell and all subsidiaries which are wholly owned. All
significant intercompany balances and transactions have been eliminated.
F-8
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(2) Continued
Foreign Currency Translation
Financial statements of foreign subsidiaries are translated into U.S.
dollars using the year-end exchange rate for net assets and average
exchange rates for revenue and expense accounts. Adjustments resulting
from these translations are reflected directly in shareholders' equity.
Cash and Cash Equivalents
Cash and cash equivalents of $33.1 million and $57.8 million at December
31, 1998 and 1997, respectively, consist of money market deposits, bank
deposits, commercial paper with maturity of less than three months, and a
mutual fund which invests in short duration bonds. For purposes of the
statements of cash flows, the Company considers all highly liquid debt
instruments which have maturities of three months or less when acquired to
be cash equivalents. The Company holds no collateral for these financial
instruments. Cash and cash equivalents subject the Company to
concentrations of credit risk.
Investments
At December 31, 1996 the Company had certain investments which were
classified as "available-for-sale". These investments were reported at fair
market value in the balance sheet, and related unrealized holding gains and
losses were reported as separate component of shareholders' equity until
realized.
Inventories
Inventories, which consist only of finished goods, are stated at the lower
of cost or market.
Fixed Assets
Fixed assets consist of office and laboratory equipment and leasehold
improvements stated at cost, unless such assets are under a capital lease
in which case they are stated at the present value of the minimum lease
payments. Equipment held for sale is valued at its net tangible value.
Equipment is depreciated on a straight-line basis over its estimated useful
lives which range from 3 to 15 years. Leasehold improvements are amortized
on a straight-line basis over the shorter of the lease term or estimated
useful life of the asset. The cost and related accumulated depreciation or
amortization of assets retired or sold are removed from the respective
accounts and any gain or loss is recognized in operations.
Expenditures for maintenance and repairs which do not materially extend the
useful lives of the assets are charged to operations as incurred.
Intangible Assets
Goodwill and other intangibles arising from the 1997 acquisition of the
assets of Nexell represents the excess of purchase price paid by the
Company over 80.5% of the fair value of net assets tangible assets acquired
(see note 3). Such amounts are being amortized over 12.5 to 15 years,
with the exception of purchased research and development, which was
immediately charged to the statement of operations. 1997 amortization
expense related to the Nexell goodwill was not material.
F-9
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(2) Continued
Goodwill arising from the 1996 acquisition of Innovir, represents the
excess of the purchase price paid by the Company over 68% of the fair value
of the net tangible assets acquired. Such amount has been amortized on a
straight-line basis over the period of expected benefit of three years,
with the exception of purchased research and development which was charged
to the statement of operations in 1996. Amortization of the Innovir
goodwill for the year ended December 31, 1998 was $307,000 and $412,000 for
the year ended December 31, 1997.
In 1998, when management determined that Innovir's operations would be shut
down and the employment of the workforce would be discontinued (see
Footnote 4), the remaining value of the Goodwill, $517,000, was charged to
expense.
Other Assets
Other assets consist principally of security deposits and will be recovered
upon termination of the related leases.
Revenue Recognition
Revenue and related cost of goods sold are recognized upon shipment of
products.
Research and Development
Research and development costs are charged to expense as incurred. In the
event of a business combination, purchased research and development is
valued and included in the allocation of the purchase price. If
technological feasibility of the acquired technology can not be established
at the date of acquisition and the technology has no future alternative
uses, the amount is immediately charged to expense.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Deferred tax assets may be
reduced, if necessary, by a valuation allowance for any tax benefits which
are not expected to be realized. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Stock-based Compensation
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board Opinion
No. 25 ("APB 25"), Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
Accounting for Stock-Based Compensation, which permits entities to
recognize as expense over the vesting period the fair value of all stock-
based awards on the date of grant. Alternatively, SFAS 123 also allows
entities to continue to apply the provisions of APB 25 and provide pro
forma net income and
F-10
<PAGE>
(2) Continued
pro forma earnings per share disclosures for employee stock option grants
made in 1995 and future years as if the fair value based method defined in
SFAS 123 had been applied. The Company has elected to continue to apply
the provisions of APB 25 and provide the pro forma disclosure required by
SFAS 123.
Net Loss Per Share
Basic net loss per share is computed using the weighted average number of
shares of common stock outstanding during the period. Diluted net loss per
share is computed using the weighted average number of shares of common and
diluted potentially dilutive outstanding during the period. Potentially
dilutive common shares consist of stock options and warrants using the
treasury stock method but are excluded if their effect is antidilutive.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties, and other sources are recorded when it is
probable that a liability has been incurred and the amount of the
assessment can be reasonably estimated.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment when events or
changes in circumstances indicate that the carrying amount of a long-lived
asset may not be recoverable. Such asset is deemed impaired and written
down to its fair value if expected future cash flows are less that its
carrying amount.
Fair Value of Financial Instruments
Financial instruments include receivables, accounts and notes payable and
investments. The carrying amount of these instruments approximate fair
value due either to their short-term nature or because the Company believes
the instrument could be exchanged in a current transaction for that
carrying amount.
Comprehensive Loss
On January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting and
presentation of the Company's comprehensive loss and its components in a
full set of financial statements. Comprehensive loss consists of net loss
and net unrealized gains (losses) on securities and is presented in the
consolidated statements of changes in stockholder's equity. The Statement
requires only additional disclosures in the
F-11
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(2) Continued
consolidated financial statements; it does not affect the Company's
financial position or results of operations. Prior year financial
statements have been reclassified to conform to the requirements of SFAS
No. 130.
Comprehensive loss is summarized below:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net loss $(34,963,000) $(56,199,000) $(19,860,000)
Net unrealized gain
(loss) in investment securities -- 143,000 (143,000)
Translation adjustment 60,000 (32,000) (8,000)
------------ ------------ ------------
Total comprehensive loss $(34,903,000) $(56,088,000) $(20,011,000)
============ ============ ============
</TABLE>
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported assets and liabilities as well as the
disclosure of contingencies. Actual results could differ from those
estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform with current
year presentation.
(3) Acquisitions
Acquisition of 80.5% of the Immunology Division of the Biotech Business
Group of Baxter Healthcare Corporation
On December 17, 1997, the Company completed its acquisition of the
intellectual property and intangible assets, other than trademarks, of the
Immunotherapy Division (the "Division") of the Biotech Business Group of
Baxter Healthcare Corporation ("Baxter"), for 11,000,000 shares of the
Company's Common Stock and 66,304 shares of the Company's Class A Preferred
Stock; and the transfer of such intangible assets to a newly organized
subsidiary, Nexell Therapeutics, Inc. ("Nexell"), in exchange for 80.5% of
Nexell's common stock. Concurrently, Nexell acquired the tangible assets,
business, trademarks and certain obligations of the Division in exchange
for the payment to Baxter of 19.5% of Nexell's common stock and a warrant
entitling Baxter to purchase an additional 6% of Nexell's common stock for
$6,000,000. In addition, the Company purchased $10,000,000 principal
amount of the Subsidiary's 6.5% convertible subordinated debentures for
$10,000,000 and Baxter purchased $30,000,000 principal amount of such
debentures for $30,000,000. The Company's debentures eliminate on
consolidation.
VIMRX's acquisition of 80.5% of Nexell has been accounted for as a purchase
and the operating results of the Company include those of Nexell for the
period from December 23, 1997 (date of acquisition) to December 31, 1997.
The purchase price of $93,000,000 was allocated as follows:
F-12
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(3) Continued
<TABLE>
<S> <C>
Tangible assets $13,952,000
Liabilities (1,389,000)
In-process research and development 37,712,000
Goodwill 28,861,000
Other intangible assets 11,086,000
-----------
$93,000,000
===========
</TABLE>
The technological feasibility of the purchased in-process research and
development has not yet been established, therefore, the entire amount has
been expensed in the period ended December 31, 1997.
The in-process technology acquired in the Division acquisition consisted of
several significant research and development projects associated with
Isolex product line. At the time of acquisition, the Division was
continuing research and development to obtain marketing approval in the
United States and several foreign countries. At the time of the
acquisition, the Company assigned a value of $37.7 million to the in-
process technology with the assistance of an independent valuation prepared
at such time.
The value was determined by estimating the costs to develop the Isolex
products into commercially viable products, obtaining FDA approval in the
United States and other regulatory agencies in foreign countries and
discounting the net cash flows back to their present value. The resulting
cash flows are based upon management's estimates of revenues, costs of
sales, research and development costs, selling, general and administrative
costs and income taxes from such products.
The Company has since received an "approvable" letter in the United States
for certain of the Isolex products and expects to market the products by
the end of the fiscal 1999. The Company continues to perform research and
development in the United States to expand the indications for such
products and to obtain regulatory approval in foreign countries.
In addition, the Company entered into a series of agreements pursuant to
which Baxter will (i) perform manufacturing services; (ii) supply certain
products and components; (iii) have the exclusive rights to distribute
certain of the products and instruments which it sold to Nexell; (iv)
provide engineering and product development services and certain
transitional services for Nexell; (v) sublicense certain technology to
Nexell; and (vi) comply with a non-competition and confidentiality
agreement. In connection with the product development agreement, the
Company may pay up to $21,000,000 to Baxter as and when certain product
development and regulatory milestones are achieved. Baxter provides
manufacturing services to the Company on an ongoing basis with respect to
Nexell's products at cost, and marketing services are provided at a
certain margin.
Transactions to Acquire Majority Interest in Innovir Laboratories, Inc.
The Company, Innovir and certain stockholders of Innovir (the "Aries
Funds") entered into a transaction (the "Transaction") whereby the Company
acquired 68% of Innovir and Innovir acquired 100% of the outstanding
capital stock of VIMRX Holdings Limited ("VHL"). In consideration of the
acquisition of VHL, Innovir, on December 23, 1996, issued 8,666,666 shares
of a newly designated series of preferred stock, Class D convertible
preferred stock and warrants to purchase two million shares of the
Innovir's common stock. The warrants expire after five years. The
exercise price for one million warrants is $1.00 per share; the remaining
one million warrants have an exercise price of $2.00 per share.
Simultaneously with Innovir's acquisition of VHL, the Company, in exchange
for $3 million and three million shares of its common stock, acquired 9.5
million shares of Innovir's common stock from the Aries Funds. In
addition, the Company and the Aries Funds entered into an agreement whereby
the Company obtained the right to vote 500,000 shares of Innovir's common
stock held by the Aries Funds, thereby, effectively giving the Company
voting control of an aggregate of 18,666,666 shares of Innovir's stock.
The Company's partial acquisition of Innovir and Innovir's acquisition of
VHL, have been accounted for as a purchase in accordance with APB Opinion
No. 16, Business Combinations ("APB 16") and Emerging Issues Task Force
Issue No. 90-13, Accounting for Simultaneous Common Control Mergers ("EITF
90-13"). The application of APB 16 and EITF 90-13 requires that the
Transaction be accounted for as a partial sale of VHL to the minority
shareholders of Innovir and a partial acquisition of Innovir. The Company's
purchase price of its 68% of Innovir totaled approximately $17 million. Of
the total purchase price, approximately $3.7 million was allocated to
tangible assets, $1.8 million to liabilities, $13.8 million to purchased
in-process research and development and the balance to goodwill. The
purchased in-process research and development was immediately expensed. In
connection with the partial sale of VHL, the Company recorded a gain of
$2.8 million which has been included with
F-13
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(3) Continued
purchased research and development expense for the year ended December 31,
1996. The accompanying statement of operations include the operations of
Innovir for the year ended December 31, 1997 and the period from December
23, 1996 to December 31, 1996.
During the year ended December 31, 1998, the Company purchased additional
shares (at market price) which increased its ownership interest to
approximately 85%.
Acquisition of Ribonetics
During 1996 VHL acquired 100% of the outstanding capital stock of
Ribonetics in consideration for approximately $1.6 million of cash and a
warrant to purchase 365,000 shares of the Company's common stock at an
exercise price of $.01 per share (the "Acquisition"). The Company valued
the warrants at approximately $1,562,000. The Acquisition has been
accounted for as a purchase and the operating results of the Company
include those of Ribonetics for the years ended December 31, 1998 and 1997
and the seven months ended December 31, 1996. The total purchase price
aggregated approximately $3.7 million and has been allocated to tangible
assets, liabilities and purchased in-process research and development of
$475,000, $289,000 and $3,528,000, respectively. The purchased research and
development was immediately expensed.
Unaudited Pro Forma Results of Operations
The unaudited pro forma results of operations for the year ended December
31, 1997 have been prepared as if the acquisition of 80.5% of the
Immunology Division discussed in (a) above, occurred on January 1, 1997.
The unaudited pro forma results of operations for the year ended December
31, 1996 have been prepared as if the acquisitions of Innovir and
Ribonetics above had occurred on January 1, 1996.
<TABLE>
<CAPTION>
Unaudited
Year Ended December 31,
-------------------------------------
1997 1996
<S> <C> <C>
Revenue $20,829,000 $ 6,420,000
Other income 7,361,000 9,267,000
Expenses $62,501,000 $61,199,000
Cost of sales 17,079,000 8,948,000
----------- -----------
Net loss $51,390,000 $54,460,000
=========== ===========
Basic loss per share $ 0.93 $ 1.07
Diluted loss per share $ 0.93 $ 1.07
</TABLE>
The pro forma results of operations above include adjustments for the
amortization of intangibles and exclude nonrecurring charges related to
purchased in-process research and development arising from the
acquisitions.
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the acquisitions above been
consummated at the beginning of the respective periods, nor are they
necessarily indicative of future operating results.
F-14
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(4) Restructuring Costs
The Company has discontinued funding its 85% owned subsidiary, Innovir, and
in order to reduce operating expenses, Innovir has closed all operations
and has discontinued research and development activities. Innovir continues
to seek partners, licensees or purchasers of its technology.
The three operating locations, Cambridge, England, Gottingen, Germany, and
New York, were closed in 1998. The total number of employees terminated as
a result of the restructuring was 44, all of which were terminated by
December 31, 1998. Termination payments, however, will continue into 1999.
Fixed assets of the closed facilities consisting mainly of laboratory
equipment, were sold or are held for sale. Costs of $2,625,000 related
to the restructuring were expensed in 1998. Related expenses in connection
with the closing of the Innovir research operations consists of the
following:
<TABLE>
<CAPTION>
Restructuring Balance
Provision Applied December 31, 1998
------------- ------------ -----------------
<S> <C> <C> <C>
Severance related $ 711,000 $ 330,000 $ 381,000
Lease termination 80,000 80,000 ---
Fixed asset impairment 1,215,000 1,215,000 ---
Goodwill 517,000 517,000 ---
Other 102,000 102,000 ---
---------- ---------- ----------
Total 2,625,000 $2,244,000 $ 381,000
========== ========== ==========
</TABLE>
(5) Research Contracts and other Agreements
In the normal course of business, the Company is party to various research
contracts, collaborative agreements, employment agreements, and other
commitments. Significant contracts and agreements are described below.
Research Agreements with Columbia University
In March 1997 the Company entered into an agreement (the "Agreement") with
Columbia University ("Columbia") whereby the Company, through its then
newly established subsidiary, VGI, would provide $30 million in funding to
Columbia over the next five years in exchange for the right to exclusively
license technology developed under the Agreement at Columbia. Columbia
received a 10% interest in VGI (valued at $500,000), and received 200,000
shares of the Company (valued at $700,000) which collectively were
allocated to purchased research and development which was immediately
expensed. Through December 31, 1998, VGI paid Columbia $6.0 million in
funding under the terms of the Agreement.
In March 1997 the Company also entered into a research agreement with
Columbia whereby the Company was to provide $2.7 million in funding over
three years to research and develop Blood Factor IXai ("VM201"). In
connection with this agreement, the Company acquired the exclusive,
worldwide license to VM201 for $100,000.
F-15
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(5) Continued
Termination Agreement with Columbia University
In November 1998, the Company entered into a termination agreement with
Columbia University whereby the above agreements and other agreements were
terminated, the Company paid Columbia $900,000.
Agreements with Baxter
As described in note 3, the Company is party to numerous contracts with
Baxter.
Hypericin Agreement
Pursuant to an agreement with New York University ("NYU" and YEDA Research
and Development Co., Ltd. ("YEDA"), located in Israel, (NYU and YEDA,
collectively, the "Licensors"), the Licensors granted the Company a
worldwide exclusive license to commercialize and exploit natural hypericin
and synthetic hypericin compounds to inactivate viruses and retro viruses
as a therapeutic or preventive treatment for viral or retroviral diseases,
and for anti-glioma (brain tumor) indications. The agreement requires the
Company to protect the Licensors and their related parties (consultants and
scientists) from damages arising out of the conduct of the research project
and the use or practice of the research technology, products or processes
by the Company or its related parties. The Company must also maintain
employer's liability insurance for all its employees engaged in work
involving the research project.
In addition, the Company is required to make royalty and related payments
to licensers under the agreement consisting of: (1) royalties of 7% on net
sales of products licensed; (2) royalties of 4.4% on net sales of products
sublicensed; (3) 40% of payments from third parties to Fund research and
development and (4) 12% of consideration received from an entity selling
licensed products.
Commencing June 1, 1993, minimum annual royalty payments of $100,000 are
due until the later of the expiration of the Licensors' patents or 15 years
from the first commercial sale of products under the agreement.
(6) Investments
At December 31, 1997 and 1998, substantially all of the Company's
investments were in a mutual fund which, for financial statement purposes,
is considered to be a cash equivalent.
During the year ended December 31, 1996, the Company realized a gain of
approximately $272,000 on the sale of available-for-sale investments, which
is included in other income.
Expected maturities may differ from contractual maturities because the
issuers of the securities may have the right to repay obligations without
repayment penalties. In 1997 all investments which were held at December
31, 1996 were liquidated, and the proceeds were reinvested in a mutual fund
which is considered to be a cash equivalent.
During 1996 the Company purchased for $800,000 an aggregate of 457,143
shares of the common stock of Epoch Pharmaceuticals, Inc. ("Epoch"),
warrants to purchase 450,000 shares of Epoch's common stock at $2.00 per
share and warrants to purchase an additional 450,000 common shares at $3.00
per
F-16
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(6) Continued
share, which warrants expired on October 1, 1997 and October 1, 1998,
respectively. In connection therewith, Epoch released the Company and its
affiliates from any claims Epoch might have with respect to the Innovir's
subsidiary, Ribonetics. During 1996 the Company recorded a charge to
operations of $350,000 representing the excess over the fair value of
securities at the date of purchase. During 1997 the investment was written
down to its market value of $214,000, and is included in other assets.
Such write-down resulted in a charge of $236,000 to the 1997 statement of
operations.
(7) Supplemental Balance Sheet Information
Fixed assets consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
Office and laboratory equipment $13,013,000 $14,199,000
Computers 717,000 358,000
Leasehold improvements 1,328,000 1,858,000
---------------- ----------------
15,058,000 16,415,000
---------------- ----------------
Less: accumulated depreciation 4,116,000 951,000
---------------- ----------------
Fixed assets, net $10,942,000 $15,464,000
================ ================
</TABLE>
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
Miscellaneous accrued expenses $347,000 $1,459,000
Professional fees 388,000 382,000
Accrued payroll and related costs 848,000 686,000
Closure of facilities and related costs 381,000 --
Relocation 441,000 --
Royalties 139,000 --
---------------- ----------------
$2,544,000 $2,527,000
================ ================
</TABLE>
F-17
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(7) Continued
Intangible assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Goodwill $31,030,000 $30,099,000
Patents 7,230,000 7,230,000
Workforce 3,490,000 3,490,000
Other 416,000 366,000
-------------- --------------
42,166,000 41,185,000
Less: accumulated amortization 4,531,000 412,000
-------------- --------------
Intangible assets, net $37,635,000 $30,171,000
============== ==============
</TABLE>
Receivables from related party are due from Baxter,
and arise upon sale of inventory to Baxter.
(8) Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Convertible debt payable to related party $32,031,000 $30,075,000
Note payable to warrantholder 96,000 226,000
-------------- --------------
Total long-term debt 32,127,000 30,301,000
Less current installments 96,000 130,000
-------------- --------------
Long-term debt, excluding current installments $32,031,000 $30,171,000
============== ==============
</TABLE>
Convertible Debt Payable to Related Party
In connection with the Company's purchase of 80.5% of Nexell, Baxter
purchased $30,000,000 of Nexell's subordinated debentures which are due
in November 2004. The debentures bear interest at a rate of 6.5% which
is initially payable in November 2002. At December 31, 1998, accrued
interest amounted to $2,031,000 and has been included in longterm debt.
In the event of a public offering by, or the merger or sale of Nexell,
the debentures are convertible into Nexell common stock at a per share
price equal to 95% of the public offering, merger, or sale price.
This debt will be assumed by VIMRX under the definitive agreement
described in Footnote 15.
F-18
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(8) Continued
Term Note Payable to Warrantholder
The term note provides for interest, payable quarterly, at a rate of 8% per
annum. The noteholder holds a lien on all the assets of Innovir. In
connection with the issuance of the term note, the Company issued a warrant
which provides the holder the right to acquire an aggregate of 40,000
shares of the Innovir's common stock at $6.25 per share. Any accrued but
unpaid interest related to the term note may also be used to acquire
additional shares of common stock at a price of $6.25 per share.
In November 1996 the note was amended ("Amended Note"), and related accrued
and unpaid interest as of that date was deferred. In consideration for the
amendment, Innovir issued a second warrant, which entitles the holder to
purchase 20,000 shares of the Innovir's common stock at a price of $1.50
per share. This warrant expires in November 2001. The fair value of the
warrant is not material.
The aggregate maturities of longterm debt for each of the five years
subsequent to December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
<S> <C>
1999 $ 96,000
2000 --
2001 --
2002 12,031,000
2003 10,000,000
Thereafter $10,000,000
</TABLE>
For the years ended December 31, 1998, 1997, and 1996, interest expense was
$2,036,000, $121,000, and $329,000 respectively.
(9) Shareholders' Equity
The Company is authorized to issue up to 120,000,000 shares of common stock
with a par value of $.001. Additionally, the Company's Board, at its sole
discretion, can issue series of preferred stock with each series having its
own rights, privileges, and qualifications determined by the Board. As of
December 31, 1998, the Company is authorized to issue up to 150,000 shares
of $0.001 par Class A Preferred Shares, of which 70,282 are outstanding.
Class A Preferred Shares ("A Shares") rights are as follows:
Holders of A Shares have no voting rights and are entitled to receive
dividends at the rate of 6% of the Liquidation Preference ($1,000 per
share) per share per annum, as and when declared by the Board of Directors,
before any dividend or distribution is declared, set apart or paid upon the
Common Stock. The A Shares conversion feature provides for each share to
be converted into that number of common shares as is determined by dividing
the "Conversion Price" in effect at the time of conversion. The Conversion
Price is initially the highest average closing price for any sixty day
trading period during the first 18 months of issue, but in no event shall
be greater than $7.50 per share, or less than $5.50 per share. After seven
years from the original issue date, or immediately prior to merger or sale
of the Company, the A Shares automatically convert into shares of Common
Stock at the then effective Conversion Price. The A Shares are not subject
to any mandatory redemption or sinking fund provisions.
F-19
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(9) Continued
At December 31, 1998 and 1997, A Share dividends amounting to $3,988,000
and $166,000 respectively, are payable. As of December 17, 1998,
$3,978,000 In-kind dividends were declared by the Board of Directors.
(10) Stock Option Plans
Employees Stock Option Plans
The Company has two employee stock option plans (the "1990 Plan" and the
"1997 Plan"). On June 20, 1996, the 1990 Plan was amended increasing the
number of shares of common stock issuable upon exercise of options granted
under the Plan from 1,200,000 to 2,400,000 shares and on June 24, 1997,
the 1990 Plan was amended to conform the 1990 Plan to certain statutory
and regulatory development and to provide the Board of Directors and the
Compensation Committee with greater flexibility in determining the terms
and conditions of employee options. The shares of common stock are
reserved for issuance upon exercise of either incentive or nonincentive
options, which may be granted from time to time by a committee of the
Board of Directors to employees and others. The terms of the options may
be up to 10 years and are exercisable as determined by the committee
provided that the option does not become exercisable before six months
from the date of grant. At December 31, 1998, there were no additional
options available for grant under the 1990 Plan. Generally, options vest
25% per annum on the anniversary date of grant.
Under the terms of the 1997 Plan, up to 2,000,000 shares of common stock
are issuable upon exercise of options granted. The shares of common stock
are reserved for issuance upon exercise of either incentive or non-
incentive options, which may be granted from time to time by a committee
of the Board of Directors to employees and others. The terms of the
options may be up to 10 years and are exercisable as determined by the
committee provided that the option does not become exercisable before six
months from the date of grant. The grant prices must be no less than 50%
and 100% of the fair market value for non-incentive and incentive options,
respectively. Generally, options vest 25% per annum on the anniversary
date of grant.
Stock options outstanding under these plans are as follows:
<TABLE>
<CAPTION>
1990 Plan 1997 Plan
Weighted- Weighted-
Average Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1995 274,500 -- -- --
Granted 1,475,000 $2.71 -- --
Exercised (12,000) 1.16 -- --
--------- ----- ------- -----
Outstanding at December 31, 1996 1,737,500 $2.34 -- --
Granted 411,900 2.40 203,100 $1.91
Expired (131,250) 1.66 -- --
Exercised (12,500) 1.38 -- --
--------- ----- ------- -----
Outstanding at December 31, 1997 2,005,650 $2.45 203,100 $1.91
Granted -- -- 772,500 1.62
Expired (240,000) 2.33 -- --
Exercised -- -- -- --
Outstanding at December 31, 1998 1,765,650 $2.47 975,600 $1.68
========= ===== ======= =====
</TABLE>
F-20
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(10) Continued
The following table summarizes information about stock options outstanding
at December 31, 1998 under the 1990 Plan and the 1997 Plan:
<TABLE>
<CAPTION>
1990 PLAN
---------
Options Outstanding Options Exercisable
---------------------------------------------------------------------
Weighted- Weighted-
Average Remaining Average Weighted-Average
Number Contractual Life Exercise Number Exercise
Range of Exercise Price Outstanding (in Years) Price Exercisable Price
----------------------- ----------- ---------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
.44 - .69 250,000 0.88 $0.59 225,000 $0.61
1.66 1.91 85,650 2.76 1.78 54,225 1.71
2.56 3.31 1,430,000 4.91 2.84 751,898 2.78
--------- ---- ----- ------- -----
Total 1990 Plan 1,765,650 4.24 $2.47 1,031,123 $2.25
=============== ========= ==== ===== ========= =====
</TABLE>
<TABLE>
<CAPTION>
1997 PLAN
---------
Options Outstanding Options Exercisable
------------------------------------------------------------------
Weighted-
Average Weighted-
Remaining Average Weighted-Average
Number Contractual Exercise Number Exercise
Range of Exercise Price Outstanding Life (in Years) Price Exercisable Price
----------------------- ----------- --------------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
1.50-1.91 975,600 7.91 $1.68 50,775 $1.91
------- ---- ----- ------ -----
Total 1997 Plan 975,600 7.91 $1.68 50,775 $1.91
=============== ======= ==== ===== ====== =====
</TABLE>
Nexell Stock Option Plan
Under the terms of the Nexell Plan, up to an aggregate of (i) 1,000,000
shares of Nexell common stock and (ii) 3,000,000 shares of VIMRX common
stock are reserved for issuance upon the exercise of non-incentive options,
which may be granted from time to time by a committee of the Board of
Directors to employees and others. The terms of the options may be up to ten
years and are exercisable as determined by the committee provided that
options do not become exercisable before six months from the date of grant.
Each grant provides for an exercise price of $5.00 per share of Nexell
common stock (approximately $1.67 per share of VIMRX common stock in the
event such options become exercisable for VIMRX common stock). Generally,
options vest at 25% per annum on the anniversary date of the grant.
Nexell Plan
-----------
<TABLE>
<CAPTION>
Weighted Average
------------------------------------
Shares Exercise Price
---------- --------------
<S> <C> <C>
Granted 1,188,100 $5.00
Expired 116,925 5.00
Outstanding at December 31, 1998 1,071,175 5.00
</TABLE>
F-21
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(10) Continued
Directors Stock Option Plan
In August 1995 the Company adopted a Directors Stock Option Plan (the
"Directors Plan") authorizing the issuance of five year options to purchase
an aggregate of 920,000 shares at an exercise price equal to the fair
market value of the common stock at date of grant. All the options were
granted under the Directors Plan and no further options are available for
grant.
Additional information with respect to the Directors Plan option activity
is summarized as follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
------ --------------
<S> <C> <C>
Outstanding at December 31, 1995 920,000 0.86
Exercised (200,000) 0.89
-------- -----
Outstanding at December 31, 1996 720,000 0.85
Exercised (520,000) 1.14
-------- -----
Outstanding at December 31, 1997 200,000 $0.94
Exercised 0 0
-------- -----
Outstanding at December 31, 1998 200,000 $0.94
======== =====
</TABLE>
At December 31, 1998, all the options under the Directors Plan are
exercisable, and the weighted average remaining contractual life is 1.88
years.
At December 31, 1998, there were 1,024,400 additional shares available for
grant under the Plans. The per share weighted-average fair value of the
options granted during 1998, 1997 and 1996 are estimated at $1.66 per
share, $2.40 per share and $2.20 per share, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following
weighted average assumptions
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Expected dividend yield 0% 0% 0%
Expected volatility 88% 110% 110%
Risk free interest rate 5.3% 6.2% 6.1%
Expected Life 5 years 5 years 5 years
------- ------- -------
</TABLE>
The Company applies APB 25 in accounting for its stock option plans and,
accordingly, recognizes compensation expense for the difference between the
fair value of the underlying common stock and the grant price of the option
at the date of grant. In the event that the fair value of the underlying
common stock is equal to or below the grant price of the option at the date
of grant, no compensation expense is recognized in the financial
statements. Had the Company determined compensation cost based on the fair
value at the date of grant for its stock options under SFAS 123, the
Company's net loss applicable to common stock would have been increased to
the pro forma amounts indicated below:
F-22
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(10) Continued
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Loss:
As reported $38,951,000 $56,199,000 $19,860,000
Pro forma $40,699,000 $57,533,000 $20,745,000
Loss per share:
As reported $ 0.58 $ 1.02 $ 0.50
Pro forma $ 0.60 $ 1.04 $ 0.53
</TABLE>
Nonemployee Director Restricted Stock Award Plan
On June 21, 1996, the Company adopted the 1996 nonemployee Director
Restricted Stock Award Plan (the "Award Plan") under which an aggregate of
900,000 shares of common stock are reserved for issuance as restricted
shares of common stock to nonemployee directors. Restricted shares shall
be forfeited by the nonemployee director in the event the director ceases
to serve as director of the Company, except that such forfeiture provision
will lapse at a rate of 25% of the number of restricted shares per annum
commencing one year from the date of issuance.
The Company has the right of first refusal to purchase any vested
restricted shares proposed to be transferred by a nonemployee director for
a period of 30 days after receipt of written notice at a per share price
equal to the difference between the fair market value at the date of
proposed transfer minus the difference between the fair market value at the
date of grant less $1.00. During the year ended December 31, 1996, the
Company granted 400,000 restricted shares under the Award Plan, 25% of
which have vested at December 31, 1997. The Company valued these shares at
$400,000, which is being amortized over the vesting period. No restricted
shares were granted in the year ended December 31, 1997.
Warrants to Acquire Common Stock
As of December 31, 1998, the Company had warrants to purchase 2,400,000
shares of common stock at an exercise price of $1.50 per share, exercisable
through June 20, 2006.
In addition, at December 31, 1996, the Company has issued warrants to
purchase 365,000 shares of common stock at an exercise price of $.01 per
share, exercisable through May 21, 2006 [see note 3(c)]. 121,667 warrants
were exercised in the year ended December 31, 1997.
As of December 31, 1998, there were 2,325,000 warrants exercisable at a
weighted-average exercise price of $1.50.
Other Options
In connection with its public offerings, the Company sold to an
underwriter, at a nominal amount, the following options for the purchase of
units:
F-23
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(10) Continued
<TABLE>
<CAPTION>
Number Exercise Price Number of
of Units Per Unit Shares Reserved Expiration Date
-------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
1992 offering 120 $8,000 819,000 January 20, 1999
1994 offering 135 $7,000 1,407,374 January 20, 1999
</TABLE>
The units were subject to adjustment for dilution (as defined). Each
warrant entitled the holder to purchase a unit consisting of one share of
common stock and one redeemable Class B detachable warrant. Each Class B
warrant entitles the holder to purchase one share of common stock.
The Company has granted stock options to certain consultants, who are also
directors, of the Company as follows:
<TABLE>
<CAPTION>
Number of Exercise Expiration
Shares Price Date Term Note
------ -------- -------- ----- ----
<S> <C> <C> <C> <C>
1,300,000 $0.94 5 years November, 2000 (x)
100,000 1.47 10 years March 11, 2006 (y)
100,000 1.47 10 years March 11, 2006 (y)
</TABLE>
(x) In 1995 the aggregate value of this option was determined to be
$351,000 and is being amortized over the vesting period.
(y) Options granted in connection with a March 1996 agreement whereby
certain directors agreed to provide operating funds if needed through
September 1996.
(11) Income Taxes
As of December 31, 1998, the Company has approximately $89,275,000 of net
operating loss carryforwards available to offset future federal and state
taxable income. The federal net operating loss carryforwards will expire
beginning in the year 2002 through the year 2018 if not utilized. The
state net operating loss carryforwards have various expiration periods
beginning in the year 2002 through the year 2018. In addition, as of
December 31, 1998, the Company has approximately $2,548,000 of research tax
credits available to offset future federal tax liability. These research
tax credits will expire through the year 2018 if not utilized.
Under the Tax Reform Act of 1986, the utilization of a corporation's net
operating loss and tax credit carryforwards is limited following a greater
than 50% in ownership during a three-year period. Due to the Company's
prior and current equity transactions, the Company's net operating loss and
tax credit carryforwards may be subject to an annual limitation generally
determined by multiplying the value of the Company on the date of the
ownership change by the federal long-term tax exempt rate. Any unused
annual limitation may be carried forward to future years for the balance of
the net operating loss and tax credit carryforward period.
F-24
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(11) Continued
The components of the deferred taxes at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------- --------------
<S> <C> <C>
Net operating loss carryforwards $ 35,581,000 $ 24,109,000
Research tax credit carryforwards 2,548,000 1,404,000
Purchased R&D 14,112,000 15,680,000
Accrued Expenses and Other 349,000 59,000
Total Deferred Tax Asset 52,590,000 41,252,000
Valuation Allowance (52,590,000) (41,252,000)
--------------- --------------
Net Deferred Tax Asset -- --
=============== ==============
</TABLE>
Deferred tax assets and liabilities reflect the net tax effects of
temporary differences between carrying amounts of assets and liabilities
for financial reporting purposes and the carrying amounts used for federal
income tax purposes. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which temporary
differences representing net future deductible amounts become deductible.
Due to the uncertainty of the Company's ability to realize the benefit of
the deferred tax asset, the deferred tax assets are fully offset by a
valuation allowance at December 31, 1998 and 1997.
(12) Contingencies
The Company is aware of patents in the United States and Europe held by an
unaffiliated third party relating to certain technology which may be
infringed by certain of Innovir's oligozymes, in which event a license from
such third party would be required.
The Company is involved in various other claims and legal actions arising
in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial position, results of
operations, or liquidity.
F-25
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(13) Geographic Information
The Company operates in only one "dominant segment," as substantially all
of its combined revenues, losses and assets are derived and utilized in the
development and commercialization of pharmaceutical products. All sales in
1998 and 1997 were to Baxter Healthcare.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues from Customers:
------------------------
United States $ 13,443,000 $ 5,002,000 $ 0
International 0 0 0
------------- ------------- -------------
$ 13,443,000 $ 5,002,000 $ 0
============= ============= =============
Net Income / (loss):
--------------------
United States ($31,038,000) ($53,444,000) ($18,325,000)
International (3,925,000) (2,755.000) (1,535,000)
------------- ------------- -------------
($34,963,000) ($56,199,000) ($19,860,000)
============= ============= =============
Identifiable assets:
--------------------
United States $ 87,199,000 $ 120,496,000 $ 50,639,000
International 402,000 1,451,000 1,053,000
------------- ------------- -------------
$ 87,601,000 $ 121,947,000 $ 51,692,000
============= ============= =============
</TABLE>
(14) Subsequent Events
In January 1999, the Company announced that it intends to acquire 100% of
its 80.5% held subsidiary, Nexell, and to restructure the Company under the
Nexell name. The corporate headquarters will relocate to Nexell's offices
in Irvine, California. Costs related to this restructuring , which will be
recorded in the first quarter of 1999, are expected to be $632,000 and
include employee termination payments and asset valuation allowances
charged to expense of approximately $240,000 and $392,000 respectively.
In February 1999, the Company entered into an agreement with Baxter through
which the Company will acquire Baxter's 19.5% interest in Nexell in
exchange for:
. 3,000,000 shares of Common Stock,
. an adjustment of the conversion price of the 70,202 outstanding
shares of Series A Preferred Stock, $1,000,
. liquidation value, now owned by Baxter from $5.50 per share to
$2.75 per share: all outstanding shares of Series A Preferred
automatically convert into Common Stock on December 17, 2004,
. a warrant to purchase 5,200,000 shares of Common Stock at a price
of $1.15 per share, and
F-26
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
(14) Continued
. approximately $33,000,000 principal amount of 6 1/2% Convertible
Subordinated Debentures (replacing the $30,000,000 principal
amount of Nexell's 6 1/2% convertible subordinated debentures
plus accrued interest through the closing date of the
Acquisition) convertible, commencing November 30, 2002, into
Common Stock at a conversion price equal to 95% of the market
price at the time of conversion.
On January 29, 1999 Nexell consummated an agreement (the "CellPro
Acquisition Agreement") with CellPro Incorporated ("CellPro"), formerly
one of Nexell's principal competitors, to purchase substantially all the
intellectual property assets of CellPro, together with certain related
tangible and intangible assets in exchange for 1,882,215 shares of VIMRX's
common stock valued by the parties at $3,000,000.
Pro Forma Balance Sheet
The unaudited proforma balance sheet has been prepared as if the
acquisition of Baxter's 19.5% interest in Nexell and the purchase of the
intellectual property assets of CellPro had ocurred on December 31, 1998.
The proforma balance sheet includes adjustments to the value of
intangible assets and shareholders' equity arising from the acquisition.
Unaudited Pro Forma Balance Sheet Information
31-Dec-98
Other intangible assets $ 15,565,000
Goodwill 40,826,000
All other assets 50,223,000
---------------
Total assets $ 106,614,000
===============
Total liabilities $ 39,009,000
---------------
Minority interest --
Shareholders' equity --
Class A convertible preferred stock 100
Common stock 72,000
Additional paid-in capital 205,333,900
Accumulated deficit (137,542,000)
--
All other shareholders' equity account (259,000)
---------------
Total 67,605,000
---------------
Total liabilities and shareholders' equity $ 106,614,000
===============
F-27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
VIMRX PHARMACEUTICALS INC.
By: /s/ Richard L. Dunning
-----------------------------------
Richard L. Dunning
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard L. Dunning President and Chief Executive Officer March 29, 1999
- -------------------------------- (Principal Executive Officer)
Richard L. Dunning
/s/ Donald G. Drapkin Chairman of the Board and Director March 29, 1999
- --------------------------------
Donald G. Drapkin
/s/ Francis M. O'Connell Vice President, Finance and Controller March 29, 1999
- -------------------------------- (Principal Financial and Accounting
Francis M. O'Connell Officer)
/s/ Laurence D. Fink Director March 29, 1999
- --------------------------------
Laurence D. Fink
/s/ Linda G. Robinson Director March 29, 1999
- --------------------------------
Linda G. Robinson
/s/ Lindsay A. Rosenwald, M.D. Director March 29, 1999
- --------------------------------
Lindsay A. Rosenwald, M.D.
/s/ Eric A. Rose, M.D. Director March 29, 1999
- --------------------------------
Eric A. Rose, M.D.
/s/ Victor W. Schmitt Director March 29, 1999
- --------------------------------
Victor W. Schmitt
/s/ Michael Weiner, M.D. Director March 29, 1999
- --------------------------------
Michael Weiner, M.D.
</TABLE>
<PAGE>
Exhibit 2.5
ACQUISITION AGREEMENT
---------------------
ACQUISITION AGREEMENT ("Agreement"), made this 18th day of February,
1999, by and among BAXTER HEALTHCARE CORPORATION, a Delaware corporation
with offices at 1627 Lake Cook Road, Deerfield, Illinois 60015 ("Baxter"),
VIMRx PHARMACEUTICALS INC., a Delaware corporation with offices at 2751
Centerville Road, Suite 210, Wilmington, Delaware 19808 ("VIMRx") and
NEXELL THERAPEUTICS INC. (f/k/a BIT ACQUISITION CORP.), a Delaware
corporation with offices at 9 Parker, Irvine, California 92518 ("Nexell").
WHEREAS, pursuant to an Asset Purchase Agreement, dated as of October
10, 1997, by and among Baxter, VIMRx and Nexell (the "Asset Purchase
Agreement"), Baxter, VIMRx and Nexell agreed to enter certain transactions
whereby, among other things, certain assets from the Immunotherapy Division
of Baxter's Biotech Business Group were acquired by Nexell, a then wholly-
owned subsidiary of VIMRx, in exchange for Baxter's acquisition of certain
securities of VIMRx and Nexell (the "Original Transactions"); and
WHEREAS, the Original Transactions were consummated as of December 17,
1997; and
WHEREAS, Baxter now desires to have VIMRx acquire, and VIMRx now desires
to acquire, Baxter's entire interest in Nexell, in exchange for Baxter's
acquisition of additional VIMRx Common Stock (as hereinafter defined) and
certain other securities of VIMRx; and
WHEREAS, upon VIMRx's acquisition of Baxter's interest in Nexell in
accordance with the terms and conditions hereof, Nexell would become a
wholly-owned subsidiary of VIMRx; and
WHEREAS, the parties hereto wish to set forth their agreement with
respect to the purchase and the sale of such securities; and
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, the parties hereto agree as follows:
1. Definitions and Interpretation
------------------------------
1.1 Definitions. Capitalized terms used herein shall have the following
-----------
meanings:
"Acquired VIMRx Securities" shall mean the VIMRx Common Stock, VIMRx
Preferred Stock (if any), VIMRx Warrant and VIMRx Convertible Debentures
to be acquired by Baxter pursuant to Section 2.2 hereof.
<PAGE>
"Affiliate" shall mean, with respect to any party hereto, any entity (i)
which directly, or indirectly through one or more intermediaries, Controls,
is Controlled by, or is under common Control with, the party hereto or (ii)
fifty percent (50%) or more of the voting capital stock (or in the case of
an entity which is not a corporation, fifty percent (50%) or more of the
equity interest) of which is beneficially owned or held by a party hereto
or any of such party's Subsidiaries.
"Agreement" shall have the meaning assigned thereto in the Preamble to
this Agreement.
"Asset Purchase Agreement" shall have the meaning assigned thereto in
the Preamble to this Agreement.
"Authority" shall mean any federal, state, municipal, foreign or other
government or governmental department, commission, board, bureau, agency or
instrumentality.
"Baxter" shall have the meaning assigned thereto in the Preamble to this
Agreement.
"Baxter Shares" shall have the meaning assigned thereto in Section
2.2(B) hereof.
"Closing Date" shall have the meaning assigned thereto in Section 2.5
hereof.
"Closing" shall have the meaning assigned thereto in Section 2.5 hereof.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of an
entity (other than a natural person), whether through the ownership of
voting capital stock, by contract or otherwise.
"Conversion VIMRx Securities" shall mean any VIMRx Common Stock issuable
upon conversion or exercise of the Acquired VIMRx Securities other than the
VIMRx Common Stock to be acquired by Baxter pursuant to Section 2.2(A)
hereof.
"Encumbrance" shall mean collectively all liens, charges, security
interests, encumbrances or claims of every kind or nature whatsoever,
whether legal or equitable.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Nasdaq" shall mean the Nasdaq Stock Market.
"Nexell" shall have the meaning assigned thereto in the Preamble to this
Agreement.
2
<PAGE>
"Nexell Common Stock" shall mean the common stock of Nexell, $.001 par
value per share.
"Nexell Convertible Debentures" shall collectively mean (i) the Series 1
6.5% Convertible Subordinated Debenture due November 30, 2004 in the
principal amount of $10,000,000.00 and (ii) the Series 3 6.5% Convertible
Subordinated Debenture due November 30, 2004 in the principal amount of
$20,000,000.00, issued by Nexell to Baxter pursuant to the Asset Purchase
Agreement.
"Nexell Securities" shall mean the Nexell Common Stock, the Nexell
Warrant and the Nexell Convertible Debentures acquired by Baxter pursuant
to the Asset Purchase Agreement.
"Nexell Warrant" shall mean the Common Stock Purchase Warrant for 6.383
shares of Nexell Common Stock at a per share price of $939,996.86, issued
by Nexell to Baxter pursuant to the Asset Purchase Agreement.
"Original Transactions" shall have the meaning assigned thereto in the
Preamble to this Agreement.
"Original Transaction Agreements" shall mean the following documents
executed by Baxter, VIMRx and Nexell, as the case may be, in connection
with the Original Transactions pursuant to the Asset Purchase Agreement
(except for the Registration Rights Agreement and the Stockholders'
Agreement, each such document shall have the meaning ascribed thereto in
the Asset Purchase Agreement):
(i) the Distribution Agreement,
(ii) the Non-Competition and Confidentiality Agreement,
(iii) the Assignment of Parker Lease,
(iv) the Registration Rights Agreement,
(v) the First BD Sublicense,
(vi) the Second BD Sublicense,
(vii) the Dorken Sublicense,
(viii) the Chiron Sublicense,
(ix) the Stockholders' Agreement,
(x) the Services Agreement,
(xi) the Antibody Manufacturing and Storage Agreement,
(xii) the Royalty Assignment and Agreement,
(xiii) the Hardware and Disposables Manufacturing Agreement,
(xiv) the Hardware and Disposables Supply Agreement,
(xv) the Voting Agreement, and
(xvi) and each other agreement, document, certificate and instrument
executed in connection with the Original Transactions.
"Person" shall mean any individual, corporation, partnership, limited
partnership, limited liability partnership, joint venture, limited
liability company,
3
<PAGE>
association, joint-stock company, trust, unincorporated organization,
Authority or other entity.
"Proxy Statement" shall mean a proxy statement on Schedule 14A prepared
by VIMRx in connection with a meeting of VIMRx stockholders and which,
among other items of business, requests VIMRx stockholder consideration and
approval of this Agreement and all transactions and actions contemplated
herein requiring VIMRx stockholder approval (including (i) VIMRx's purchase
from Baxter of the Nexell Securities and VIMRx's sale to Baxter of the
Acquired VIMRx Securities, (ii) the change in the conversion price of the
VIMRx Preferred Stock to $2.75 per share and (iii) the change of VIMRx's
name to "Nexell Therapeutics Inc."). The Proxy Statement may address other
matters not relating to this Agreement as VIMRx may determine.
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement, dated as of December 17, 1997, by and between VIMRx and
Baxter.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Reports" shall mean all forms, reports and documents required to be
filed with the SEC by VIMRx pursuant to the Securities Act or the Exchange
Act since January 1, 1997.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Stockholders' Agreement" shall mean that certain Stockholders'
Agreement, dated as of December 17, 1997, between Baxter, VIMRx and Nexell.
"Transaction Documents" shall mean all documents, agreements,
certificates and instruments other than this Agreement to be executed
and/or delivered by Baxter, VIMRx and Nexell, as the case may be, in
connection with the transactions contemplated hereunder.
"Transactional Taxes" shall mean all transfer, conveyance or other such
taxes, duties, excises or governmental charges imposed by any taxing
jurisdiction.
"VIMRx" shall have the meaning assigned thereto in the Preamble to this
Agreement.
"VIMRx Convertible Debentures" shall mean collectively the 6.5%
convertible subordinated debentures to be issued by VIMRx to Baxter,
substantially in the forms annexed hereto as Exhibits A and B, in an
----------------
aggregate principal amount equal to (i) $30,000,000.00 plus (ii) all
----
accrued but unpaid interest (if any) on the Nexell Convertible Debentures
as of the Closing Date, which debentures shall be convertible into
additional shares of VIMRx Common Stock commencing November 30, 2002, at a
conversion price equal to ninety-five percent (95%) of the average closing
sale
4
<PAGE>
prices of VIMRx Common Stock on the thirty (30) trading days preceding, but
not including, the date of such conversion, as reported by Nasdaq.
"VIMRx Common Stock" shall mean the common stock of VIMRx, $.001 par
value per share.
"VIMRx Preferred Stock" shall mean Series A Convertible Preferred Stock
of VIMRx, par value $.001 per share.
"VIMRx Warrant" shall mean a common stock purchase warrant,
substantially in the form annexed hereto as Exhibit C, for the purchase by
---------
Baxter of up to and including 5,200,000 additional shares of VIMRx Common
Stock at a per share price of $1.15.
1.2 Interpretation.
--------------
(A) Whenever in this Agreement the phrase "in the ordinary course
of business" is used, it shall be construed as meaning "in the ordinary
course of business and substantially consistent with prior practice."
(B) Whenever in this Agreement the term "including" is used, it
shall be construed as meaning "including but not limited to."
(C) Whenever in this Agreement the term "all" is used, it shall be
construed as meaning "any and all."
(D) Whenever in this Agreement the term "every" is used, it shall
be construed as meaning "every and all."
(E) Whenever in this Agreement the term "agreement" is used, it
shall be deemed to refer to commitments, leases, licenses, contracts and
other agreements.
2. Purchase and Sale of the Securities; Closing
--------------------------------------------
2.1 Purchase and Sale. In reliance on the representations and warranties
-----------------
contained herein and subject to all of the terms and conditions hereof,
Baxter hereby agrees to sell, assign, transfer and deliver (or cause to be
sold, assigned, transferred and delivered) to VIMRx and VIMRx agrees to
purchase from Baxter, on the Closing Date, all of Baxter's right, title and
interest in and to the Nexell Securities.
2.2 Purchase Consideration. In reliance on the representations and
----------------------
warranties contained herein and subject to all of the terms and conditions
hereof, and in consideration of the sale, assignment, transfer and delivery
of the Nexell Securities, VIMRx hereby agrees to issue to Baxter the
following consideration:
(A) three million (3,000,000) shares of VIMRx Common Stock;
5
<PAGE>
(B) in the event that the total amount of shares of VIMRx Common
Stock held by Baxter immediately prior to the Closing (the total amount of
such shares shall be collectively hereinafter referred to as the "Baxter
Shares") plus the three million shares of VIMRx Common Stock to be issued
to Baxter pursuant to Section 2.2(A) hereof will be equivalent to twenty
percent (20%) or more of the aggregate number of shares of VIMRx Common
Stock issued and outstanding immediately following the Closing, then:
(i) the number of shares of VIMRx Common Stock to be issued
to Baxter pursuant to Section 2.2(A) above will be reduced so that the
total amount of shares of VIMRx Common Stock issued to Baxter pursuant to
Section 2.2(A) above, combined with the Baxter Shares, will be equivalent
to less than twenty percent (20%) (but equal to the highest percentage
possible under twenty percent (20%)) of the aggregate number of shares of
VIMRx Common Stock issued and outstanding by VIMRx immediately following
the Closing; and
(ii) VIMRx shall issue to Baxter such number of shares of
VIMRx Preferred Stock so that the number of shares of VIMRx Common Stock
issuable upon conversion thereof shall be equal to the number of shares of
VIMRx Common Stock required to be reduced at the Closing pursuant to this
Section 2.2(B);
(C) the VIMRx Warrant; and
(D) the VIMRx Convertible Debentures.
2.3 Nexell Securities. At the Closing provided for in Section 2.5
-----------------
hereof, Baxter shall deliver to VIMRx, as provided for in Section 2.1
hereof, the certificates representing the Nexell Common Stock together with
the Nexell Warrant and the Nexell Convertible Debentures, all duly endorsed
to VIMRx or with transfer powers attached thereto, against delivery of the
items designated to be delivered by VIMRx and/or Nexell at Closing pursuant
to Section 8.2 hereof.
2.4 Acquired VIMRx Securities. At the Closing provided for in Section
-------------------------
2.5 hereof, VIMRx shall deliver to Baxter certificates representing VIMRx
Common Stock and VIMRx Preferred Stock (if any) as provided for in Section
2.2 hereof, together with the VIMRx Warrant and the VIMRx Convertible
Debentures, against delivery of the items designated to be delivered by
Baxter at Closing pursuant to Section 8.1 hereof.
2.5 Closing. The closing of the purchase and sale of the securities as
-------
set forth in this Section 2 (the "Closing") shall be held at the offices of
counsel to Baxter, Seyfarth, Shaw, Fairweather & Geraldson, 55 East Monroe
Street, Chicago, Illinois, within thirty (30) days after the last of the
conditions set forth in Section 7 hereof has been satisfied or waived in
accordance with the terms of this Agreement, or on such other date, and at
such other time and place, as Baxter and VIMRx shall mutually agree in
writing (the day of occurrence of the Closing being referred to hereinafter
as the "Closing Date").
6
<PAGE>
3. Representations and Warranties of Baxter
----------------------------------------
Baxter represents and warrants to VIMRx and Nexell, as of the Closing
Date, as follows:
3.1 Good Standing. Baxter is a corporation organized, validly existing
-------------
and in good standing under the laws of the State of Delaware, with all
necessary corporate power and authority to own, lease and operate its
properties and to carry on its business as the same is now being conducted.
3.2 Authority. Baxter possesses full right, corporate power and legal
---------
authority to execute and deliver this Agreement and the Transaction
Documents to which Baxter is a party and to perform each of the agreements
and make each of the representations and warranties on its part to be
performed and made hereunder and thereunder. The execution and delivery of
this Agreement and the Transaction Documents to which Baxter is a party and
the consummation by it of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on
the part of Baxter. This Agreement has been duly and validly executed by
Baxter and constitutes, and the Transaction Documents (upon and subject to
their execution and delivery by all parties thereto) shall constitute, the
legal, valid and binding obligation of Baxter enforceable against it in
accordance with their respective terms subject to the qualification that
the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws, now or
hereafter in effect, affecting creditors' rights and except that the
availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding for the
enforcement thereof may be brought.
3.3 Consents and Approvals. No other action or consent, whether
----------------------
corporate or otherwise, including action or consent by any Authority, is
necessary in connection with the execution, delivery, validity or
enforceability of this Agreement or the Transaction Documents with respect
to Baxter or the consummation by it of the transactions contemplated hereby
and thereby.
3.4 Ownership of Nexell Securities. Baxter is the sole and exclusive
------------------------------
beneficial and legal owner of all of the Nexell Securities, and Baxter has
good title to, and the absolute right to sell and transfer, all Nexell
Securities to VIMRx, free and clear of all Encumbrances.
3.5 Investment. Baxter is acquiring the Acquired VIMRx Securities and
----------
will acquire any Conversion VIMRx Securities for investment for Baxter's
own account and not with the view to, or for resale in connection with, the
distribution thereof. Subject to Baxter's rights under the Registration
Rights Agreement, Baxter understands that the Acquired VIMRx Securities
(and any Conversion VIMRx Securities) have not been and will not be
registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment
---------
7
<PAGE>
intent as expressed herein. Baxter further represents that it does not have
any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to any third person with respect to
any of the Acquired VIMRx Securities (or any Conversion VIMRx Securities).
Subject to Baxter's rights under the Registration Rights Agreement, Baxter
understands and acknowledges that the offering and issuance of the Acquired
VIMRx Securities pursuant to this Agreement, and any issuance of Conversion
VIMRx Securities, will not be registered under the Securities Act on the
ground that the sale provided for in this Agreement and the issuance of
securities hereunder is exempt from the registration requirements of the
Securities Act based on, among other things, the bona fide nature of the
---------
investment intent as expressed herein.
3.6 Rule 144. Subject to the terms of the Registration Rights Agreement,
--------
Baxter acknowledges that the Acquired VIMRx Securities (and any Conversion
VIMRx Securities) must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is
available. Baxter is aware of the provisions of Rule 144 promulgated under
the Securities Act which permit limited resale of certain securities
purchased in a private placement subject to the satisfaction of certain
conditions. In connection therewith, Baxter acknowledges that VIMRx will
make a notation on their stock books regarding the restrictions on
transfers set forth in this Section 3.6. Baxter acknowledges that all
shares representing Acquired VIMRx Securities (and any Conversion VIMRx
Securities) will bear appropriate restrictive legends reflecting the
transfer restrictions reflected in this Section 3.6.
3.7 No Public Market. Baxter understands that no public market now
----------------
exists or is expected to ever exist for the VIMRx Preferred Stock, the
VIMRx Warrant or the VIMRx Convertible Debentures.
3.8 Access to Data. For purposes of satisfying the applicable
--------------
requirements for the exemptions from registration relating to the issuance
of the Acquired VIMRx Securities, Baxter acknowledges that it has received
and reviewed such information about VIMRx as it deems necessary and has had
an opportunity to discuss VIMRx's business, management and financial
affairs with its management and to review its facilities.
4. Representations and Warranties of VIMRx
---------------------------------------
VIMRx represents and warrants to Baxter and Nexell, as of the Closing
Date, as follows:
4.1 Good Standing. VIMRx is a corporation organized, validly existing
-------------
and in good standing under the laws of the State of Delaware, with all
necessary corporate power and authority to own, lease and operate its
properties and to carry on its business as the same is now being conducted.
True, accurate and complete copies of the Certificate of Incorporation and
By-Laws of VIMRx have been provided to Baxter.
8
<PAGE>
4.2 Authority. VIMRx possesses full right, corporate power and legal
---------
authority to execute and deliver this Agreement and the Transaction
Documents to which VIMRx is a party and to perform each of the agreements
and make each of the representations and warranties on its part to be
performed and made hereunder and thereunder. The execution and delivery of
this Agreement and the Transaction Documents to which VIMRx is a party and
the consummation by it of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on
the part of VIMRx. This Agreement has been duly and validly executed by
VIMRx and constitutes, and the Transaction Documents (upon and subject to
their execution and delivery by all parties thereto) shall constitute, the
legal, valid and binding obligation of VIMRx enforceable against it in
accordance with their respective terms subject to the qualification that
the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws, now or
hereafter in effect, affecting creditors' rights and except that the
availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding for the
enforcement thereof may be brought.
4.3 Consents and Approvals. No other action or consent, whether
----------------------
corporate or otherwise, including action or consent by any Authority, is
necessary in connection with the execution, delivery, validity or
enforceability of this Agreement or the Transaction Documents with respect
to VIMRx or the consummation by it of the transactions contemplated hereby
and thereby.
4.4 Valid Issuance of VIMRx Warrant and VIMRx Common Stock. The VIMRx
------------------------------------------------------
Warrant, when issued and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and validly
authorized and issued, fully paid and nonassessable, and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement and the Registration Rights Agreement, and under applicable state
and federal securities laws. The shares of VIMRx Common Stock that are
being acquired by Baxter hereunder, when issued and delivered in accordance
with the terms of this Agreement for the consideration expressed herein,
will be duly and validly authorized and issued, fully paid and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Registration Rights
Agreement, and under applicable state and federal securities laws. The
VIMRx Common Stock issuable upon exercise of the VIMRx Warrant has been
duly authorized and validly reserved for issuance and, upon issuance upon
such exercise in accordance with the terms of the VIMRx Warrant, will be
duly and validly authorized and issued, fully paid, and nonassessable, and
will be free of restrictions on transfer other than restrictions on
transfer under this Agreement and the Registration Rights Agreement, and
under applicable state and federal securities laws.
4.5 Valid Issuance of VIMRx Preferred Stock. The shares of VIMRx
---------------------------------------
Preferred Stock that may be acquired by Baxter hereunder, when issued and
delivered in accordance with the terms of this Agreement for the
consideration
9
<PAGE>
expressed herein, will be duly and validly authorized and issued, fully
paid and nonassessable. The VIMRx Common Stock issuable upon conversion of
the VIMRx Preferred Stock has been duly authorized and validly reserved for
issuance and, upon issuance upon such conversion in accordance with the
terms of the Certificate of Incorporation of VIMRx, will be duly and
validly authorized and issued, fully paid, and nonassessable, and will be
free of restrictions on transfer other than restrictions on transfer under
this Agreement and the Registration Rights Agreement, and under applicable
state and federal securities laws.
4.6 Valid Issuance of VIMRx Convertible Debentures. The VIMRx
----------------------------------------------
Convertible Debentures, when issued and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, shall be
legal, valid and binding obligations of VIMRx enforceable against it in
accordance with their respective terms, subject to the qualification that
the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws, now or
hereafter in effect, affecting creditors' rights and except that the
availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding for the
enforcement thereof may be brought. The VIMRx Common Stock issuable upon
conversion of the VIMRx Convertible Debentures has been duly authorized and
validly reserved for issuance and, upon issuance upon such conversion in
accordance with the terms of each such VIMRx Convertible Debenture, will be
duly and validly authorized and issued, fully paid, and nonassessable, and
will be free of restrictions on transfer other than restrictions on
transfer under this Agreement and the Registration Rights Agreement, and
under applicable state and federal securities laws. Notwithstanding the
foregoing, as there is no "floor" or minimum conversion price of the VIMRx
Convertible Debentures, it is mathematically possible that the VIMRx
Convertible Debentures could convert into a number of shares of VIMRx
Common Stock that is in excess of VIMRx's authorized capitalization
thereof.
4.7 SEC Reports. VIMRx has delivered or made available to Baxter true
-----------
and complete copies of the SEC Reports. As of their respective dates, the
SEC Reports complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as applicable, and the rules and
regulations of the SEC promulgated thereunder, and the SEC Reports did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. Since the date of the last of the SEC Reports filed
with the SEC, VIMRx has not become aware of any fact which has not been
disclosed herein which (i) would make the statements contained herein or in
the SEC Reports filed with the SEC materially misleading; (ii) has had, or
would reasonably be expected to have, a Material Adverse Effect (as that
capitalized term is defined in the Asset Purchase Agreement) on VIMRx; or
(iii) would reasonably be expected to materially and adversely affect the
ability of VIMRx to perform its obligations under this Agreement.
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5. Representations and Warranties of Nexell
----------------------------------------
Nexell represents and warrants to Baxter and VIMRx, as of the Closing
Date, as follows:
5.1 Good Standing. Nexell is a corporation organized, validly existing
-------------
and in good standing under the laws of the State of Delaware, with all
necessary corporate power and authority to own, lease and operate its
properties and to carry on its business as the same is now being conducted.
5.2 Authority. Nexell possesses full right, corporate power and legal
---------
authority to execute and deliver this Agreement and the Transaction
Documents to which Nexell is a party and to perform each of the agreements
and make each of the representations and warranties on its part to be
performed and made hereunder and thereunder. The execution and delivery of
this Agreement and the Transaction Documents to which Nexell is a party and
the consummation by it of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on
the part of Nexell. This Agreement has been duly and validly executed by
Nexell and constitutes, and the Transaction Documents (upon and subject to
their execution and delivery by all parties thereto) shall constitute, the
legal, valid and binding obligation of Nexell enforceable against it in
accordance with their respective terms subject to the qualification that
the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws, now or
hereafter in effect, affecting creditors' rights and except that the
availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding for the
enforcement thereof may be brought.
5.3 Consents and Approvals. No other action or consent, whether
----------------------
corporate or otherwise, including action or consent by any Authority, is
necessary in connection with the execution, delivery, validity or
enforceability of this Agreement or the Transaction Documents with respect
to Nexell or the consummation by it of the transactions contemplated hereby
and thereby.
6. Certain Covenants and Agreements
--------------------------------
6.1 Pre-Closing Covenants.
---------------------
(A) Covenants of Baxter. From the date hereof until the Closing
-------------------
Date, Baxter covenants that it shall do the following:
(i) not sell, transfer or otherwise dispose of any of the
Nexell Securities;
(ii) not mortgage, pledge or otherwise subject any of the
Nexell Securities to any Encumbrance, except for Encumbrances arising by
operation of law and not due to any action or inaction on the part of
Baxter;
11
<PAGE>
(iii) not take any action inconsistent with the consummation of
this Agreement and the transactions contemplated hereunder;
(iv) cooperate with VIMRx in VIMRx's preparation of the Proxy
Statement, including providing to VIMRx, at its request, all information,
with respect to Baxter and its business, properties, personnel and
operations, as may be required for inclusion in the Proxy Statement and, to
the extent that any information previously provided to VIMRx pursuant to
this paragraph is discovered to be false or misleading, provide to VIMRx,
in writing, such additional or different information as may be required to
correct such deficiency; and
(v) in the event and to the extent, that events or
circumstances occur or arise, or Baxter becomes aware of events or
circumstances, which render any of the representations and warranties set
forth in Section 3 hereof inaccurate, and without limiting in any way
VIMRx's or Nexell's rights under Section 7.2 hereof, promptly notify VIMRx
and Nexell thereof.
(B) Covenants of VIMRx. From the date hereof until the Closing Date,
VIMRx covenants that it shall, and shall (except with respect to items (v)
and (vi) below) cause Nexell to :
(i) preserve and maintain its corporate existence and good
standing in the jurisdiction of its incorporation;
(ii) continue to operate, in all material respects, in the
ordinary course of business;
(iii) not take any action inconsistent with the consummation of
this Agreement and the transactions contemplated hereunder;
(iv) use its best efforts to maintain and preserve satisfactory
relationships with suppliers, contractors, customers, creditors and others
with which it has a business relationship;
(v) promptly prepare and file with the SEC the Proxy Statement,
and prior to filing the Proxy Statement with the SEC, submit such material
to Baxter and its counsel and provide Baxter and its counsel a reasonable
opportunity to review and comment upon such materials;
(vi) duly and promptly call, give notice of, convene and hold a
meeting of the VIMRx stockholders for the purpose of considering and taking
action upon this Agreement and all transactions and actions contemplated
herein requiring VIMRx stockholder approval, and, subject to the fiduciary
duties of the VIMRx Board of Directors under applicable law, include in the
Proxy Statement the recommendation of the VIMRx Board of Directors that the
VIMRx stockholders vote in favor of this Agreement and all such
transactions and actions;
12
<PAGE>
(vii) in the event and to the extent, that events or
circumstances occur or arise, or it becomes aware of events or
circumstances, which render any of the representations and warranties set
forth in Sections 4 or 5 hereof inaccurate, and without limiting in any way
Baxter's rights under Section 7.1 hereof, promptly notify Baxter thereof;
(viii) assume all of Nexell's obligations under Nexell's 1998
Non-Incentive Stock Option Plan;
(ix) cause Nexell to file with the Secretary of State for the
State of Delaware a Certificate of Amendment of Certificate of
Incorporation of Nexell whereby the corporate name of Nexell is changed to
"Nexell of California, Inc."; and
(x) subject to the approval of VIMRx's stockholders, file with
the Secretary of State for the State of Delaware a Certificate of Amendment
of Certificate of Incorporation of VIMRx in substantially the form annexed
hereto as Exhibit D, whereby, among other things, (x) the name of VIMRx is
---------
changed to "Nexell Therapeutics Inc." and (y) the Conversion Price
of the VIMRx Preferred Stock is changed to $2.75 per share.
6.2 Post-Closing Covenants by VIMRx and Nexell.
------------------------------------------
(A) Qualification to do Business in California. As soon as is
------------------------------------------
reasonably practicable following the Closing Date, (a) Nexell shall file an
Amended Statement and Designation by Foreign Corporation (or similar
document) with the Secretary of State of the State of California changing
its corporate name to "Nexell of California, Inc." and (b) if required by
California law, VIMRx (under the name "Nexell Therapeutics Inc.") shall
file a Statement and Designation by Foreign Corporation (or similar
document) with the Secretary of State of the State of California,
evidencing its qualification to do business in California.
(B) No Change of Control of Nexell. On and after the Closing Date,
------------------------------
VIMRx covenants and agrees that it shall not, and it shall cause Nexell not
to, either directly or indirectly, without the prior written consent of
Baxter so long as Baxter owns three percent (3%) or more of the issued and
outstanding capital stock of VIMRx, (i) sell, transfer or otherwise dispose
of all or substantially all of the operating assets of Nexell, (ii) issue,
sell, transfer or otherwise dispose of any securities of Nexell, or (iii)
permit a merger or consolidation involving Nexell where immediately
following such merger or consolidation Nexell shall not be the surviving
entity, VIMRx shall cease to own 100% of any securities of Nexell, and
VIMRx shall cease to possess 100% of the voting interest in Nexell.
(C) Notification to Nexell Employees. As soon as is reasonably
--------------------------------
practicable following the Closing Date, VIMRx shall notify all holders of
options to purchase shares of Nexell Common Stock under Nexell's 1998 Non-
Incentive
13
<PAGE>
Stock Option Plan of VIMRx's acquisition of all of the capital stock of
Nexell and VIMRx's assumption of such Plan.
(D) Authorized Shares of VIMRx Common Stock. On and after the
---------------------------------------
Closing Date, VIMRx covenants and agrees that, in the event that any VIMRx
Convertible Debenture would be convertible into a number of shares of VIMRx
Common Stock which is in excess of the authorized amount of VIMRx Common
Stock as then stated in VIMRx's certificate of incorporation, VIMRx shall
use its best efforts, without demand by Baxter, to obtain VIMRx stockholder
approval of any amendments to its certificate of incorporation required to
increase its authorized shares of Common Stock to such amount as is
necessary to issue Baxter authorized shares of VIMRx Common Stock upon such
conversion.
(E) No Redemption of Shares of VIMRx. On and after the Closing
--------------------------------
Date, VIMRx covenants and agrees that it shall not, either directly or
indirectly, without the prior written consent of Baxter, purchase, redeem
or otherwise acquire any outstanding shares of VIMRx Common Stock where,
immediately following such purchase, redemption or acquisition, Baxter
would own 20% or more of the issued and outstanding VIMRx Common Stock,
unless immediately prior to such purchase, redemption or other acquisition,
------
Baxter already owned 20% or more of the issued and outstanding VIMRx Common
Stock.
7. Conditions to Obligations of Baxter, VIMRx and Nexell
-----------------------------------------------------
7.1 Baxter's Conditions. The obligations of Baxter to consummate the
-------------------
transactions contemplated hereunder are conditioned upon the following, any
or all of which may be waived by Baxter in its sole and absolute
discretion:
(A) All warranties and representations of VIMRx and Nexell
contained in this Agreement that are qualified as to materiality shall be
true and correct on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and
as of the Closing Date, and all representations and warranties of VIMRx and
Nexell which are not so qualified shall, in all material respects, be true
and correct on and as of the Closing Date with the same force and effect as
though such representations and warranties had been made on and as of the
Closing Date.
(B) VIMRx and Nexell shall, in all material respects, have
performed and complied with all of the covenants and agreements (including
the agreements to make the deliveries set forth in Section 8.2 hereof)
required by or pursuant to this Agreement or any Transaction Document
delivered pursuant to this Agreement, to be performed or complied with by
them on or prior to the Closing Date.
(C) There has not been, and no facts or circumstances exist as of
the Closing Date that would be reasonably likely to cause, any material
adverse
14
<PAGE>
change in either VIMRx's or Nexell's financial condition, operating
results or business prospects.
(D) VIMRx shall have assumed all of Nexell's obligations under
Nexell's 1998 Non-Incentive Stock Option Plan.
(E) Nexell shall have filed with the Secretary of State for the
State of Delaware a Certificate of Amendment of Certificate of
Incorporation of Nexell whereby the corporate name of Nexell is changed to
"Nexell of California, Inc."
(F) VIMRx shall have filed with the Secretary of State for the
State of Delaware, a Certificate of Amendment of Certificate of
Incorporation of VIMRx in substantially the form annexed hereto as
Exhibit D, whereby, among other things, (x) the name of VIMRx is changed to
---------
"Nexell Therapeutics Inc." and (y) the Conversion Price of the VIMRx
Preferred Stock is changed to $2.75 per share.
7.2 VIMRx's and Nexell's Conditions. The obligations of VIMRx and Nexell
-------------------------------
to consummate the transactions contemplated hereunder are conditioned upon
the following, any or all of which may be waived by VIMRx in its sole and
absolute discretion:
(A) All representations and warranties of Baxter contained in this
Agreement shall, in all material respects, be true and correct on and as of
the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
(B) Baxter shall, in all material respects, have performed and
complied with all of the covenants and agreements (including the agreement
to make the deliveries set forth in Section 8.1 hereof) required by or
pursuant to this Agreement, or any Transaction Document delivered pursuant
to this Agreement, to be performed or complied with by it on or prior to
the Closing Date.
(C) The Board of Directors of VIMRx shall have received a fairness
opinion by Piper Jaffray Inc., in form and substance satisfactory to such
Board, as to the fairness to VIMRx of the transactions contemplated herein.
7.3 Mutual Conditions. The respective obligations of each party hereto
-----------------
to consummate the transactions contemplated hereunder are conditioned upon
the following:
(A) This Agreement and the transactions and actions contemplated
herein shall have been approved and adopted by the requisite vote of
VIMRx's stockholders in accordance with applicable Delaware General
Corporation Laws and the rules and regulations of Nasdaq.
(B) No order of any court or Authority shall be in effect which
restrains or prohibits the transactions contemplated hereby, and no suit,
action or
15
<PAGE>
proceeding by any Authority or other person shall be pending or threatened
which seeks to restrain the consummation, or challenges the validity or
legality, of the transactions contemplated by this Agreement.
(C) All other consents, approvals or orders of any Authority, the
granting of which is required for the lawful consummation of the
transactions contemplated hereby, shall have been obtained; and all other
waiting and notification periods specified under applicable law, the
termination or expiration of which is necessary for such consummation,
shall have been terminated or shall have expired.
16
<PAGE>
8. Deliveries of the Parties
-------------------------
8.1 Deliveries of Baxter. At the Closing, Baxter shall deliver to VIMRx
--------------------
the following:
(A) the original Stock Certificate No. 3, representing the 19.5
shares of Nexell Common Stock in the name of Baxter, duly endorsed to VIMRx
or with stock powers attached thereto;
(B) the Nexell Warrant duly endorsed to VIMRx or with transfer
powers attached thereto;
(C) the Nexell Convertible Debentures duly endorsed to VIMRx or with
transfer powers attached thereto;
(D) an executed copy of each of the Transaction Documents to which
Baxter is a party;
(E) all governmental or other approvals, consents, grants, and
licenses, if any, required to be procured by Baxter in connection with the
transactions contemplated hereby; and
(F) a certificate of the Secretary or an Assistant Secretary of
Baxter, certifying the incumbency, signature and authorization of Victor W.
Schmitt, President, Venture Management, to execute, deliver and perform
this Agreement and all Transaction Documents on behalf of Baxter.
8.2 Deliveries of VIMRx. At the Closing, VIMRx shall deliver (or, as
-------------------
applicable, cause Nexell to deliver) to Baxter the following:
(A) stock certificate(s) evidencing the issuance to Baxter of the
number of shares of VIMRx Common Stock in accordance with Sections 2.2 (A)
and (B) hereof;
(B) stock certificate(s) evidencing the issuance to Baxter of the
number of shares of VIMRx Preferred Stock in accordance with Section 2.2
(B) hereof, if any;
(C) the VIMRx Warrant;
(D) the VIMRx Convertible Debentures;
(E) an executed copy of each of the other Transaction Documents to
which VIMRx and/or Nexell is a party;
(F) all governmental or other approvals, consents, grants, and
licenses, if any, required to be procured by VIMRx and/or Nexell in
connection with the transactions contemplated hereby;
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<PAGE>
(G) copy of the certificate of incorporation of VIMRx, certified as
of the date as close as practicable to the Closing Date, by the Secretary
of State of the State of Delaware;
(H) copy of the certificate of incorporation of Nexell, certified as
of the date as close as practicable to the Closing Date, by the Secretary
of State of the State of Delaware;
(I) a certificate of the Secretary or an Assistant Secretary of
VIMRx, certifying and including the resolutions of the VIMRx Board of
Directors authorizing the execution, delivery and performance of this
Agreement and all Transaction Documents, and attesting to the incumbency
and signatures of all officers executing this Agreement and any Transaction
Document;
(J) a certificate of the Secretary or an Assistant Secretary of
Nexell, certifying and including the resolutions of the Nexell Board of
Directors authorizing the execution, delivery and performance of this
Agreement and all Transaction Documents, and attesting to the incumbency
and signatures of all officers executing this Agreement and any Transaction
Document; and
(K) a certificate of the President or Chief Executive Officer of
VIMRx, certifying as to the voting results with respect to VIMRx
stockholder consideration of this Agreement and all transactions and
actions contemplated herein requiring VIMRx stockholder approval.
9. Amendment to Registration Rights Agreement
------------------------------------------
Baxter and VIMRx hereby agree that, conditioned upon Closing and
effective as of the Closing Date, the Registration Rights Agreement is
amended so that the definition of "Registrable Securities" contained in
Section 1(e) thereof shall be deemed to include, in addition to all VIMRx
Common Stock set forth therein, all VIMRx Common Stock and all Conversion
VIMRx Securities to be acquired by Baxter pursuant to Section 2.2 hereof.
10. Termination of Stockholders' Agreement
--------------------------------------
Baxter, VIMRx and Nexell hereby agree that, conditioned upon Closing
and effective as of the Closing Date, the Stockholders' Agreement is
terminated and of no further force and effect.
11. Amendments to Certain Original Transaction Agreements
-----------------------------------------------------
In addition to Sections 9 and 10 hereof, and conditioned upon Closing
and effective as of the Closing Date, Baxter, VIMRx, and Nexell, as the
case may be, hereby amend the provisions of certain Original Transaction
Agreements as follows:
11.1 Certain Original Transaction Documents. The first sentence of each
--------------------------------------
of Section 23 of the Distribution Agreement, Section 13 of the Services
Agreement,
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<PAGE>
Section 38 of the Antibody Manufacturing and Storage Agreement,
Section 38 of the Hardware and Disposables Manufacturing Agreement and
Section 36 of the Hardware and Disposables Supply Agreement is amended and
restated to read as follows:
Newco may assign its rights and obligations under this Agreement
to any Affiliate of Newco without the prior written consent of
Baxter, provided that such Affiliate is a wholly-owned subsidiary
--------
of VIMRx.
11.2 Hardware and Disposables Supply Agreement Section 2.3 of the
-----------------------------------------
Hardware and Disposables Supply Agreement is amended and restated in its
entirety to read as follows:
2.3 Licenses: Licenses granted by Baxter to Newco pursuant to
this Section 2 shall not be assignable and sublicenses may not be
granted thereunder, except (i) any such license may be assigned
in the event of an acquisition or transfer of substantially all
of the Ex Vivo Cell Processing business of Newco to a third
party; (ii) Newco may grant a sublicense under any such license
to an Affiliate of Newco that is a wholly-owned subsidiary of
VIMRx; and (iii) Newco may grant a sublicense under any such
license to a third party manufacturer in connection with the
manufacturing for Newco of any Supplied Product, provided that
--------
such assignee, licensee or third party manufacturer has agreed to
be bound by the terms of that certain Non-Competition and
Confidentiality Agreement of even date herewith, by and among
Baxter, VIMRx and Newco, in the same manner as Newco is bound.
11.3 Non-Competition and Confidentiality Agreement
---------------------------------------------
(A) Section 2.2 of the Non-Competition and Confidentiality Agreement
is amended and restated in its entirety to read as follows:
2.2. Baxter's obligations under the foregoing covenant and
agreement shall begin on the date hereof and shall expire on the
date that is the later of (i) the date that is five (5) years after
the date hereof or (ii) one year after the first date on which
Baxter neither owns at least ten percent (10%) of the Common Stock
of VIMRx, on a fully diluted basis, nor retains a seat on VIMRx's
board of directors, or (iii) the date on which the Marketing, Sales
and Distribution Agreement expires, as its term may be extended,
provided that all of Baxter's obligations under the foregoing
--------
covenant and agreement shall expire not later than the date that is
fifteen (15) years after the date hereof, except that following the
date that is fifteen (15) years after the date hereof, Baxter's
obligations shall continue (a) to the extent and for the period of
time that Baxter continues to act as Newco's exclusive worldwide
distributor for an Isolex(R) or Maxsep(R) Product or Reagent
19
<PAGE>
Kit under the terms of the Marketing, Sales and Distribution
Agreement, but only with respect to such Isolex(R) or Maxsep(R)
Product or Reagent Kit, and (b) to the extent and for the period of
time that Baxter continues to supply any Supplied Product under the
terms of the Hardware and Disposables Supply Agreement, but only
with respect to such Supplied Product.
(B) Section 3.1 of the Non-Competition and Confidentiality Agreement is
amended and restated in its entirety to read as follows:
3.1 Except as otherwise agreed by Baxter in writing, including
in any Acquisition and Operation Document, VIMRx covenants and
agrees that neither VIMRx nor any of its Affiliates (other than
Newco or any entity wholly-owned by VIMRx) shall, directly or
indirectly, anywhere in the world, (i) engage in, or (ii) render
consulting or advisory services to any entity that engages in, or
(iii) be a joint venturer, partner, licensor, member, shareholder
(other than, in the case of an entity with securities that are
publicly traded, a holder of 2% or less of the voting securities of
such an entity) or trustee of any entity for the purpose of
engaging in, the production, manufacture, marketing, sale or
distribution of any product which directly competes with any
Supplied Product or any product of the Business. VIMRx's
obligations under the foregoing covenant and agreement shall begin
on the date hereof and shall expire on the date that is the later
of (i) the date that is five (5) years after the date hereof or
(ii) one year after the first date on which VIMRx neither owns
voting control of Newco nor retains a seat on Newco's board of
directors; provided that all of obligations under the foregoing
--------
covenant and agreement shall expire not later than the date that is
fifteen (15) years after the date hereof, except that following the
date that is fifteen (15) years after the date hereof, VIMRx's
obligations shall continue to the extent and for the period of time
that Baxter continues to supply any Supplied Product under the
terms of the Hardware and Disposables Supply Agreement, but only
with respect to such Supplied Product.
(C) Section 3.2 of the Non-Competition and Confidentiality Agreement is
amended and restated in its entirety to read as follows:
3.2. Except as otherwise agreed by Baxter in writing, including
in any Acquisition and Operating Document, VIMRx covenants and
agrees that neither VIMRx nor any of its Affiliates shall, directly
or indirectly, anywhere in the world, (i) engage in, or (ii) render
consulting of advisory services to any entity that engages in, or
(iii) be a joint venturer, partner, licensor, member, shareholder
(other than in the case of any entity with securities that are
publicly traded, a holder of 2% or less of the voting securities of
such an
20
<PAGE>
entity) or trustee of any entity for the purpose of engaging in the
marketing, sale or distribution of any product which directly
competes with any product of Baxter for use in the separation of
human blood into its constituents, such as platelets, plasma, red
blood cells, leukocytes, and mononuclear cells, while a live donor
or patient is connected to the separation device (hereinafter
referred to as "On-Line Separation"). VIMRx's obligations under the
foregoing covenant and agreement shall begin on the date hereof and
shall expire on the date that is the later of (i) the date that is
five (5) years after the date hereof, or (ii) one year after the
first date on which Baxter neither owns at least ten percent (10%)
of the Common Stock of VIMRx, on a fully diluted basis, nor retains
a seat on VIMRx's board of directors, or (iii) the date on which
the Marketing, Sales and Distribution Agreement expires, as its
term may be extended; provided that all of VIMRx's obligations
--------
under the foregoing covenant and agreement shall expire not later
than the date that is fifteen (15) years after the date hereof.
(D) Section 4.1 of the Non-Competition and Confidentiality Agreement is
amended and restated in its entirety to read as follows:
4.1. Except as otherwise agreed by Baxter in writing, including
in any Acquisition and Operating document, Newco covenants and
agrees that neither Newco nor any of its Affiliates shall, anywhere
in the world, (i) engage in, or (ii) render consulting or advisory
services to any entity that engages in, or (iii) be a joint
venturer, partner, licensor, member, shareholder (other than in the
case of any entity with securities that are publicly traded, a
holder of 2% or less of the voting securities of such entity) or
trustee of any entity for the purpose of engaging in, the
production, manufacture, marketing, sale or distribution of any
product which directly competes with any Supplied Product, except
as such production, manufacture, marketing, sale or distribution is
conducted by Newco or an entity wholly-owned by VIMRx, for use in
Ex Vivo Cell Processing. Newco's obligations under the foregoing
covenant and agreement shall begin on the date hereof and shall
expire on the date that is the later of (i) eleven (11) years after
the date hereof or (ii) the date on which Baxter's obligation to
supply such Supplied Product expires or is terminated under the
terms of the Hardware and Disposables Supply Agreement for a reason
other than Newco's breach; provided that of Newco's obligations
--------
under the foregoing covenant and agreement shall expire not later
than the date that is fifteen (15) years after the date hereof,
except that following the date that is fifteen (15) years after the
date hereof, Newco's obligations shall continue to the extent and
for the period of time that Baxter continues to supply any Supplied
Product under the terms of the Hardware and Disposables Supply
Agreement, but only with respect to such Supplied Product.
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(E) Section 4.3 of the Non-Competition and Confidentiality Agreement is
amended and restated in its entirety to read as follows:
4.3. Except as otherwise agreed by Baxter in writing, including
any Acquisition and Operating Document, Newco covenants and agrees
that neither Newco nor any of its Affiliates shall, directly or
indirectly, anywhere in the world, (i) engage in, or (ii) render
consulting or advisory services to any entity that engages in, or
(iii) be a joint venturer, partner, licensor, member, shareholder
(other than in the case of any entity with securities that are
publicly traded, a holder of 2% or less of the voting securities of
such entity) or trustee of any entity for the purpose of engaging
in the marketing, sale or distribution of any product which
directly competes with any product of Baxter for use in On-Line
Separation. Nothing herein or in Section 3.2 shall prevent or
restrict Newco, or any Affiliate of Newco that is wholly-owned by
VIMRx, from marketing, selling or distributing any product for use
in selection as described in Section 2.1(a) above, whether or not a
live donor or patient is connected to the selection device,
provided that such selection does not include On-Line Separation.
--------
Newco's obligations under the foregoing covenant and agreement
shall begin on the date hereof and shall expire on the date that is
the later of (i) the date that is five (5) years after the date
hereof or (ii) one year after the first date on which Baxter
neither owns at least ten percent (10%) of the common stock of
VIMRx, on a fully diluted basis, nor retains a seat on VIMRx's
board of directors, or (iii) the date on which the Marketing, Sales
and Distribution Agreement expires, as its term may be extended;
provided that all of Newco's obligations under the foregoing
--------
covenant and agreement shall expire not later than the date that is
fifteen (15) years after the date hereof.
(F) Section 7 of the Non-Competition and Confidentiality Agreement is
amended and restated in its entirety to read as follows:
Recipient may utilize the Confidential Information only for
the furtherance of the Recipient's rights and obligations under the
Acquisition and Operating Documents. Recipient, on behalf of itself
and its Representatives, agrees that except with respect to
Authorized Disclosures (as that capitalized term is defined below)
and as otherwise expressly permitted by this Agreement in
furtherance of the Recipient's rights and obligations under the
Acquisition and Operating Documents, Recipient will not, and will
cause any and all of its Representatives not to, on or after the
date hereof, in any form or manner, directly or indirectly,
divulge, disclose or communicate to any person, or utilize for its
commercial benefit or for the benefit of any other person, or to
the detriment of the Owner, any Confidential Information.
Notwithstanding anything contained in this Agreement to the
contrary, without the express prior written consent of Baxter,
22
<PAGE>
neither VIMRx nor Newco may disclose or use any Confidential
Information received by VIMRx or Newco from the Baxter Group to or
on behalf of any of its Affiliates (other than an entity that both
(i) is wholly-owned by VIMRx and (ii) agrees to be bound by the
provisions of this Agreement), unless such disclosure or use
constitutes an Authorized Disclosure. Notwithstanding anything
contained in this Agreement to the contrary, without the express
prior written consent of the Owner, Baxter may not disclose or use
any Confidential Information received from the VIMRx Group or Newco
to or on behalf of any of Baxter's Affiliates, unless such
disclosure or use constitutes an Authorized Disclosure. In
addition, Recipient agrees to, and will cause any and all of its
Representatives to, protect and secure any Confidential Information
in its possession or in the possession of its Representatives from
unauthorized disclosure or use. The standard of care imposed on
Recipient and its Representatives for protecting Confidential
Information will be the care employed by Recipient and its
Representatives to protect its confidential information but in no
event shall the care used by Recipient and its Representatives be
less than the exercise of reasonable and prudent care to prevent
unauthorized disclosure or use of such Confidential Information
(except that Recipient shall not be excused for its own negligence
or the negligence of its Representatives). In the event of the
destruction, loss or theft of any materials containing Confidential
information in the possession of Recipient or its Representatives,
Recipient shall notify Owner in writing immediately identifying the
materials so lost or destroyed.
(G) Section 19 of the Non-Competition and Confidentiality Agreement is
amended and restated in its entirety to read as follows:
Baxter may assign its rights and obligations hereunder to any
Affiliate of Baxter with prior notice to VIMRx and Newco. VIMRx may
assign its rights and obligations hereunder to any Affiliate of
VIMRx with prior notice to Baxter and Newco. Newco may assign its
rights and obligations hereunder to any Affiliate of Newco with
prior notice to and written consent of Baxter and VIMRx, which
consent will not be unreasonably withheld; and Newco may assign its
rights and obligations under this Agreement to any Affiliate of
Newco without the prior written consent of Baxter or VIMRx,
provided that such Affiliate is wholly-owned by VIMRx. No party may
assign any of its rights or obligations under this Agreement,
unless and to the extent expressly permitted herein.
Notwithstanding anything contained in this Section 19 to the
contrary, in the event of any permitted assignment of any party's
rights and obligations hereunder, the assigning party shall
continue to be bound by the obligations contained in Sections 2, 3,
4, 5, 7, 9, 10, 11, 13, 14, 15 and 24 applicable to it as if no
assignment had occurred. Subject to the
23
<PAGE>
foregoing, this Agreement shall inure to the benefit of and be
binding on the permitted successors and assigns of the parties
hereto.
12. Survival of Representations and Warranties
------------------------------------------
12.1 Survival.
--------
(A) All representations and warranties contained in this Agreement
or in any Transaction Document shall survive the Closing of the
transactions contemplated under this Agreement. All covenants and
agreements contained herein and in any Transaction Document shall survive
in accordance with their respective terms; provided, however, that for the
removal of doubt, none of the covenants set forth in Sections 6.1 hereof
shall survive the termination of this Agreement in accordance with Section
16 hereof.
(B) In no event shall any party hereto be entitled to or recover
exemplary or punitive damages in any action under this Agreement or
relating to the subject matter hereof.
13. Transactional Taxes
-------------------
Baxter and VIMRx shall each bear one-half of any applicable
Transactional Taxes with respect to the sale, transfer, assignment,
delivery or issuance of the Nexell Securities or the Acquired VIMRx
Securities.
14. Further Assurances and Cooperation
----------------------------------
Following the date hereof, and subject to the terms and conditions
hereof, each of Baxter, VIMRx and Nexell severally agrees to execute and
deliver such other documents and take such other actions as shall be
reasonably requested by another party hereto to carry out and effectuate
the transactions contemplated by this Agreement. On and subsequent to the
Closing Date, each party hereto severally covenants and warrants that it
shall, whenever and as often as it shall be reasonably requested to do so
by another party hereto to this Agreement, execute, acknowledge and deliver
or cause to be executed, acknowledged and delivered, any and all such
further documents and instruments as may be reasonably necessary, expedient
or proper in order to complete any and all of the conveyances, transfers,
sales and assignments herein provided for.
24
<PAGE>
15. Notices
-------
All notices, requests, demands and other communications permitted or
required under this Agreement shall be in writing and shall be either
personally delivered (including couriers such as FedEx) or sent by pre-paid
certified mail, return receipt requested or facsimile transmission, with a
confirmation copy personally delivered or sent by pre-paid certified mail,
addressed or transmitted to the address or number stated below of the party
hereto to which notice is given, or to such other address or number as such
party may have fixed by notice given in accordance with the terms hereof:
To Baxter: Baxter Healthcare Corporation
1627 Lake Cook Road
Deerfield, Illinois 60015
Attention: President - Venture Management
Associate General Counsel Hyland Immuno
Facsimile: (847) 940-6289
With a copy to: Seyfarth, Shaw, Fairweather & Geraldson
55 East Monroe Street
Chicago, Illinois 60603-5803
Attention: Christopher A. Lause, Esq.
Facsimile: (312) 269-8869
To VIMRx: VIMRx Pharmaceuticals Inc.
2751 Centerville Road
Suite 210
Wilmington, Delaware 19808
Attention: Chief Executive Officer
Facsimile: (302) 998-3794
With a copy to: Epstein Becker Green, P.C.
250 Park Avenue
New York, New York 10177
Attention: Lowell S. Lifschultz, Esq.
Facsimile: (212) 661-0989
To Nexell: Nexell Therapeutics Inc.
9 Parker
Irvine, California 92518
Attention: Chief Executive Officer
Facsimile: (949) 470-6645
25
<PAGE>
With a copy to: Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Attention: Lowell S. Lifschultz, Esq.
Facsimile: (212) 661-0989
Any notice, sent as provided above, shall be deemed given, if sent by
certified mail, upon delivery at the address provided for above (or, in the
event delivery is refused, the first date on which delivery was tendered)
or, if sent by facsimile transmission, upon receipt by the sender of
confirmation of delivery.
16. Expenses
--------
Except as set forth in Section 13 hereof, each party hereto shall
bear its own expenses (including all fees and expenses of attorneys,
accountants, investment bankers, brokers or other representatives or
consultants) incurred in connection with the negotiation, preparation,
consummation and performance of this Agreement and the Transaction
Documents and the transactions contemplated hereby and thereby.
17. Termination
-----------
17.1 Conditions. This Agreement may be terminated at any time on or
prior to the Closing Date:
(A) by mutual consent of Baxter, VIMRx and Nexell;
(B) by VIMRx, if (i) there has been a material misrepresentation or
breach on the part of Baxter with respect to any representation or warranty
of Baxter set forth herein, or (ii) there has been any material failure on
the part of Baxter to comply with any of its obligations or to perform any
of its covenants hereunder, which failure, if capable of remedy, has not
been remedied within 15 days of receipt by Baxter of notice thereof, or
(iii) any of the conditions set forth in Sections 7.2 and 7.3 hereof shall
not have been fulfilled by June 30, 1999 (other than by virtue of a breach
of this Agreement by VIMRx or Nexell) and the fulfillment thereof shall not
have been waived by VIMRx; or
(C) by Baxter, if (i) there has been a material misrepresentation or
breach on the part of VIMRx or Nexell in any of its representations or
warranties set forth herein, or (ii) there has been any material failure on
the part of VIMRx or Nexell to comply with any of its obligations or to
perform any of its covenants hereunder, which failure, if capable of
remedy, has not been remedied within 15 days of receipt by VIMRx or Nexell,
as appropriate, of notice thereof, or (iii) any of the conditions set forth
in Sections 7.1 and 7.3 hereof shall not have been fulfilled by June 30,
1999 (other than by virtue of a breach of the Agreement by Baxter) and the
fulfillment thereof shall not have been waived by Baxter.
17.2 Effective Date. A termination pursuant to Section 17.1(B) or (C)
--------------
hereof shall be effective immediately upon delivery of a notice of
termination by the
26
<PAGE>
party or parties hereto having the right to terminate to
the other party or parties hereto.
17.3 No Liability. In the event of a termination of this Agreement as
------------
provided in this Section 17, this Agreement shall forthwith terminate and
there shall be no liability on the part of Baxter, VIMRx or Nexell, except
for liability arising from a breach of this Agreement. Notwithstanding
anything in this Agreement to the contrary, failure of the VIMRx
stockholders to approve any of the matters set forth in the Proxy Statement
relating to this Agreement or any transaction or action contemplated herein
shall not be a breach of this Agreement.
18. Miscellaneous
-------------
18.1 Entire Agreement; No Modification; Enforceability of Original
-------------------------------------------------------------
Transaction Agreements. This Agreement, including the Exhibits and
----------------------
Transaction Documents delivered pursuant hereto, sets forth the entire
agreement and understanding between the parties hereto as to the specific
subject matter hereof and thereof, and merges and supersedes all prior
discussions, agreements and understandings of every kind and nature between
them with respect to the specific subject matter hereof and thereof, and no
party hereto shall be bound by any condition, definition, warranty or
representation other than as expressly provided for in this Agreement. This
Agreement shall not be changed or amended except by a writing signed by
Baxter, VIMRx and Nexell. Notwithstanding anything in this Agreement to the
contrary, except as specifically modified herein or as modified in a
separate writing signed by Baxter, VIMRx and Nexell, as the case may be,
all of the Original Transaction Agreements shall remain in full and effect
in accordance with the provisions thereof.
18.2 Waiver of Breach. The waiver by a party hereto of a breach or
----------------
violation by another party hereto of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach or
violation by any party hereto of the same or any other provision of this
Agreement. No such waiver shall be effective unless in writing signed by
the party hereto claimed to have made the waiver.
18.3 Benefit of Parties; Assignment. This Agreement shall be binding
------------------------------
upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, legal representatives, successors and
permitted assigns. No party hereto shall have the right to assign or
delegate any of its rights or obligations arising hereunder, except with
the prior written consent of each other party hereto; provided, however,
-----------------
that any party hereto may assign any or all of its rights, and delegate any
or all of its obligations, hereunder to any person or entity who shall, by
merger, consolidation, transfer of assets or otherwise, have acquired all
or substantially all of the assets (not counting cash and cash equivalents)
of such party; provided, further, that no such delegation shall relieve the
-----------------
delegating party of the obligation to satisfy and discharge the
obligation(s) so delegated. Notwithstanding the foregoing, Baxter shall
have the right to assign this Agreement, and any rights and obligations
arising
27
<PAGE>
hereunder, to an Affiliate of Baxter without the prior written consent of
any other party hereto; provided, that no such assignment shall relieve
Baxter of any of its obligations hereunder. Any purported assignment or
delegation in violation of this Section 18.3 shall be null and void ab
--
initio.
------
18.4 Headings. The headings of the sections and paragraphs of this
--------
Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.
18.5 Governing Law; Jurisdiction. This Agreement shall be governed by
---------------------------
and construed in accordance with the laws of the State of Delaware without
giving effect to principles of conflict of laws. Each party to this
Agreement expressly and irrevocably (A) consents that any legal action or
proceeding against it under, arising out of or in any manner relating to,
this Agreement, or any other Document delivered in connection herewith, may
be brought in any court of the State of Delaware located within the
District of Delaware or in the United States District Court for the
District of Delaware, (B) consents and submits to the personal jurisdiction
of any of such courts in any such action or proceeding, (C) consents to the
service of any complaint, summons, notice or other process relating to any
such action or proceeding by delivery thereof to him, her or it by hand or
by any other manner provided for in Section 15 hereof, (D) waives any claim
or defense in any such action or proceeding based on any alleged lack of
personal jurisdiction, improper venue or forum non conveniens or any
--------------------
similar basis, and (E) waives all rights, if any, to trial by jury with
respect to any such action or proceeding. Nothing in this Section 18.5
shall affect or impair in any manner or to any extent the right of any
party hereto to commence legal proceedings or otherwise proceed against any
other party hereto in any jurisdiction or to serve process in any manner
permitted by law.
18.6 Multiple Counterparts; Execution by Fax. This Agreement may be
---------------------------------------
signed in any number of counterparts which taken together shall constitute
one and the same instrument. This Agreement may be executed and delivered
by exchange of facsimile copies showing the signatures of the parties
hereto, and those signatures need not be affixed to the same copy. The
facsimile copies showing the signatures of the parties will constitute
originally signed copies of the same agreement requiring no further
execution.
18.7 Exhibits. All Exhibits referred to in this Agreement are attached
--------
hereto and are incorporated herein by reference as if fully set forth
herein.
18.8 Construction. The language in all parts of this Agreement shall in
------------
all cases be construed as a whole according to its fair meaning, strictly
neither for nor against any party hereto, and without implying a presumption
that the terms thereof shall be more strictly construed against one party
hereto by reason of the rule of construction that a document is to be
construed more strictly against the person who himself or through his agent
prepared the same, it being agreed that representatives of all parties
hereto have participated in the preparation hereof.
28
<PAGE>
18.9 Publicity. No party to this Agreement shall issue or cause the
---------
publication of any press release or other public announcement with respect
to this Agreement or the transactions contemplated hereby without first
providing a draft of such press release or announcement to the other parties
hereto and obtaining the consent of the other parties hereto; provided,
--------
however, that nothing herein shall prevent any party hereto from making any
-------
disclosure required by law.
18.10 Number and Gender. Whenever in this Agreement the singular is
-----------------
used, it shall include the plural if the context so requires, and whenever
the masculine gender is used in this Agreement, it shall be construed as if
the masculine, feminine or neuter gender, respectively, has been used where
the context so dictates, with the rest of the sentence being construed as if
the grammatical and terminological changes thereby rendered necessary have
been made.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BAXTER HEALTH CARE CORPORATION
By: /s/ Victor W. Schmitt
---------------------------------
Name: Victor W. Schmitt
Title: President, Venture Management
VIMRx PHARMACEUTICALS INC.
By: /s/ Richard L. Dunning
---------------------------------
Name: Richard L. Dunning
Title: President and CEO
NEXELL THERAPEUTICS INC.
By: /s/ L. William McIntosh
---------------------------------
Name: L. William McIntosh
Title: President and CEO
30
<PAGE>
EXHIBIT 10.19(A)
RESOLUTION ADOPTED BY UNANIMOUS WRITTEN CONSENT OF THE
BOARD OF DIRECTORS OF VIMRX AS OF MAY 8, 1998
RESOLVED, that the Board of Directors hereby recommends to the
Stockholders of the Corporation that the 1997 Incentive and Non-Incentive Stock
Option Plan of the Corporation be amended by reserving an additional 1,000,000
shares of common stock, par value .001, of the Corporation for issuance
thereunder.
RESOLUTION ADOPTED BY THE STOCKHOLDERS OF VIMRX
AT THE ANNUAL MEETING OF STOCKHOLDERS HELD ON JUNE 23, 1998
RESOLVED, that an amendment to the 1997 Incentive and Non-Incentive
Stock Option Plan making an additional 1,000,000 shares available for issuance
thereunder, described in the 1998 Proxy Statement of the Company, be, and the
same hereby is, approved and adopted in all respects.
<PAGE>
EXHIBIT 10.24 (A)
NEXELL THERAPEUTICS INC.
NINE PARKER
IRVINE, CALIFORNIA 92718
May 28, 1998
Mr. L. William McIntosh
202 Somerset Court
Lansdale, PA 19446
Dear Bill:
This letter agreement sets forth in all respects the agreement between you
and Nexell Therapeutics Inc. ("Nexell") as to the terms and conditions of your
employment by Nexell.
1) You will be employed as President & Chief Executive Officer of Nexell.
You will report to the Board of Directors of Nexell. At the option of
the Board of Directors of Nexell, you agree to serve, for no
additional compensation, as a director and/or officer of any or all of
Nexell's subsidiaries or affiliates throughout the term of your
employment. The place of employment will be at the offices of Nexell
in Irvine, California.
2) The term of your employment will commence effective March 1, 1998, and
shall continue until terminated under the provisions of Paragraph 5
below. You will be a full-time employee of Nexell and you agree to
devote your business and professional time, energy and skills to the
affairs of Nexell and its subsidiaries and affiliates and to serve
Nexell faithfully and to the best of your ability.
a) As compensation for the services to be rendered by you
hereunder, Nexell will pay you (i) a signing bonus of $25,000 payable
on your execution and delivery of this letter agreement, and (ii) a
base salary of $225,000 per annum, payable in installments in
accordance with Nexell's regular payroll practices, and (iii) an
annual cash bonus to be determined in accordance with the provisions
of subparagraph 2(d).
b) As additional compensation, Nexell shall award you,
effective upon commencement of your employment, Non-Incentive Stock
Options to purchase 125,000 shares of Nexell common stock at an
exercise price of $5.00 per share pursuant to Nexell's 1998 Non-
Incentive Stock Option Plan (the "Plan"), subject to approval of the
Board of Directors of Nexell and approval of the adoption of the
<PAGE>
Mr. L. William McIntosh
May 28, 1998
Page 2
Plan by the shareholders of Nexell and of VIMRx Pharmaceuticals Inc.
("VIMRx"). Such options will be granted pursuant to such terms and
conditions as are set forth in the Plan and a Non-Incentive Stock
Option Agreement substantially in the form of the Non-Incentive Stock
Option Agreement attached to the Plan as Exhibit A. Such Non-Incentive
Stock Option Agreement shall provide that (i) all of such options
shall be vested and exercisable on and after January 1, 2002 and they
shall become vested in accordance with the following vesting schedule:
31,250 on January 1, 1999; 31,250 on January 1, 2000; 31,250 on
January 1, 2001; and 31,250 on January 1, 2002, (ii) such options
shall expire ten years after their grant (subject to earlier
termination pursuant to the terms of the Plan and the Non-Incentive
Stock Option Agreement), and (iii) pursuant to Section 7(a) of the
Plan, or the corresponding provision of any amendment of the Plan,
such options shall be exercisable for shares of VIMRx common stock at
the rate of 3 shares of VIMRx common stock for each share of Nexell
common stock purchasable under the options, at an exercise price per
share of VIMRx common stock equal to one-third of the exercise price
per share of the Nexell common stock set forth in the Non-Incentive
Stock Option Agreement.
c) You will be eligible to participate in Nexell's medical,
dental, life and long-term disability insurance and other benefit
programs, including any 401(k) or other retirement plans, from time to
time in effect for Nexell's senior executives, your participation in
any such plans to be in accordance with their respective terms and
conditions.
d) Your performance will be reviewed annually by Nexell's Board
of Directors, in connection with which your annual cash bonus and
possible increases in your base compensation for the future will be
discussed, it being understood that any such decisions shall be within
the discretion of Nexell's Board of Directors and/or its Compensation
Committee (or other similar committee duly appointed by Nexell's Board
of Directors). However, it is further understood that the annual cash
bonus is initially targeted at an amount equal to at least 25 percent
of base compensation, assuming satisfactory performance.
e) Until such time as you have relocated your residence to
California or until the expiration of six months following the
commencement of your employment hereunder, whichever occurs first,
Nexell will pay or reimburse (i) all of your reasonable expenses for
travel to and from California and all of your reasonable living
expenses while in California, and (ii) the cost of up to three round
trip economy airline tickets for travel to California by your fiancee.
Nexell also will pay the reasonable expenses of moving your household
and personal effects from your home in southeastern Pennsylvania to a
new residence in California and the reasonable closing costs
[including points?] of purchasing a new home in California.
<PAGE>
Mr. L. William McIntosh
May 28, 1998
Page 3
To the extent that any of the expenses paid or reimbursed by Nexell
pursuant to this subparagraph 2(e) constitutes compensation income to
you that is subject to personal income taxation, Nexell will pay you
an additional amount of cash compensation equal to the aggregate
federal, state, and local income taxes payable by you with respect to
the compensation income attributable to the payment or reimbursement
of such expenses by Nexell (including income taxes payable with
respect to such additional cash compensation).
3) You will be entitled to take up to an aggregate of four weeks of
vacation each calendar year as business conditions permit. Nexell
shall not be required to provide any additional compensation to you
for vacation time not utilized by you.
4) Nexell will reimburse you for all reasonable and documented business
expenses incurred by you on behalf of Nexell during the term of your
employment hereunder consistent with Nexell's expense reporting policy
(as the same may be modified from time to time). Notwithstanding
anything herein to the contrary, the provisions of this Paragraph 4
shall survive the effective date of termination of this Agreement for
a period of six months.
5)
a) Your employment hereunder may be terminated at any time by
Nexell for cause (as such term is hereinafter defined) or, upon at
least 60 days' prior written notice by you or by Nexell, without
cause.
b) In the event your employment is terminated by Nexell without
cause or is terminated by you in the circumstances described in
Paragraph 5(f) below, this Agreement shall terminate immediately on
the effective date of termination of your employment; provided,
however, that:
i) you will be paid twelve months' base salary as
severance in monthly installments (in arrears)
beginning the first full month following the
cessation of your employment with Nexell;
ii) you will be entitled to receive any accrued but
unpaid salary earned by you through the effective
date of such termination.
iii) in the event that your employment is terminated by
Nexell without cause or is terminated by you in the
circumstances described in Paragraph 5(f) below
within 30 months after the commencement of your
employment hereunder, Nexell will pay or reimburse
<PAGE>
Mr. L. William McIntosh
May 28, 1998
Page 4
reasonable expenses for moving your household and
personal effects from California to southeastern
Pennsylvania; and
iv) in the event that your employment is terminated by
Nexell without cause or is terminated by you in the
circumstances described in Paragraph 5(f) below
following the date that is two years after the
commencement of your employment hereunder, all of
your then-vested options to purchase Nexell common
stock shall become exercisable for shares of VIMRx
common stock at the rate of 3 shares of VIMRx common
stock for each share of Nexell common stock
purchasable under such vested options, at an exercise
price per share of VIMRx common stock equal to one-
third of the exercise price per share of Nexell
common stock set forth in the Non-Incentive Stock
Option Agreement.
c) No severance shall be paid or payable to you in the event your
employment is terminated for cause, or you voluntarily resign from your
employment with Nexell, in which events this Agreement shall terminate
immediately upon the effective date of termination of your employment or
upon the effective date of your resignation, respectively; provided,
however, that Nexell shall nonetheless be obligated to pay you any accrued
but unpaid salary earned by you through the date of such termination.
d) For purposes of this Agreement, termination for "cause" shall mean
termination due to any or more of the following: (i) if you are indicted
for committing a felony or a decision or determination is rendered by any
court or governmental authority that you have committed any act involving
fraud, willful misconduct, dishonesty, breach of trust or moral turpitude;
(ii) if you willfully breach your duty of loyalty to, or commit an act of
fraud or dishonesty upon, Nexell; (iii) if you demonstrate gross negligence
or willful misconduct in connection with your employment; (iv) if, in the
reasonable, good faith opinion of a majority of Nexell's whole Board of
Directors (excluding yourself, if you shall then be a director of Nexell),
you engage in personal misconduct of such a material nature as to render
your presence as an officer of Nexell detrimental to Nexell or its
reputation and you fail to cure the same within five days after notice
thereof from Nexell; or (v) if you commit a material breach of or a default
under any of the terms or conditions of this Agreement and you fail to cure
such breach or default within ten days after prior written notice thereof
from Nexell.
e) Your employment hereunder shall terminate immediately upon your
death or "permanent disability" (as such term is hereinafter defined). In
either such event,
<PAGE>
Mr. L. William McIntosh
May 28, 1998
Page 5
this Agreement shall terminate immediately upon the cessation
of your employment; provided, however, you (or your legal representative,
as the case may be) will be entitled to receive any accrued but unpaid
salary earned by you through the date of such termination, plus severance
in monthly installments (in arrears), beginning the first full month
following the date of such termination, in an aggregate amount equal to the
positive difference, if any, between (x) the base salary you would have
received hereunder for the six months immediately following such
termination date had your employment continued for such six month period,
and (y) the total monies paid or payable to you with respect to such six
month period under the long-term disability insurance policy or policies
maintained by Nexell for your benefit, if any. For purposes of this
Agreement, the term "permanent disability" shall have the meaning set forth
in the long-term disability insurance policy or policies then maintained by
Nexell for the benefit of its employees, or if no such policy shall then be
in effect, or if more than one such policy shall then be in effect in which
the term "permanent disability" shall be assigned different definitions,
then the term "permanent disability" shall be defined for purposes hereof
to mean any physical or mental disability or incapacity which renders you
incapable of fully performing the services required of you in accordance
with your obligations hereunder for a period aggregating 120 days during
any twelve-month period.
f) In the event of occurrence of any of the following events, you
shall have the right to terminate your employment with Nexell on at least
60 days' notice. Subject to the foregoing provisions of this Paragraph 5,
in the event such notice is given by you within 30 days of any one or more
of such events, such termination of employment shall be deemed termination
of your employment by Nexell without "cause" within the meaning of this
Paragraph 5:
i) a material breach of or default under this Agreement by
Nexell which is not cured by Nexell within ten (10) days
after its receipt of written notice thereof from you;
ii) a material reduction in your duties by Nexell's Board of
Directors (not arising from any physical or mental
disability you may sustain) which would be inconsistent with
the position of President & Chief Executive Officer of
Nexell or such other executive position to which you may be
assigned and the same shall not have been alleviated by
Nexell's Board of Directors within ten (10) days after its
receipt of written notice thereof from you.
6) You hereby agree that you shall not, directly or indirectly, during the
term of your employment hereunder and until the expiration of six months
after you cease to be
<PAGE>
Mr. L. William McIntosh
May 28, 1998
Page 6
so employed by Nexell, own, manage, operate, join, control or become
employed by, or render any services of an advisory nature or otherwise, or
participate in the ownership, management, operation or control of, or
otherwise be connected in any manner with, any business competitive with
the business of Nexell or any of its directly or indirectly, wholly or
partially owned subsidiaries without Nexell's prior written consent.
7)
a) You further hereby covenant and agree that you will not at any
time during, or (a) for a period of three (3) years following the
termination of, your employment with Nexell, reveal, divulge or make known
to any person or entity any secrets or confidential information (whether
oral, written, or electronically encoded) whatsoever, of or concerning
Nexell or any of its directly or indirectly, wholly or partially owned
subsidiaries or its business or anything connected therewith, all of which
is and shall remain the property of Nexell and shall be returned by you to
Nexell (including all copies) immediately upon any termination of your
employment (or earlier, if requested by Nexell), or (b) for a period of
three (3) years following the termination of your employment with Nexell,
directly or indirectly entice away from Nexell's employment, retain or
otherwise engage, any employee of Nexell, or attempt to do any of the
foregoing.
b) For purposes hereof, confidential information shall not include
any information which: (i) is or becomes generally available to the public
other than as a result of a wrongful disclosure by you or your
representatives; (ii) was known by you on a non-confidential basis prior to
its disclosure to you by Nexell or its representatives; (iii) becomes
available to you from a source other than Nexell or its representatives,
provided that such source is not bound by a confidentiality agreement with
Nexell or its representatives and otherwise has a right to disclose the
same; or (iv) is required to be disclosed by any governmental or judicial
authority, provided, in such case, that you shall use your best efforts to
notify Nexell immediately of any such requirement so that Nexell shall have
an opportunity to contest it.
8) In the event of any breach or threatened breach by you of any one or more
of the provisions of Paragraphs 6 (relating to non-competition) or 7
(relating to non-disclosure and non-enticement of employees) above, Nexell
will be entitled, in addition to any remedy hereunder or under any
applicable law or in equity, to an injunction restraining the breach of
such provisions hereof.
9) You agree that Nexell may, in its discretion, apply for and take out in its
name and at its own expense, and solely for its benefit, key man life
insurance on you in any
<PAGE>
Mr. L. William McIntosh
May 28, 1998
Page 7
amount deemed advisable by Nexell to protect its interests, and you agree
that you shall have no right, title or interest therein and further agree
to submit to any medical or other examination and to execute and deliver
any application or other instruments in writing reasonably necessary to
effectuate such insurance.
10) You represent and warrant that you are not under any obligation,
restriction or limitation, including but not limited to confidentiality
and/or non-competition restrictions, contractual or otherwise, to any other
individual or entity which would prohibit or impede you from performing
your duties and responsibilities hereunder and that you are free to enter
into and perform the terms and provisions of this Agreement. Your
employment agreement dated May 19, 1997 with VIMRx has been terminated by
the mutual consent of the parties, effective February 28, 1998, and VIMRx
has consented to your employment by Nexell.
11) Notwithstanding anything herein to the contrary, the provisions of
Paragraphs 6, 7, 8 and 10 hereof shall expressly survive the expiration or
termination of this Agreement regardless of the reason for, or cause of,
any such termination.
12) All notices, requests, demands, and other communications provided for by
this Agreement shall be in writing and shall be either personally delivered
(including by couriers such as FedEx) or sent by pre-paid certified mail,
return receipt requested, addressed to the address stated below of the
party to which notice is given, or to such changed address as such party
may have fixed by notice given in accordance with the terms hereof:
TO Nexell: Nexell Therapuetics Inc.
Nine Parker
California 92718
Attn: The Board of Directors
WITH A COPY TO: VIMRx Pharmaceuticals Inc.
c/o Richard L. Dunning, President
2971 Centerville Road
Suite 210, Little Falls II
Wilmington, Delaware 19808
AND A COPY TO: Lowell S. Lifschultz
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177-0077
<PAGE>
Mr. L. William McIntosh
May 28, 1998
Page 8
TO Mr. McIntosh: L. William McIntosh
202 Somerset Court
Lansdale, PA 19446
Any notice, sent as provided above, shall be deemed given upon receipt at the
address provided for above (or, in the event delivery is refused, the first
date on which delivery was tendered).
13) This Agreement contains the entire agreement and understanding between
the parties relating to the subject matter hereof and supersedes any
and all prior understandings, agreements and representations, written
or oral, expressed or implied, with respect thereto.
14) This Agreement may not be amended, modified, altered or terminated
(other than pursuant to its terms) except by an instrument in writing
signed by the parties.
15) In case any one or more of the provisions of this Agreement shall be
invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herein shall not in any way be affected thereby.
16) This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of Delaware applicable to
contracts made and to be performed entirely therein (without giving
effect to the conflict of law rules thereof) .
Kindly indicate your agreement with the foregoing by countersigning
the enclosed duplicate copy of this letter agreement and returning it to me on
behalf of Nexell.
On behalf of the Board of Directors of Nexell, we look forward to a
long and mutually rewarding relationship.
Sincerely,
NEXELL THERAPEUTICS INC.
By: /s/ Richard L. Dunning
-----------------------------
Richard L. Dunning, Director
ACCEPTED AND AGREED TO THIS
28th DAY OF MAY, 1998
/s/ L. William McIntosh
- ---------------------------
L. William McIntosh
<PAGE>
EXHIBIT 10.24 (B)
VIMRX PHARMACEUTICALS INC.
2751 CENTERVILLE ROAD
SUITE 210, LITTLE FALLS II
WILMINGTON, DELAWARE 19808
May 28, 1998
Mr. L. William McIntosh
202 Somerset Court
Lansdale, PA 19446
Dear Bill:
This letter will confirm that your employment agreement dated May 19,
1997 (the "Agreement") with VIMRx Pharmaceuticals Inc. ("VIMRx") has been
terminated effective February 28, 1998, in connection with the commencement of
your employment, effective March 1, 1998, as President & Chief Executive Officer
of VIMRx's majority-owned subsidiary, Nexell Therapeutics Inc. ("Nexell"). We
are pleased that you have agreed to undertake these new responsibilities.
The termination of your Agreement with VIMRx will be treated as a
voluntary resignation of your employment by you, and pursuant to the terms of
subparagraph 6(c) of the Agreement, such termination will not give rise to any
severance payment. VIMRx waives its entitlement to notice as provided in
subparagraph 6(a) of the Agreement.
VIMRx also is pleased to confirm that it consents to your employment
with Nexell.
You and VIMRx hereby agree upon the following arrangements concerning
the VIMRx stock options you currently own:
1. The incentive stock options granted to you pursuant to an
Incentive Stock Option Agreement dated as of May 19, 1997, will be cancelled,
effective immediately;
2. The 90,000 non-incentive stock options granted to you pursuant to
a Non-Incentive Stock Option Agreement dated as of January 15, 1998, will be
continued in accordance with the terms of that Non-Incentive Stock Option
Agreement. The term, "subsidiary" as it appears
<PAGE>
Mr. L. William McIntosh
May 28, 1998
Page 2
in section 5 of that Non-Incentive Stock Option Agreement shall be deemed and
construed to refer to Nexell Therapeutics Inc. and any other subsidiary of
VIMRx;
3. The 203,100 non-incentive stock options granted to you pursuant to
a Non-Incentive Stock Option Agreement dated as of May 19, 1997, pursuant to the
VIMRx 1997 Incentive and Non-Incentive Stock Option Plan will be continued in
accordance with the terms of that Non-Incentive Stock Option Agreement. The
term, "subsidiary" as it appears in section 5 of that Non-Incentive Stock Option
Agreement shall be deemed and construed to refer to Nexell Therapeutics Inc. and
any other subsidiary of VIMRx; and
4. Of the 34,900 non-incentive stock options granted to you pursuant
to a Non-Incentive Stock Option Agreement dated as of May 19, 1997, pursuant to
the VIMRx 1990 Incentive and Non-Incentive Stock Option Plan, 6,900 of such
options will be continued in accordance with the terms of that Non-Incentive
Stock Option Agreement, and 28,000 of such options will be cancelled, effective
immediately. The term, "subsidiary" as it appears in section 5 of that Non-
Incentive Stock Option Agreement shall be deemed and construed to refer to
Nexell Therapeutics Inc. and any other subsidiary of VIMRx.
Pursuant to your employment agreement with Nexell and pursuant to
Nexell's 1998 Non-Incentive Stock Option Plan (the "Nexell Stock Option Plan"),
you are being granted non-incentive stock options to purchase 125,000 shares of
Nexell common stock. (the "Nexell Options"). You and VIMRx hereby agree that in
the event the Nexell Options become exercisable for shares of VIMRx common stock
in accordance with section 7(a) of the Nexell Stock Option Plan, or the
corresponding provision of any amendment to the Nexell Stock Option Plan, or in
accordance with Paragraph 5(b)(iv) of your employment agreement with Nexell,
VIMRx shall issue to you up to 60,000 additional shares of VIMRx common stock
(0.48 additional share for each of the Nexell Options that you exercise for
shares of VIMRx common stock) for a purchase price equal to the par value of the
VIMRx common stock. VIMRx hereby consents to the provisions of Paragraph
5(b)(iv) of your employment agreement with Nexell and agrees that, in the
circumstances described in such Paragraph, your then-vested Nexell Options stock
shall be exercisable for shares of VIMRx common stock as provided therein.
Kindly indicate your agreement with the foregoing by countersigning
the enclosed duplicate copy of this letter agreement and returning it to me on
behalf of VIMRx.
<PAGE>
Mr. L. William McIntosh
May 28, 1998
Page 3
We wish you all the best in your new position, and look forward to our
continued association.
Sincerely,
VIMRx PHARMACEUTICALS INC.
By: /s/ Richard L. Dunning
-------------------------------------
Richard L. Dunning
President & Chief Executive Officer
ACCEPTED AND AGREED TO THIS
28th DAY OF MAY, 1998
/s/ L. William McIntosh
- -------------------------------------
L. William McIntosh
<PAGE>
EXHIBIT 10.38
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, made this 28th day of October, 1998, by and among
CELLPRO, INCORPORATED, a Delaware corporation with offices at 22215 26th Avenue
S.E., Bothell, Washington 98201 (the "Corporation"), and NEXELL THERAPEUTICS,
INC., a Delaware corporation with offices at 9 Parker, Irvine, California 92518-
1605 ("Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Corporation desires to sell to the Buyer, and the Buyer
desires to purchase from the Corporation, all of the intellectual property, and
certain related tangible and intangible assets, of the Corporation;
WHEREAS, the parties wish to set forth their agreement with respect to the
purchase and sale of such assets;
NOW THEREFORE, in consideration of the mutual covenants and promises herein
contained, the parties agree as follows:
1. Purchase and Sale of the Assets.
-------------------------------
1.1 Agreement of Purchase and Sale; Consideration.
---------------------------------------------
(A) Purchase and Sale. Subject to the terms and conditions hereof, and at
-----------------
the Closing provided for in Section 1.3 hereof, the Corporation shall sell,
assign and otherwise transfer to Buyer, and Buyer shall purchase from the
Corporation, all of the Corporation's right, title and interest in and to the
Assets (such latter term, as well as each other capitalized term used, and not
otherwise defined, in the text hereof, having the meaning assigned thereto in
Section 14 hereof) other than the Regulatory Assets and the MRP System Current
Products, which shall be transferred to Buyer on the Post-Closing Transfer Date.
The Included Agreements shall be transferred in accordance with Section 1.1(B)
below. To the extent the Assets consist of tangible property, including any
books and records and copies of documents, such tangible property shall be
delivered to Buyer at the Corporation's principal place of business on or after
the Closing Date or the Post-Closing Transfer Date, as the case may be.
(B) Included Agreements. Subject to the terms and conditions hereof, and
-------------------
at the Closing provided in Section 1.3 hereof, the Corporation shall assign to
Buyer and Buyer shall assume from the Corporation all rights and obligations
arising under or related to the Included Agreements as set forth and described
in Section (1) of Exhibit 1.1(A). The Corporation shall be responsible for
making "cure" amount payments as determined by the Bankruptcy Court in response
to Statements of Defaults (as defined in Section 1.4(C)(iii)(b)) sustained by
the Bankruptcy Court, provided, however, in no event shall the Corporation be
-------- -------
obligated hereunder to make any cure amount payment in excess of $50,000
individually or in excess of $100,000 in the aggregate. Upon payment of any such
cure
<PAGE>
amounts, the Corporation shall have no further liabilities or obligations
related to the Included Agreements on or after the Closing.
(C) Regulatory Assets and MRP System Current Products. Subject to the
-------------------------------------------------
terms and conditions hereof, on a date (the "Post-Closing Transfer Date") on or
promptly following the date which is (i) after the expiration or other
termination of the Distribution Agreement by and between the Corporation and
Baxter Healthcare Corporation ("Baxter") and (ii) the earlier of: (x) the first
anniversary of the Closing Date or (y) the final liquidation of substantially
all of the Corporation's assets, the Corporation shall sell, assign and
otherwise transfer to Buyer and Buyer shall purchase from the Corporation,
without further consideration, all of the Corporation's right, title and
interest in and to the Regulatory Assets and the MRP System Current Products.
(D) Purchase Consideration. In consideration of the sale, assignment and
----------------------
transfer pursuant to Sections 1.1(A), 1.1(B) and 1.1(C) hereof, Buyer agrees to
pay to the Corporation the Purchase Consideration. For purposes of this
Agreement, the "Purchase Consideration" shall consist of such number of shares
of the common stock of VIMRx Pharmaceuticals, Inc. ("VIMRx") registered under
the Securities Act of 1933, as amended, subject to the restrictions under
Section 4.2(B) below, as shall be equivalent in value to $3,000,000
(collectively, the "Shares"). For these purposes, the value per share of VIMRx
common stock shall be deemed to be equal to the average of the closing prices of
VIMRx common stock on the fifteen trading days ending on (and including) that
date falling three business days prior to (and not counting) the Closing Date
(as hereinafter defined).
(E) Payment. At the Closing provided for in Section 1.3(A) hereof, Buyer
-------
shall deliver to the Corporation certificates representing the Shares, against
delivery of the items designated to be delivered by the Corporation at Closing
pursuant to Sections 1.1(A) and 1.1(B), and as advance payment for the transfer
of the Regulatory Assets and the MRP System Current Products.
(F) Allocation. The parties hereto agree that the consideration paid or
----------
given for the Assets (including but not limited to the Purchase Consideration)
shall be deemed, for all purposes (including those relating to Taxes of any kind
whatsoever), to be allocated in accordance with Exhibit 1.1(F) annexed hereto.
Accordingly, and without limiting the foregoing, Buyer and Corporation agree to
each prepare and file on a timely basis with the Internal Revenue Service (and
applicable state tax authorities) substantially identical and supplemental
Internal Revenue Service Forms 8594 (and corresponding state tax forms) prepared
consistently with such Exhibit 1.1(F).
1.2 Liabilities.
-----------
(A) Assumed Liabilities. In addition to the consideration payable pursuant
-------------------
to Section 1.1(D) hereof, and subject to the terms and conditions set forth in
this Agreement, effective as of the Closing Date, Buyer hereby assumes only (i)
those liabilities of the Corporation specifically set forth on Exhibit 1.2(A)
(the "Assumed Liabilities") and
2
<PAGE>
(ii) the liabilities and obligations associated with the Assets that arise after
the Closing Date.
(B) Liabilities Not Assumed. Except as specifically provided in Section
-----------------------
1.2(A), Buyer neither assumes nor shall be obligated to pay, perform or
discharge any of the debts, liabilities and obligations of the Corporation (such
non-assumed liabilities being hereinafter referred to as the "Non-Assumed
Liabilities"). The Corporation agrees to hold the Buyer harmless from any and
all liabilities, costs and expenses incurred by the Buyer prior to the
confirmation of the Plan in connection with any Non-Assumed Liabilities of the
Corporation.
1.3 Closing and Post-Closing Transfer.
---------------------------------
(A) The closing of the purchase and sale of the Assets, other than the
Regulatory Assets and the MRP System Current Products identified in Section
(9)(i) of Exhibit 1.1(A), (the "Closing") shall be held at the offices of
counsel to Buyer, Epstein Becker & Green, P.C., 250 Park Avenue, New York, New
York 10177, within 5 Business Days after each of the conditions set forth in
Section 5 has been satisfied or waived in accordance with the terms of this
Agreement, or at such other date, time and place as the Corporation and Buyer
shall mutually agree in writing (the day of occurrence of the Closing being
referred to hereinafter as the "Closing Date"), or may be conducted by
facsimile, by mail or courier delivery of documents and instruments of transfer,
or by any other method mutually agreed by the Corporation and the Buyer.
(B) Post-Closing Transfer. The transfer to the Buyer of the Regulatory
---------------------
Assets and the MRP System Current Products shall occur on the Post Closing
Transfer Date, at such time and place as shall be mutually agreed by the
Corporation and the Buyer, or may be conducted by facsimile, by mail or courier
delivery of documents and instruments of transfer, or by any other method
mutually agreed by the Corporation and the Buyer.
1.4 Certain Bankruptcy Matters.
--------------------------
(A) The Corporation agrees that promptly after execution and delivery of
this Agreement and the Distribution Agreement it shall file a voluntary petition
(the "Petition") with the Bankruptcy Court initiating a case under chapter 11 of
the Bankruptcy Code. The date on which the Petition is filed with the Bankruptcy
Court is herein referred to as the "Petition Date".
(B) On the Petition Date, the Corporation shall file with the Bankruptcy
Court a motion or motions, in form and substance satisfactory to the Buyer and
Baxter, to: (i) approve the Corporation's assumption (but not assignment)
(pursuant to Bankruptcy Code Section 365) of the Distribution Agreement (the
"Assumption Motion"); (ii) approve and authorize the Corporation to consummate
(pursuant to Bankruptcy Code Section 363), subject to overbid, this Agreement
(the "Sale Motion"); (iii) approve and authorize the Corporation to honor (and,
if necessary, assume) a retention pay program (the "RPP Motion"); and (iv)
establish and approve procedures and deadlines for the submission and
3
<PAGE>
consideration of overbids for purchase of the Assets, including an expense
reimbursement provision of the type contained to in Section 1.5(B) below (the
"Overbid Procedures Motion").
(C) The Overbid Procedures Motion shall provide for the following notice
and overbid procedures:
(i.) That a hearing (the "Sale Hearing") on the motion to approve
and authorize the Corporation to consummate (pursuant to Bankruptcy Code Section
363), subject to overbid, this Agreement (the "Sale Motion") be set for a date
no later than December 11, 1998.
(ii.) At least 21 days prior to the Sale Hearing, the Corporation
shall have filed and served the Sale Motion (which shall include a notice of the
hearing and an explanation of the overbid procedures set forth herein), this
Agreement executed by the Corporation and the Buyer, and all supporting evidence
on: (a) the Office of the United States Trustee (the "UST"), (b) the
Corporation's twenty largest unsecured creditors, (c) the Buyer, (d) all
entities who have provided the Corporation with written expressions of interest
in purchasing the Assets, and (e) such other persons as the Bankruptcy Court may
direct.
(iii.) With respect to the Sale Hearing: any objection (an "Initial
Objection") to (a) the Sale Motion, including any objection to the assumption
and assignment by the Corporation of the Included Agreements, (b) any allegation
that defaults exist or must be cured as a condition to the assumption and
assignment of the Included Agreements, which allegation must include a precise
statement of the nature and amounts of such alleged defaults (a "Statement of
Defaults"), and (c) any competing "Initial Overbid" (as described below) must be
filed with the Court and served on the Corporation, the special bankruptcy
counsel to the Corporation, the Buyer, and the UST, in a manner such that the
Initial Objection, Statement of Defaults, and/or Initial Overbid actually is
received by no later than 7 days prior to the Sale Hearing (the
"Objection/Overbid Deadline"). The failure to file and serve a timely Initial
Objection, Statement of Defaults, or competing Initial Overbid shall be deemed
to be a waiver of any defaults and a consent to the proposed sale of the Assets
(including an assumption and assignment of the Included Agreements) to the
Buyer.
(iv.) Any entity (other than the Buyer) that is interested in
purchasing the Assets must submit to the Corporation an "Initial Overbid" in
conformance with this paragraph by no later than the Objection/Overbid Deadline.
Any such Initial Overbid must:
(a.) Be filed with the Bankruptcy Court and served on the
Corporation, the Buyer, and the UST in a manner such that
the Initial Overbid actually is received on or before the
Objection/Overbid Deadline;
4
<PAGE>
(b.) Be on substantially the same terms and conditions as are
contained in the Acquisition Agreement;
(c.) Contain terms and conditions no less favorable to the
Corporation than the terms and conditions of the
Acquisition Agreement;
(d.) Provide for aggregate consideration to the Corporation of
at least $125,000 more than the consideration to be
provided by the Buyer;
(e.) Be accompanied by affidavits or declarations establishing
the overbidder's good faith, within the meaning of section
363(m) of the Bankruptcy Code, and its "adequate assurance
of future performance" of the Included Agreements to be
assumed, as required under the Bankruptcy Code;
(f.) Provide for the overbidder's assumption of certain of the
Corporation's obligations under the Distribution
Agreement, including those set forth in Section 8.1 of the
Distribution Agreement as follows: (x) any remaining
obligation to supply Disposable Kits and Antibody Vials
(as defined in the Distribution Agreement); (y) the
obligation to purchase, upon request by Baxter and the
Corporation, at the price paid by Baxter therefor, any
remaining unsold Disposable Kits and Antibody Vials
previously purchased by Baxter from the Corporation; and
(z) the Corporation's indemnification obligations to
Baxter related to the Disposable Kits and Antibody Vials
sold by Baxter;
(g.) Be accompanied by affidavits or declarations establishing
that the overbidder is willing, authorized, capable, and
qualified, financially, legally, and otherwise, of
unconditionally performing all obligations under the
Acquisition Agreement (or its equivalent) and assumed
obligations under the Distribution Agreement in the event
that it submits the prevailing overbid at the Sale
Hearing.
(v.) Any entity that fails to submit a timely, conforming Initial
Overbid, as set forth above, shall be disqualified from bidding for the Assets
at the Sale Hearing.
(vi.) The Corporation and other parties in interest may file
responses to any Initial Objection, Statement of Defaults, or Initial Overbid by
no later than 2 days prior to the hearing.
(vii.) If no timely, conforming Initial Overbids are submitted, the
Corporation shall request at the Sale Hearing that the Court approve this
Agreement and
5
<PAGE>
the proposed sale of the Assets to the Buyer.
(viii.) In the event that one or more timely, conforming Initial
Overbids are submitted (each person who has submitted such a timely conforming
Initial Overbid shall be referred to herein as a "Qualified Overbidder"), the
Corporation may request either that the Court approve this Agreement and the
proposed sale of the Assets to the Buyer or that the Court conduct an auction
for such assets at the Sale Hearing (the "Auction"), in which the Buyer and all
Qualified Overbidders may participate. The Auction shall be governed by the
following procedures:
(a.) All Qualified Bidders shall be deemed to have consented to
the core jurisdiction of the Bankruptcy Court and to have waived any
right to jury trial in connection with any disputes relating to the
Auction and/or the sale of the Assets. The Buyer and all Qualified
Overbidders shall be bound by their bids until such time as a
definitive sale agreement is executed by the prevailing bidder (as
approved by the Court at the conclusion of the Auction) and the Court
has entered an order approving the sale to the prevailing bidder, but
not later than 10 days after the Auction. If, for any reason, such
prevailing bidder is unable or unwilling to execute a definitive sale
agreement or to perform its obligations thereunder, the Corporation,
in the exercise of its business judgment, may sell the Assets to the
next highest bidder at the Auction (as approved by the Court), upon ex
--
parte application to the Court and without further notice or a
-----
hearing (except that parties to the Included Agreements shall receive
notice and an opportunity for a hearing), provided that such bidder is
--------
authorized, capable, and qualified to proceed with the sale;
(b.) Bidding will commence at the amount of the highest bid
submitted by a Qualified Overbidder, as determined by the Corporation
in its reasonable discretion;
(c.) The next subsequent overbid shall be made in an increment of
at least $25,000 in aggregate consideration above the previous bid;
provided, however, that during the course of the Auction (but not
-------- -------
following the conclusion of the Auction and not as a right of first
refusal), the Buyer shall have the right to match (as opposed to
overbid) the highest bid then made at the Auction by a Qualified
Overbidder, and if no overbid is made, the Buyer shall be deemed to be
the prevailing bidder;
(d.) If, upon the conclusion of the Auction, the Buyer has failed
to make a bid that the Corporation determines, in its reasonable
discretion, to be equal to or greater than the highest bid made by a
Qualified Overbidder, the Corporation will recommend that the Court
authorize and approve a sale of the Assets (including an assumption
and assignment of the Included Agreements) to such prevailing
Qualified Overbidder; and
6
<PAGE>
(e.) If, however, the Buyer does make a bid that the Corporation
determines, in its reasonable discretion, to be equal to or greater
than the highest bid made by a Qualified Overbidder, the Corporation
will recommend that the Court approve this Agreement and authorize the
Corporation to sell the Assets (including an assumption and assignment
of the Included Agreements) to the Buyer in accordance therewith.
(ix.) The Corporation reserves all rights to exercise its business
judgment to recommend a sale of the Assets (including an assumption and
assignment of the Assigned Agreements) to any bidder whose bid the Corporation
determines, in its sole discretion, to be in the best interests of the estate.
Each Qualified Overbidder should be prepared to make its best and final offer at
the Auction on the date of the Sale Hearing; and the Corporation shall object to
and oppose any request for a continuance or recess of the Sale Hearing.
(x.) In the event that the parties hereto are unable to consummate
the sale of the Assets pursuant to this Agreement for any reason, including if a
Qualified Overbidder is the purchaser, and such failure is not due to a breach
by the Buyer, the Corporation shall reimburse the Buyer for actual and
reasonable out-of-pocket expenses incurred in connection with the sale
(including legal fees and costs) up to $100,000, as provided in Section 1.5(B)
of this Agreement.
(D) The Corporation shall use its best efforts to secure the entry of an
order or orders, in form and substance satisfactory to Baxter and the Buyer,
granting the RPP Motion and the Overbid Procedures Motion (including the
procedures in Section 1.4(C) (iii)(b)) and, to the extent the RPP Motion is
granted, the Assumption Motion. The Corporation shall use its best efforts to
have the Bankruptcy Court schedule expedited hearings on the Assumption Motion,
the RPP Motion and Overbid Procedures Motion, but in no event shall the
Corporation request hearings on the Assumption Motion, the RPP Motion and
Overbid Procedures Motion to be held sooner than five (5) business days after
the Petition Date.
(E) The Corporation shall use its best efforts to have the Bankruptcy
Court schedule the Sale Hearing at the earliest practicable date not less than
21 days after the entry of an Order granting the Overbid Procedures Motion. The
Corporation shall use its best efforts to secure the entry of an order, in form
and substance satisfactory to the Buyer, granting the Sale Motion.
(F) If, for any reason whatsoever, the Bankruptcy Court has not (i)
entered an Order granting the Assumption Motion and an Order granting the
Overbid Procedures Motion (in each case, satisfactory to the Buyer and Baxter)
by the date falling 30 days after the Petition Date or (ii) entered an Order
(satisfactory to the Buyer) approving the sale of the Assets to the Buyer
pursuant to this Agreement by the date falling 120 days after the Petition Date,
Baxter, with the approval of the Buyer, shall have the immediate right to
7
<PAGE>
terminate the Distribution Agreement and the Buyer shall have the immediate
right to terminate this Agreement.
1.5 Bidding Protections.
-------------------
(A) Other Proposals. Except as provided for in the Overbid Procedures
---------------
Motion or otherwise by order of the Bankruptcy Court, neither the Corporation
nor any of its Affiliates or Agents, directly or indirectly, will (i) solicit or
initiate discussions or engage in negotiations or discussions with any other
person or entity (other than the Buyer or any of its Affiliates or Agents)
involving (a) the possible acquisition of the Corporation's capital stock, (b)
the possible acquisition of any of the Corporation's intellectual property or
any other material tangible or intangible property of the Corporation which is,
or has a reasonable possibility of being, included in the Assets, (c) a merger
or other business combination involving the Corporation or (d) any form of
extraordinary transaction involving the Corporation that could reasonably be
expected to frustrate the purposes of, or hinder, the Transaction (a "Competing
Transaction"); (ii) provide information to any person or entity (other than the
Buyer or its affiliates or Agents) with respect to a possible Competing
Transaction; or (iii) enter into any Competing Transaction with any person or
entity other than the Buyer or any of its affiliates.
(B) Expense Reimbursement. In the event that (i) the Corporation is unable
---------------------
to obtain the Sale Order permitting consummation of the sale to the Buyer, or
(ii) this Agreement is terminated for any reason other than as set forth in the
last sentence of this Section 1.5(B), the Buyer shall be entitled to receive
reimbursement of the reasonable, actual, out-of-pocket costs and expenses paid
or incurred by Buyer, directly incident to, under or in connection with this
Agreement and the transactions contemplated hereby (including fees and
disbursements of counsel, accountants, financial advisors and other third
parties and commitment fees paid to financing institutions) in an amount not to
exceed $100,000 in the aggregate (the "Expense Reimbursement"). The Expense
Reimbursement shall be payable within 5 days after the earlier of (x) the
consummation of a sale to a Qualified Overbidder or a Competing Transaction; or
(y) termination of this agreement for any reason other than a sale or
transaction specified in Section 1.5(B)(x); provided, that the Buyer shall have
--------
presented to the Corporation invoices or other documentation supporting the
Expense Reimbursement. Buyer's claim for such Expense Reimbursement shall be a
super-priority administrative claim in the Case senior to all unsecured
administrative claims other than those arising under administrative claims of
employees of the Corporation for wages, benefits and severance entitlements.
Notwithstanding anything contained in this Agreement to the contrary, the Buyer
shall not be entitled to receive the Expense Reimbursement if the Agreement is
terminated pursuant to Section 14.1(C) (by the Corporation solely as a result of
any default or breach by Buyer).
2. Representations and Warranties to Buyer
---------------------------------------
The Corporation represents and warrants to Buyer as of the date hereof and
as of the Closing Date as follows:
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2.1 Good Standing.
-------------
The Corporation is a corporation organized, validly existing and in good
standing under the Laws of the State of Delaware, with all necessary corporate
power to own, lease and operate its properties and to carry on its business as
the same is now being conducted. True, accurate and complete copies of the
Certificate of Incorporation and By-Laws of the Corporation have been provided
to Buyer.
2.2 Authority.
---------
Subject to obtaining the Sale Order, (i) the Corporation possesses full
right, corporate power and legal authority to execute and deliver this Agreement
and the other Transaction Documents and to make and/or perform, as the case may
be, each of the agreements, representations and warranties on its part to be
made and performed hereunder and thereunder; (ii) the execution and delivery of
this Agreement and the other Transaction Documents to which the Corporation is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by the Board of Directors of the
Corporation; and (iii) this Agreement and the other Transaction Documents to
which the Corporation is a party have been duly and validly executed by the
Corporation and constitute the legal, valid and binding obligation of the
Corporation enforceable against it in accordance with their terms. Except as set
forth on Schedule 2.2, the execution and delivery of this Agreement and the
other Transaction Documents to which the Corporation is a party and the
performance of all of the transactions contemplated herein and therein do not
and shall not (with or without the giving of notice, the passage of time or
both) violate or conflict with (x) any Law where such violation would have a
Material Adverse Effect or (y) the Certificate of Incorporation or By-laws of
the Corporation. Except as described in Section 1.4 and as set forth on Schedule
2.2, no other action or consent, whether corporate or otherwise, including
action by or any filing with or notice to any Authority, is necessary in
connection with the execution, delivery, validity or enforceability of this
Agreement or the other Transaction Documents (except as expressly set forth
therein) with respect to the Corporation or the consummation of the transactions
contemplated hereby or thereby.
2.3 FDA and Related Regulatory Matters.
----------------------------------
(A) Except as disclosed in Schedule 2.3(A), to the best of the
Corporation's knowledge, the Corporation, its facilities and all products
manufactured or marketed by the Corporation (or any Affiliate) have been in
compliance and continue to comply, in all material respects, with all applicable
requirements of the FDA and any analogous Authority in any other country or
other jurisdiction.
(B) Schedule 2.3(B) lists all PMAs, 510(k)s, IDEs, INDs, Drug Master
Files, Device Master Files, ELAs, PLAs, BLAs and other FDA-related submissions
including all similar submissions to any analogous Authority in any other
country or other jurisdiction, which relate to products manufactured or marketed
by the Corporation (or any Affiliate). Except as disclosed in Schedule 2.3(B),
to the best of the Corporation's
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knowledge, these submissions complied at the time they were made, and continue
to comply, in all material respects, with applicable requirements of the FDA or
any analogous Authority in any other country or jurisdiction, as the case may
be.
2.4 Title to Assets; Encumbrances.
------------------------------
(A) Subject to any order or action of the Bankruptcy Court, the
Corporation is the sole and exclusive owner of and has good and valid title to
all of the Assets, free and clear of all Encumbrances, except for Permitted
Encumbrances and except as set forth in Schedule 2.4 attached hereto.
(B) To the best knowledge of the Corporation, no Affiliate, employee or
agent of the Corporation has any interest in any of the Assets other than
interests attributable to their status as a shareholder or as a general or
employee creditor of the Corporation.
2.5 Intellectual Property.
---------------------
(A) Schedule 2.5(A) contains a list and description of all Patents and
Trademarks currently owned by or licensed to the Corporation (separately
identifying those which are owned and those which are licensed and, if not owned
by the Corporation, identifying the owner thereof, if any).
(B) Schedule 2.5 (B) contains a list of (i) all applications for
registration of any Intellectual Property (other than Patents) owned by or
licensed to the Corporation (identifying the Intellectual Property, the
application or registration number and the jurisdiction thereof) and (ii)
pending applications for any Patents where the Corporation is listed as the
owner or is the licensee of such Patents (identifying the subject matter of the
application, the relevant application number, the jurisdiction thereof and the
owner thereof). True and correct copies of all such applications and
registrations have been provided to the Buyer.
(C) Schedule 2.5 (C) contains a list of all material documents relating to
product clearances for Patent infringement performed by or on behalf of the
Corporation with respect to (i) the CEPRATE(R) System and (ii) all other
products of the Corporation. The Corporation has delivered to the Buyer true and
correct copies of all such documents.
(D) Schedule 2.5 (D) contains a list and description of all Owned
Software.
(E) Except as disclosed in Schedule 2.5(E): (i) to the knowledge of the
Corporation, all Patents, and all Copyright and Trademark registrations, owned
by the Corporation are valid and in full force and effect, and (ii) the
Corporation has not received notice of any outstanding challenges, by any third
party, either to any such Patents or registrations or to any of the applications
described in Section 2.5 (B).
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(F) Except as disclosed in Schedule 2.5 (F), the Corporation is not aware
that there now exists any use, by a third party, of any Intellectual Property
which violates any material Intellectual Property Right of the Corporation.
(G) Except for the Patent Litigation and except as set forth in Schedule
2.5 (G), (i) to the Corporation's knowledge, no infringement of any material
Intellectual Property Right of any other person or entity has occurred or
results in any way from the current operations of the Corporation, and (ii) no
claim of any infringement by the Corporation of any material Intellectual
Property Right of any other person or entity has been made, asserted or
threatened against the Corporation. (H) Except as disclosed in Schedule 2.5
(H): (i) the Corporation has all right, title and interest in and to the
Owned Software; and (ii) any Owned Software includes the source code, object
code and system documentation, used for the development, maintenance,
implementation and use thereof.
(I) Except as disclosed in Schedule 2.5 (I), all employees, agents,
consultants or contractors who have contributed to or participated in the
creation or development of any copyrightable, patentable or trade secret
material on behalf of the Corporation or any predecessor in interest thereto
either: (i) is a party to a valid written agreement under which the Corporation
is deemed to be the original owner/author of all property rights therein; or
(ii) has executed, or is obligated pursuant to an existing agreement to execute,
a valid agreement assigning to the Corporation (or such predecessor in interest,
as applicable) all right, title and interest in such material; provided,
however, that this Section 2.5 (I) shall not apply to any copyrightable,
patentable or trade secret material which, whether considered individually or in
the aggregate, is not material to the operation of the business of the
Corporation.
2.6 Contracts and Commitments.
-------------------------
Subject to any order or action of the Bankruptcy Court:
(A) Except as set forth on Schedule 2.6 attached hereto, the Corporation
has made available to Buyer for review true and correct copies of all contracts
and commitments that are material to the Business and operations of the
Corporation and, to the knowledge of the Corporation, all contracts and
commitments that involve material liabilities or obligations of the Corporation,
including the text of any written or oral:
(i) Cooperative research and development agreement, supply agreement,
research agreement, research funding agreement, clinical trial agreement, cell
processing laboratory agreement, investigator agreement, development agreement,
consulting agreement, incoming material transfer agreement, or outgoing material
transfer agreement;
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(ii) royalty, distribution, agency or license agreement (license
agreements shall include, but not be limited to, any agreement pursuant to which
the Corporation or any third party is licensed, or otherwise afforded the right,
to use, sell, reproduce or exploit any Intellectual Property);
(iii) agreement (except leases of personal property) for the
purchase or sale of products or other personal property, or the provision or
purchase of services, involving a sum in excess of $15,000;
(iv) partnership or joint venture agreement;
(v) security, pledge or escrow agreement or any other agreement
creating or providing for the creation of any Encumbrance.
(B) Included in the books and records being conveyed to Buyer
at Closing are true and correct copies of all Included Agreements, including all
Included Agreements that have not been made available to Buyer that become known
to the Buyer or the Corporation prior to the confirmation of the Plan.
(C) Except as set forth in Schedule 2.6(C), to the best of the
Corporation's knowledge, each of the Included Agreements to which the
Corporation is a party is valid, enforceable and in full force and effect,
except to the extent that an Included Agreement is rendered invalid,
unenforceable, or not in full force and effect as a result of breaches and
defaults set forth in Section 365(b)(2) of the Bankruptcy Code.
(D) Except (i) as set forth in Schedule 2.6(D), (ii) for breaches and
defaults set forth in Section 365(b)(2) of the Bankruptcy Code and (iii) for
defaults that are cured or deemed waived pursuant to the procedures described in
Section 1.4(C)(iii), there is no existing breach of any Included Agreement by
the Corporation; and no event has occurred which, with the lapse of time or the
giving of notice or both, would constitute a material breach of any Included
Agreement by the Corporation or give rise to a right on the part of any of the
other parties thereto to terminate such Included Agreement or to deprive the
Corporation of any material right, or accelerate any of its material
obligations, thereunder.
(E) Except (i) as set forth in Schedule 2.6(E), (ii) for breaches and
defaults set forth in Section 365(b)(2) of the Bankruptcy Code and (iii) for
defaults that are cured or deemed waived pursuant to the procedures described in
Section 1.4(C)(iii), to the knowledge of the Corporation there is no existing
material breach of any Included Agreement by any party (other than the
Corporation) thereto and no event has occurred which, with the lapse of time or
the giving of notice or both, could constitute a material breach thereof by such
other party or give rise to a right on the part of the Corporation to terminate
such Included Agreement or to deprive the other party of any right, or
accelerate any obligation of such party, thereunder.
12
<PAGE>
(F) The Corporation makes no representation or warranty as to the
transferability or assignability of any Included Agreement (or the rights or
obligations thereunder), including, without limitation, as to whether the
transfer or assignment of any such Included Agreement will cause any forfeiture
or impairment thereunder or as to whether the consent, approval or act of, or
the making of any filing with, or the giving of any notice to, any other party
is required in connection with the assignment or transfer of any Included
Agreement.
2.7 Legal Proceedings.
-----------------
(A) Except as set forth on Schedule 2.7 (A) attached hereto, there are no
Actions pending, or to the best knowledge of the Corporation, threatened against
or affecting the Corporation or any of the Assets (other than the Patent
Litigation and the Securities Litigation); and the Corporation is not in default
with respect to any material Order entered against the Corporation or any of the
Assets (other than as contemplated by the Settlement Agreement and the documents
delivered in connection therewith). Except as set forth on Schedule 2.7 (A),
there are no Orders issued against the Corporation or any of the Assets.
(B) Except as set forth on Schedule 2.7 (B), there are no Actions in which
the Corporation is currently either a plaintiff or, if not a formal proceeding,
an aggrieved party or claimant relating to any of the Assets.
2.8 Compliance with Law; Permits.
----------------------------
The Corporation (a) has complied in all material respects with all
federal, state, local and, to the best of the Corporation's knowledge, foreign,
laws, statutes, regulations, rules, codes or ordinances applicable to the
Corporation and (b) has all federal, state, local and, to the best of the
Corporation's knowledge, foreign, governmental licenses, permits and
qualifications material to and necessary in the conduct of its business as
currently conducted.
2.9 Suppliers and Customers.
-----------------------
Schedule 2.9 attached hereto sets forth, as to the Corporation, (A) all of
the buyers or licensees of its products since December 1, 1996, and (B) the
twenty largest providers (including licensors) of goods, services and/or
Intellectual Property or other rights to the Corporation since December 1, 1995.
Schedule 2.9 also sets forth, as to the Corporation, all other Persons who
provide or, within the last year, provided goods, services and/or Intellectual
Property or other rights which goods, services or rights are otherwise material
to the Business of the Corporation.
13
<PAGE>
2.10 Products; Product Samples.
-------------------------
(A) The samples of Current Products included in the Assets are genuine
examples of each of the Current Products of the Corporation and are
substantially identical in all material respects to products that are
merchantable and suitable for sale in the ordinary course of the Corporation's
business as new and first quality goods.
(B) Schedule 2.10(B) attached hereto is a true and correct list of all
products ("Current Products") of the Corporation, showing in each case the name
of the product, the model number, and the Corporation's inventory part number or
other product code.
2.11 Affiliated Transactions.
-----------------------
Schedule 2.12 sets forth a list of every Material Contractor which is owned
(directly or indirectly, in whole or in part) by any Affiliate of the
Corporation or (to the best knowledge of the Corporation) by any current or
former employee or agent of the Corporation.
2.12 Benefits Received.
-----------------
The Corporation has not:
(A) received any payment or other consideration for any products or
services that Buyer will be obligated hereunder to deliver; or
(B) received any payment or other benefit for or with respect to any other
obligation that Buyer will be obligated hereunder to perform.
2.13 Books and Records; Liabilities.
------------------------------
The books and records of the Corporation included in the Assets accurately
reflect all material Assets and all Assumed Liabilities.
2.14 Brokers.
-------
Except as described on Schedule 2.14, no broker, finder or other such
Person has been connected with, or is entitled to receive a finder's or broker's
fee or other such compensation with respect to, the transactions contemplated
hereby as a result of actions of the Corporation or any director, officer,
employee, agent or shareholder thereof.
3. Representations and Warranties of Buyer.
---------------------------------------
14
<PAGE>
Buyer represents and warrants, as of the date hereof and as of the Closing
Date, as follows:
3.1 Good Standing.
-------------
Buyer is a corporation organized, validly existing and in good standing
under the Laws of the State of Delaware, with all necessary corporate power to
own, lease and operate its properties and to carry on its business as the same
is now being conducted. True, accurate and complete copies of the Certificate of
Incorporation and By-Laws of Buyer have been provided to the Corporation.
3.2 Authority.
---------
Buyer possesses full right, corporate power and legal authority to execute
and deliver this Agreement and to perform and/or make, as the case may be, each
of the agreements, representations and warranties on its part to be made and
performed hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Buyer. This Agreement has been duly and
validly executed and delivered by Buyer and this Agreement constitutes a valid
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms. The execution and delivery of this Agreement and the performance of
all of the transactions contemplated herein do not and shall not (with or
without the giving of notice, the passage of time or both) (A) violate or
conflict with any Law or the Certificate of Incorporation or By-laws of the
Buyer, or (B) (i) violate or conflict with any condition or provision of, (ii)
result in the creation or imposition of any Encumbrance upon any of the assets
of the Buyer pursuant to, (iii) accelerate or create or permit the acceleration
or creation of, any liability or obligation of the Buyer under, or (iv) cause a
termination under or give rise to a right of termination under, the terms of any
agreement or Order to which the Buyer is a party or which is binding upon the
Buyer. No other action or consent, whether corporate or otherwise, including
action by or filing with or notice to any Authority, is necessary in connection
with the execution, delivery, validity or enforceability of this Agreement with
respect to the Buyer or the consummation of the transactions contemplated
hereby.
3.3 Brokers.
-------
No broker, finder or other such person or entity has been connected with,
or is entitled to receive a finder's or broker's fee or other such compensation
with respect to, the transactions contemplated hereby as a result of actions of
the Buyer or any director, officer, employee, agent or shareholder thereof.
15
<PAGE>
3.4 Litigation.
----------
There is no litigation or proceeding pending or, to Buyer's
best knowledge, threatened against or affecting Buyer or any property or asset
of Buyer that would adversely affect Buyer's ability to carry out this
Agreement.
3.5 Valid Issuance of Securities.
----------------------------
The Shares of VIMRx that are being issued to the Corporation pursuant
hereto, when delivered in accordance with the terms hereof for the consideration
expressed herein, will be duly and validly issued, fully paid and nonassessable
and free of restrictions on transfer other than restrictions on transfer
provided under this Agreement and applicable state and federal securities laws.
The Shares will be delivered in compliance with all applicable federal and state
securities laws.
3.6 SEC Documents; Financial Statements
-----------------------------------
(A) VIMRx has filed all forms, reports and documents required to be filed
by it with the U.S. Securities and Exchange Commission (the "SEC") (such
documents herein collectively referred to as the "VIMRx SEC Documents"). As of
their respective filing dates, the VIMRx SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended, and the Securities Act of 1933, as amended, and none of the VIMRx SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed VIMRx SEC
Document.
(B) The financial statements of VIMRx, including the notes thereto,
included in the VIMRx SEC Documents (the "VIMRx Financial Statements") were
complete and correct in all material respects as of their respective filing
dates, complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with United States generally accepted accounting principles applied
on a basis consistent throughout the periods indicated and consistent with each
other (except as may be indicated in the notes thereto or, in the case of
unaudited statements, included in Quarterly Reports on Forms 10Q). The VIMRx
Financial Statements fairly present the consolidated financial condition and
operating results of VIMRx and its subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments). There has been no change in VIMRx
accounting policies except as described in the notes to the VIMRx Financial
Statements.
16
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4. Certain Covenants.
-----------------
4.1 Pre-Closing.
-----------
(A) Corporation. From the date hereof until the Closing Date, except
-----------
insofar as any failure of the following results directly from filing or
prosecuting of the Case or implementation of the Overbid Procedures Order, the
Corporation covenants that it shall:
(i) preserve and maintain its corporate existence and good standing
in the jurisdiction of its incorporation;
(ii) maintain, keep and preserve, in all material respects, all of
the Assets;
(iii) exercise commercially reasonable efforts to keep available the
services of its employees identified in the RPP Motion, to satisfy its
obligations pursuant to the Included Agreements, except to the extent that any
defaults under any of the Included Agreements are cured, deemed waived or
otherwise satisfied pursuant to the procedures described in Section 1.4(C)(iii);
(iv) keep reasonably adequate books and records, as they relate to
the Assets;
(v) upon reasonable prior notice and during normal business hours,
(x) permit Buyer, or any agent or representative thereof, to examine and make
copies and abstracts from the Corporation's records and books and visit and
inspect any and all of its properties and (y) make available its officers,
directors and employees to discuss with Buyer and its representatives the
Corporation's affairs, finances and accounts;
(vi) in the event and to the extent that events or circumstances
occur or arise, or the Corporation becomes aware of events or circumstances,
which render any of the representations and warranties set forth in Section 2
hereof materially incomplete or otherwise materially inaccurate, and without
limiting in any way Buyer's rights under Section 5.1, promptly notify Buyer and
Buyer's counsel thereof and provide a reasonably detailed description of such
events or circumstances;
(vii) promptly notify Buyer of any Order of the Bankruptcy Court
entered in the Case that affects or will affect the Assets or the sale of the
Assets contemplated herein and promptly upon request deliver a copy of any such
Order to Buyer;
(viii) not, without the prior written consent of Buyer, mortgage,
pledge or subject to any Encumbrance (other than Permitted Encumbrances) any of
the Assets;
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(ix) not, without the prior written consent of Buyer, sell, transfer
or otherwise dispose of any assets or property included in the Assets, except in
connection with (a) a sale to a Qualified Overbidder pursuant to the procedures
described in Section 1.4(C), or (b) the sale of inventory in the ordinary course
of business;
(x) not, without the prior written consent of Buyer, waive, release
or compromise any material claims or rights which are included in the Assets;
(xi) not, without the prior written consent of Buyer, (a) enter into
any material transaction or agreement which would have a Material Adverse Effect
on the Assets or (b) amend or terminate any Included Agreement, provided, that
nothing herein shall be deemed to obligate the Corporation to extend any
Included Agreement beyond its current term or to exercise any option to renew
any of the Included Agreements, and provided, further, that the Corporation
shall use its reasonable efforts to give the Buyer reasonable prior written
notice of the expiration of the term of, or the expiration of any period for
exercise of an option to renew, any of the Included Agreements prior to the
Closing Date;
(xii) not, without the prior written consent of Buyer, enter into or
amend any contract or other agreement, which constitutes or shall constitute
part of the Included Agreements or Assumed Liabilities, pursuant to which it
agrees to indemnify any party or to refrain from competing with any party or
engaging in any enterprise;
(xiii) not, without the prior written consent of Buyer, abandon or
forfeit any Intellectual Property, or any application for protection or
registration (including patenting) of any Intellectual Property;
(xiv) not merge, consolidate, liquidate or dissolve.
(B) Filings. The Buyer and the Corporation shall (i) promptly take all
-------
such action as may be reasonably necessary under any Laws applicable to or
necessary for, and will file and, if appropriate, use their reasonable efforts
to have declared effective or approved all documents and notifications with all
Authorities which they respectively deem necessary or appropriate for, the
consummation of the transactions contemplated hereby and (ii) promptly give any
other party hereto information requested by such other party pertaining to it
and its subsidiaries and Affiliates which is reasonably necessary to enable such
other party to take such actions and file in a timely manner all reports and
documents required to be so filed by or under applicable Laws.
(C) Cure of Defaults. Subject to the limitations on cure amount payments
----------------
under Section 1.1(B), the Corporation shall, on or prior to the Closing, cure
any and all defaults with respect to Included Agreements, or provide adequate
assurance that they will be cured.
18
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4.2 Post-Closing Covenants.
----------------------
(A) Assignability. To the extent that the Bankruptcy Court shall determine
-------------
that any Included Agreement, or any claim, right or benefit arising thereunder
or resulting therefrom is not capable of being sold, assigned, transferred or
conveyed pursuant to the Sale Order without the approval, consent or waiver of
the other party or parties thereto, or of any other Person (including an
Authority) ("Non-Assignable Contract"), this Agreement shall not, in the event
any such issuer or other Person shall object to such assignment, constitute a
sale, assignment, transfer or conveyance thereof, or an attempted sale,
assignment, transfer or conveyance thereof absent such approval, consent or
waiver. The Corporation shall use its best efforts (not to include the payment
of money), both prior and subsequent to the Closing Date, to obtain all
necessary approvals, consents or waivers necessary to convey to Buyer each such
Non-Assignable Contract as soon as reasonably practicable. To the extent any of
the approvals, consents or waivers referred to in this Section 4.2(A) have not
been obtained as of the Closing, the Corporation shall, exercise reasonable
commercial efforts to cooperate with Buyer in any reasonable and lawful
arrangements designed to provide the benefits of such Non-Assignable Contract to
Buyer.
(B) Lock-Up. For a period of 180 days following the Closing, the
-------
Corporation shall not sell into the public market more than that number of
Shares on any given day as would equal 25% of the average daily trading volume
of VIMRx common stock (excluding sales by the Corporation and by any third party
who has acquired Shares from the Corporation in a private transaction) during
the 180 day period immediately preceding (and not including) the date on which
such public sale by the Corporation occurs. Any third party buying Shares from
the Corporation in a private transaction or receiving such Shares in connection
with a distribution under the Plan will be bound by this provision in the same
manner and to the same extent as the Corporation is bound, and the Corporation
shall not sell shares to a third party in a private transaction unless the third
party acquiror has agreed, as a condition of such sale, to be bound by the
restrictions on sale set forth in this Section 4.2(B). The certificates for the
Shares delivered by the Buyer to the Corporation hereunder shall bear the
following legend:
SALE OF THESE SHARES IS RESTRICTED PURSUANT TO
THE TERMS OF AN AGREEMENT BY AND BETWEEN THE
ISSUER AND CELLPRO, INCORPORATED, DATED AS OF
OCTOBER 28, 1998. INFORMATION CONCERNING SUCH
RESTRICTIONS IS AVAILABLE FROM THE ISSUER OR
THE TRANSFER AGENT.
(C) On the Post-Closing Transfer Date, all of the right, title and
interest of the Corporation in and to the Regulatory Assets shall be transferred
to, and shall fully vest in, the Buyer. The Corporation shall thereupon deliver
the to the Buyer a letter to the FDA in the form of Exhibit 6.2(A) (on the
Corporation's letterhead), executed by an authorized officer of the Corporation
and complying with relevant FDA laws and policy, in respect of each of the
categories of FDA submissions listed in Schedule 2.3(B), assigning to the
19
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Buyer all of the Corporation's right, title and interest in and to each FDA
Submission listed on such Schedule.
(D) Facilitation of Possession. Subsequent to the Closing, the
--------------------------
Corporation, at the reasonable request of the Buyer, shall write letters to, and
otherwise communicate with third parties, and do such other reasonable acts and
things as may be necessary or appropriate (not to include the payment of money),
to facilitate the gaining of possession, by the Buyer of the Assets.
(E) Management Slate. For so long as the Corporation shall own any of the
----------------
Shares, the Corporation agrees to vote all of its Shares (whether at meetings,
pursuant to written consents or otherwise) for the election to the Board of
Directors of VIMRx of all candidates who are recommended to be elected thereto
by the then-current Board of Directors.
(F) Intellectual Property. The Corporation shall cooperate, and shall
---------------------
cause its Representatives to cooperate, with the Buyer (at the Buyer's cost and
expense) in obtaining, maintaining, enforcing, defending and confirming the
Buyer's ownership of the Intellectual Property included in the Assets.
(G) Proprietary Information.
-----------------------
(i) Confidentiality. At all times after the Closing Date, (a) the
---------------
Corporation (and its Affiliates, employees and Agents) shall hold all
Proprietary Information in the strictest confidence, (b) not use Proprietary
Information for any purpose and (c) not disclose any Proprietary Information to
any Person, by publication or otherwise. Notwithstanding the foregoing sentence,
the Corporation may disclose Proprietary Information if and to the extent that
it becomes legally compelled to do so; provided, however, that the Corporation
shall (1) immediately notify the Buyer of such legal compulsion in order to
enable the Buyer, if it so chooses, to apply for a protective order or similar
relief, (2) cooperate (at the cost and expense of Buyer) in all reasonable
respects with the Buyer's attempts to secure such protective Order or other
relief and (3) if and to the extent that the Buyer secures the same, comply in
all respects therewith.
(ii) Return of Information. Effective as of the Closing Date, all
---------------------
notes, data, apes, reference materials, memoranda and other documents, materials
or other tangible matter constituting or containing Proprietary Information
shall (as between the Buyer, on the one hand, and the Corporation, on the other
hand), belong exclusively to the Buyer. Without limiting any other provision
hereof, simultaneously with the Closing, the Corporation shall at the
Corporation's principal place of business surrender to the Buyer all such
documents, materials and tangible matter together with all copies thereof in the
Corporation's possession or control.
20
<PAGE>
(iii) Ownership of Information. Effective as of the Closing Date, (a)
------------------------
all Proprietary Information shall (as between the Buyer, on the one hand,
and the Corporation, on the other hand) be and remain the sole property of the
Buyer and (b) the Corporation hereby assigns to Buyer all of the Corporation's
right, title and interest, if any, in any idea or concept, invention, work of
authorship or other information or material (whether or not patentable or
protectable by copyright) conceived or developed in whole or in part by the
Corporation or any of its employees or Agents, or in which such employees or
Agents may have aided the development, while employed by or otherwise affiliated
with the Corporation, including, without limitation, any Proprietary
Information. If any such works of authorship are deemed in any way to fall
within the definition of "work for hire," as such term is defined in 17 U.S.C.
101, such works shall be considered "works made for hire," the copyright of
which, effective as of the Closing Date, shall be owned solely, completely and
exclusively by the Buyer. If any such works are determined not to be "works for
hire," such works are hereby automatically, effective as of the Closing Date,
owned by and assigned and transferred completely and exclusively to the Buyer.
Without limiting any other provision hereof, the Corporation will use reasonable
efforts to cause its current and former employees and Agents to execute,
acknowledge and deliver any instruments or documents and to do all other things
reasonably requested at any time, on or after the Closing Date, by the Buyer in
order to completely vest in the Buyer all ownership rights in such ideas,
concepts, inventions, works, information and materials.
(iv) License to the Corporation. Notwithstanding anything contained
--------------------------
in the foregoing subparagraphs (i) through (iii), at all times after the Closing
Date and for so long as the Distribution Agreement remains in effect, the
Corporation shall have a license to use Proprietary Information as and to the
extent necessary to fulfill its obligations under the Distribution Agreement.
(H) Non-Competition and Non-Solicitation.
------------------------------------
(i) Prohibited Conduct. During the period beginning on the Closing
------------------
Date and ending on the third anniversary of the Closing Date, and except as
expressly provided in the Distribution Agreement, the Corporation shall not,
directly or indirectly, anywhere in the world, (a) engage in the business of
manufacturing, selling, distributing, licensing or developing products or
services related to the selection or separation, or any subsequent modification,
genetic alteration, activation or expansion of cells for therapeutic purposes
such as cellular therapy or gene therapy (or engage in the business of selling
or providing any other product or service which the Corporation or the Buyer has
sold or provided within the eighteen months immediately preceding the Closing
Date) (the "Business") or assist, advise, represent or consult for any other
Person in connection with such Person engaging in the Business, (b) employ any
person who shall have been an employee of the Buyer within the six months prior
to the Determination Date, or induce, or attempt to induce, any employee of the
Buyer to leave such employ, or to accept any other position or employment or
assist any other Person in hiring such employee, (c) solicit, or attempt to
solicit, any Persons who or which are clients or customers of the Buyer as of
the Determination Date or who or which were clients or customers of the
Corporation as of the Closing Date, in connection with the engagement, by any
person or entity, in the Business,
21
<PAGE>
(d) otherwise disrupt or interfere with, or attempt to disrupt or interfere
with, the Buyer's relations with any actual or potential client, customer,
printer, publisher, distributor, promoter or supplier or any other material
relationship of the Buyer, or (e) publicly or privately disparage, criticize or
otherwise refer to the Buyer or any of its Affiliates in an adverse or
unflattering fashion, whether orally or in writing; provided, however, that
-------- -------
nothing contained in Section 4.2(H)(i)(e) shall be deemed applicable to former
employees of the Corporation once their employment and affiliation with the
Corporation has ceased.
(ii) Certain Understandings. For purposes of this Section 4.2(H):
----------------------
(a) the term "indirectly" shall include, without
limitation, a reference to any business or entity: (1) which the
Corporation engages in, consults for, manages, operates, controls or
supervises or in which it participates in the management, operation,
control or supervision of; or (2) in which the Corporation has any
direct or indirect ownership or financial interest, other than the
direct or indirect beneficial ownership by the Corporation of less
than two percent (2%) of the voting capital stock of a publicly held
corporation;
(b) the term "Determination Date" shall mean the date
with respect to which a determination as to the application of Section
4(H) is being made;
(c) any Person to whom or to which the Buyer, has sold
products or rendered services within the eighteen-month period
immediately preceding the Determination Date, or to whom or to which
the Corporation has sold products or rendered services within the
eighteen-month period immediately preceding the Closing Date, shall be
deemed to be a customer or client of the Buyer, or the Corporation, as
the case may be, as of the Determination Date or the Closing Date as
the case may be; and
(d) the Corporation or the Buyer, as the case may be,
shall be deemed, on any given Determination Date or on the Closing
Date, as the case may be, to be selling or providing, any product or
service if the Corporation or the Buyer, as the case may be, has or
had, as of such date, formulated plans to commence engaging in such
selling or provision and had expended time and effort in connection
with such formulation.
(iii) Certain Acknowledgements. The Corporation agrees that any and
------------------------
all restrictions set forth in this Agreement are fair and reasonable and are
reasonably required for the protection of the business and the interest of the
Buyer. Without limiting the foregoing, the Corporation acknowledges that the
Corporation conducts, and the Buyer intends to conduct, the Business throughout
the World.
22
<PAGE>
(I) Injunctive Relief. The Corporation agrees that damages cannot
-----------------
reasonably compensate the Buyer in the event of a violation of the covenants and
restrictions in Section 4.2(G) and 4.2(H) and that it would be difficult to
ascertain the damages which would be suffered by the Buyer. Accordingly, the
Corporation hereby agrees and consents that in the event of any actual or
threatened or violation, the Buyer shall be entitled to and may obtain
injunctive relief in order to prevent a continued violation of the terms of such
sections. The foregoing shall not limit the Buyer in the pursuit of any other
rights or remedies it may have hereunder or at law or in equity, including
damages.
(J) Severability. The parties intend that the provisions of the covenants
------------
and restrictions contained in Sections 4.2(G) and 4.2(H) be enforced to the
fullest extent permissible under applicable law. If any particular portion of
such covenants or restrictions are adjudicated or determined to be invalid or
unenforceable (including, without limitation, as to duration or geographic
area), such determination shall only apply to that portion of this Agreement and
the remaining covenants and restrictions shall be enforceable to the fullest
extent permissible (including, without limitation, fullest duration and
geographic area permissible) under applicable law.
(K) Certain Activities. The Corporation represents that it has withdrawn
------------------
its citizen's petition(s) before the FDA and has withdrawn its petition to HHS
requesting the exercise of so-called "march-in" rights with respect to Johns
Hopkins University patents, and the Corporation covenants and agrees that (A) it
will not refile or file, or cause or assist others to file, any new citizen's
petitions or other similar actions, or take any other action directly or
indirectly to interfere with the Buyer's pending pre-market approval application
with the FDA for the Isolex(R) cell separation system, and (B) it will cease any
and all attempts to acquire a license to CD34+ antibodies or any other asset
used or possessed by Nexell. The covenants under this Section 4.2(K) shall
survive the Closing, provided that if this Agreement shall terminate without
consummation of the sale of the Assets to the Buyer, the covenants under this
Section 4.2(K) shall no longer be binding.
(L) Change of Corporation's Name. Following the Post-Closing Transfer
----------------------------
Date, (i) the Corporation shall cease to use the name "CellPro" in any of its
business operations, (ii) shall not use the name CellPro in connection with the
sale of any product, and (iii) as soon as practicable, shall either: (x) wind up
its affairs and dissolve, subject to confirmation of the Plan, or (y) amend its
Certificate of Incorporation to change its name to one that does not contain the
word "CellPro" or any variation of such name or any other confusingly similar
name. Subject to the covenants contained in the preceding sentence, effective
from and after the Closing Date, the Buyer grants to the Corporation a non-
exclusive license to use the name "CellPro" and the Trademarks transferred to
the Buyer under this Agreement, provided that such name and Trademarks may be
--------
used by the Corporation solely for the purposes of satisfying its obligations
under the Distribution Agreement and of completing its dissolution and winding
up. Notwithstanding the foregoing, the Corporation agrees that following the
Closing Date, it will not interfere with the Buyer's use of the name "CellPro"
or the Buyer's use of any of the Trademarks transferred to the Buyer.
23
<PAGE>
5. Conditions to Obligations of Buyer and the Corporation
------------------------------------------------------
5.1 Buyer's Conditions.
------------------
The obligations of Buyer to consummate the transactions contemplated
hereunder are conditioned upon the following, any or all of which may be waived
by the Buyer in its sole and absolute discretion:
(A) All representations and warranties of the Corporation contained in
this Agreement that are qualified as to materiality shall be true and correct on
and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date, and
all representations and warranties of the Corporation contained in this
Agreement which are not so qualified shall, in all material respects, be true
and correct on and as of the Closing Date with the same force and effect as
though such representations and warranties had been made on and as of the
Closing Date.
(B) The Corporation shall, in all material respects, have performed and
complied with all of the material covenants and agreements (including the
agreement to make the deliveries set forth in Section 6.1) required by or
pursuant to this Agreement, or any Exhibit or instrument delivered pursuant to
this Agreement, to be performed or complied with by it on or prior to the
Closing Date.
(C) The Corporation shall have obtained and delivered to the Buyer
consents, in form reasonably satisfactory to the Buyer, executed by (i) every
party (other than the Corporation) to every material Non-Assignable Contract,
consenting to the assignment and delegation to the Buyer of such material Non-
Assignable Contract; (ii) every party (other than the Corporation) to every
other material Included Agreement, if any, consent to the assignment of which
has not been deemed granted pursuant to the procedures described in Section
1.4(C)(iii); and (iii) every party (other than the Corporation) to every
material Included Agreement to which the Corporation becomes a party after the
date hereof whose consent to the assignment and delegation of such agreement to
the Buyer is required in order to avoid a violation of such agreement.
(D) No Order shall be in effect which restrains or prohibits the
transactions contemplated hereby or which would limit or adversely affect the
ability of the Buyer to use the Assets to conduct the business now conducted by
the Corporation, and no Action by any Authority or other Person shall be pending
which seeks to restrain the consummation, or challenges the validity or
legality, of the transactions contemplated by this Agreement or which would, if
successful, limit or adversely affect the ability of the Buyer to use the Assets
to conduct the business now conducted by the Corporation.
(E) All consents, approvals or orders of any Authority, the granting of
which is required for the consummation of the transactions contemplated hereby,
shall have been obtained; and all waiting and notification periods specified
under applicable Law the
24
<PAGE>
termination or expiration of which is necessary for such consummation shall have
been terminated or shall have expired.
(F) The Buyer shall have received the opinion of Venture Law Group,
counsel to the Corporation, substantially in the form annexed hereto as Exhibit
5.1(F).
(G) The Bankruptcy Court shall have entered an order granting the Sale
Motion in form and substance satisfactory to Baxter and the Buyer: (i) approving
and authorizing (pursuant to Bankruptcy Code Section 363) the performance by the
Corporation of this Agreement and the consummation of the transactions
contemplated hereby, including authorizing the Company to sell the Assets to
Buyer free and clear of all liens, claims and encumbrances, without imposing any
restrictions, obligations, conditions or liabilities not otherwise imposed
herein; and (ii) approving the assumption and assignment to the Buyer of the
Included Agreements (pursuant to Bankruptcy Code section 365) (the "Sale
Order"). The Sale Order shall: (x) not modify the terms and conditions of this
Agreement in a manner not consented to by both the Corporation and the Buyer;
(y) not be subject to a stay; and (z) be final and no longer subject to appeal.
5.2 Corporation's Conditions.
------------------------
The obligations of the Corporation to consummate the transactions
contemplated hereunder are conditioned upon the following, any or all of which
may be waived by the Corporation in its sole and absolute discretion:
(A) All representations and warranties of Buyer contained in this
Agreement which are qualified as to materiality shall be true and correct on and
as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date and
all representations any warranties of the Buyer contained in this Agreement
which are not so qualified shall, in all material respects, be true and correct
on and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
(B) Buyer shall, in all material respects, have performed and complied
with all of the covenants and agreements required by or pursuant to this
Agreement (including the agreement to make the deliveries set forth in Section
6.3), or any Exhibit, Schedule or instrument delivered pursuant to this
Agreement, to be performed or complied with by it on or prior to the Closing
Date.
(C) No Order shall be in effect which restrains or prohibits the
transactions contemplated hereby, and no Action by any Authority or other person
shall be pending or threatened which seeks to restrain the consummation, or
challenges the validity or legality, of the transactions contemplated by this
Agreement.
25
<PAGE>
(D) All consents, approvals or orders of any Authority, the granting of
which is required for the consummation of the transactions contemplated hereby,
shall have been obtained; and all waiting and notification periods specified
under applicable Law the termination or expiration of which is necessary for
such consummation shall have been terminated or shall have expired.
(E) The Bankruptcy Court shall have entered the Sale Order as described in
Section 5.1(G) hereof; and such Order shall (i) not be subject to a stay; and
(ii) not modify the terms and conditions of this Agreement in a manner not
consented to by both the Corporation and the Buyer.
(F) The Corporation shall have received the opinion of Epstein Becker &
Green, P.C., counsel to the Buyer, substantially in the form annexed hereto as
Exhibit 5.2(F).
(G) A registration statement covering the Shares to be issued to the
Corporation hereunder shall have become effective under the Securities Act of
1933, as amended, and no stop order proceedings suspending the effectiveness of
such registration statement shall be instituted, threatened or pending.
(H) The Shares to be issued to the Corporation hereunder shall have been
duly authorized for quotation on the Nasdaq National Market.
6. Deliveries of the Parties.
-------------------------
6.1 Corporation's Deliveries.
------------------------
At the Closing, the Corporation shall deliver to Buyer the following:
(A) A good standing certificate, dated as of a date not more than 5 days
prior to the Closing Date, as to the corporate existence and good standing of
the Corporation, certified by the Secretary of State of Delaware.
(B) All governmental or other approvals, consents, grants, and other
Licenses, if any, required to be procured in connection with the purchase and
sale of the Assets contemplated hereby.
(C) Such individual or general contract assignments as Buyer shall request
with respect to any of the Included Agreements consent to the assignment of
which has not been deemed granted or otherwise approved pursuant to the
procedures described in Section 1.4(C)(iii).
26
<PAGE>
(D) A certificate of the Assistant Secretary of the Corporation (i)
certifying and including the resolutions of the Board of Directors of the
Corporation authorizing the execution, delivery and performance of this
Agreement and the transactions, agreements and instruments contemplated hereby
and (ii) attesting to the incumbency and signatures of all officers executing
any documents in connection with the transactions contemplated by this
Agreement;
(E) A certificate of the Corporation signed by the President or any Vice
President and by the Secretary or any Assistant Secretary of the Corporation
certifying that the representations and warranties of the Corporation made
herein were true and correct as of the date of this Agreement and are true and
correct as of the Closing Date, and that the Corporation has performed and
complied with all covenants and agreements required by this Agreement to be
performed or complied with by the Corporation prior to the Closing Date.
(F) Such executed assignments, bills of sale, endorsements, notices,
consents, assurances and such other instruments of conveyance and transfer as
counsel for Buyer shall reasonably request and as shall be effective to vest in
Buyer good, valid and indefeasible title to all of the Assets, other than the
Regulatory Assets and the MRP System Current Products, and to effectuate the
consummation of the transactions contemplated by this Agreement.
(G) An executed and notarized assignment of the United States registration
for each trademark included in the Assets which is registered with the PTO, the
form of which assignment shall be reasonably satisfactory to the Buyer.
(H) An executed and notarized assignment of the United States trademark
application for each trademark included in the Assets which is the subject of an
application for registration filed with the PTO, the form of which assignment
shall be reasonably satisfactory to the Buyer.
(I) An executed and notarized assignment of United States patents/patent
applications for each United States patent or patent application included in the
Assets, the form of which assignment shall be reasonably satisfactory to the
Buyer.
6.2 Deliveries of Seller at the Closing of the Transfer of the Regulatory
---------------------------------------------------------------------
Assets.
------
(A) On the Post-Closing Transfer Date, the Corporation shall deliver to
the Buyer a separate letter to the FDA substantially in the form of Exhibit
6.2(A) (on the Corporation's letterhead), executed by an authorized officer of
the Corporation and complying with relevant FDA laws and policy, in respect of
each of the categories of Regulatory Assets listed in Section (10) of Exhibit
1.1(A) assigning to the Buyer all of the Corporation's right, title and interest
in and to all of such Regulatory Assets.
27
<PAGE>
(B) A certificate of the Corporation signed by the President or any Vice
President and by the Secretary or any Assistant Secretary of the Corporation
certifying that the representations and warranties of the Corporation made
herein regarding the Regulatory Assets and the MRP System Current Products were
true and correct as of the date of this Agreement and are true and correct as of
the date of transfer to the Buyer of the Regulatory Assets, and that the
Corporation has performed and complied with all covenants and agreements
required by this Agreement to be performed or complied with by the Corporation
prior to the date of transfer to the Buyer of the Regulatory Assets.
(C) Such executed assignments, bills of sale, endorsements, notices,
consents, assurances and such other instruments of conveyance and transfer as
counsel to the Buyer shall reasonably request and as shall be effective to vest
in Buyer good, valid and indefeasible title to all of the Regulatory Assets and
the MRP System Current Products, and to effectuate the consummation of the
transactions contemplated by this Agreement.
6.3 Deliveries of Buyer.
-------------------
At the Closing, Buyer shall deliver to the Corporation the following:
(A) the Purchase Consideration due to the Corporation at Closing pursuant
to Section 1.1(C) hereof.
(B) A certificate of the Secretary of the Buyer, (i) certifying and
including the resolutions of the Board of Directors of the Buyer authorizing the
execution, delivery and performance of this Agreement and the transactions,
agreements and instruments contemplated hereby and (ii) attesting to the
incumbency and signatures of all officers executing any documents in connection
with the transactions contemplated by this Agreement.
(C) A certificate of the Buyer signed by the President or any Vice
President and by the Secretary or any Assistant Secretary of the Buyer
certifying that the representations and warranties of the Buyer made herein were
true and correct as of the date of this Agreement and are true and correct as of
the Closing Date, and that the Buyer has performed and complied with all
covenants and agreements required by this Agreement to be performed or complied
with by the Buyer prior to the Closing Date.
(D) Such other instruments or documents as the Corporation may reasonably
request to effectuate the consummation of the transactions contemplated by this
Agreement.
7. No Survival.
-----------
Regardless of any investigation made by or on behalf of any party hereto,
no representation or warranty contained in, or in any certificate delivered
pursuant to or in
28
<PAGE>
connection with, this Agreement shall survive after the Closing Date, except the
representations and warranties regarding the Regulatory Assets and the MRP
System Current Products, which shall survive until the Post-Closing Transfer
Date.
8. Bulk Transfer Laws and Related Taxes.
------------------------------------
Buyer hereby waives compliance by the Corporation with the provisions of
any so called bulk transfer Law of any jurisdiction.
9. Employment.
----------
It is understood and agreed that, beginning on the date hereof, the Buyer
shall have the right, but not the obligation, to discuss and negotiate with, and
to extend offers of employment to, any or all of the Corporation's current or
former employees, any such employment to be on terms satisfactory to the Buyer
and any such current or former employee, provided that, except with the consent
--------
of the Corporation, no such employment of any current employee of the
Corporation shall become effective earlier than the day following the later of
(i) the Closing Date or (ii) the Corporation's completion of all of its
obligations under the Distribution Agreement.
10. Personal Property Taxes.
-----------------------
All personal property Taxes relating to any and all personal property
conveyed pursuant to this Agreement shall be pro-rated between Buyer and the
Corporation in accordance with the relationship of the Closing Date to the
entire relevant fiscal Tax year. Subject to the rest of this Section 10, any
payment owed in respect of such pro-ration shall be made at Closing. If the
amount of said personal property Taxes is not known at the Closing, then such
personal property Taxes shall be apportioned on the basis of the personal
property Taxes (as abated, if applicable) assessed for the preceding fiscal Tax
year, with a reapportionment as soon as the new Tax rate and valuation can be
ascertained.
11. Further Assurances and Cooperation.
----------------------------------
11.1 Further Deliveries and Actions.
------------------------------
Following the date hereof, and subject to the terms and conditions hereof,
the Corporation and Buyer shall each execute and deliver such documents and take
such other action as shall be reasonably requested by the other party to carry
out and effectuate the transactions contemplated by this Agreement. On and
subsequent to the Closing Date, each party covenants and warrants that it shall,
whenever and as often as it shall be reasonably requested to do so by another
party to this Agreement, execute, acknowledge
29
<PAGE>
and deliver or cause to be executed, acknowledged and delivered, any and all
such further documents and instruments, and take such further action not
requiring the payment of money or other consideration, as may be reasonably
necessary, expedient or proper in order to effectuate or complete any and all of
the conveyances, transfers, sales, assignments and other transaction herein
provided for.
11.2 Access to Books and Records.
---------------------------
For a period ending on the earlier to occur of (i) the date which is 6
years after the Closing, or (ii) final and complete dissolution of the
Corporation, the Corporation and its Representatives shall have reasonable
access to all the books and records of the Corporation transferred to the Buyer
hereunder to the extent such access may reasonably be required by the
Corporation in connection with matters relating to or affected by the operations
of the Corporation prior to Closing. Such access shall be afforded by the Buyer
upon receipt of reasonable advance notice and during normal business hours. The
Corporation shall be solely responsible for any costs and expenses incurred by
it, and for any out-of-pocket costs and expenses incurred by the Buyer, in
connection with the access afforded pursuant to this Section 11.2.
12. Notices.
-------
All notices, requests, demands, and other communications permitted or required
under this Agreement shall be in writing and shall be either personally
delivered (including couriers such as FedEx) or sent by pre-paid certified mail,
return receipt requested or fax transmission (with a confirmation copy
personally delivered or sent by prepaid certified mail), addressed or
transmitted to the address or fax number stated below of the party to which
notice is given, or to such other address or number as such party may have fixed
by notice given in accordance with the terms hereof:
TO THE CORPORATION:
CellPro, Incorporated
22215 26th Avenue S.E.
Bothell, Washington 98021
Attention: Mark Handfelt
Executive Vice President,
General Counsel and Acting
Chief Operating Officer
Fax: (425) 485-8787
30
<PAGE>
With a copy to:
Sonya F. Erickson
Venture Law Group
4750 Carillon Point
Kirkland, WA 98033
Fax: (425) 739-8750
TO BUYER:
Nexell Therapeutics Inc.
9 Parker
Irvine, California 92618-1605
Attention: CEO
Fax: (949) 470-9011
With a copy to:
VIMRx Pharmaceuticals Inc.
2751 Centerville Road
Suite 210
Wilmington, Delaware 19808
Attention: CEO
Fax: (302) 998-3794
and a copy to:
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Attention: Lowell S. Lifschultz, Esq.
or Mary Anne Mayo, Esq.
Fax: (212) 661-0989
Any notice, sent as provided above, shall be deemed given and received upon
delivery to the address provided for above (or, in the event delivery is
refused, the first date on which delivery was tendered).
13. Expenses.
--------
Each party shall each bear its own legal, accounting and other costs and
expenses incurred by it in connection with the negotiation, preparation and
execution of this Agreement and the other Transaction Documents and the
performance hereof and thereof.
31
<PAGE>
14. Termination.
-----------
14.1 Conditions.
----------
This Agreement may be terminated at any time on or prior to the Closing
Date:
(A) By mutual consent of the Corporation and Buyer;
(B) By Buyer, if (i) there has been a material misrepresentation or breach
on the part of the Corporation with respect to any material representations or
warranties set forth herein, or (ii) there has been any material failure on the
part of the Corporation to comply with any material obligations or to perform
any material covenants hereunder, which failure, if capable of remedy, has not
been remedied within 30 days after receipt by the Corporation of notice thereof,
or (iii) any of the conditions set forth in Section 5.1 shall not have been
fulfilled on or prior to March 31, 1999 (other than by virtue of a breach of
this Agreement by the Buyer) and the fulfillment thereof shall not have been
waived by Buyer, or (iv) a Qualified Overbidder is the successful bidder at an
Auction held pursuant to the Overbid Procedures Order, or (v) for any reason
whatsoever, the Bankruptcy Court has not (x) entered an Order granting the
Assumption Motion and an Order granting the Overbid Procedures Motion (in each
case satisfactory to the Buyer and Baxter) by the date falling 30 days after the
Petition Date or (y) entered the Sale Order by the date falling 120 days after
the Petition Date; or
(C) By the Corporation, if (i) there has been a material misrepresentation
or breach on the part of Buyer in any of its material representations or
warranties set forth herein, or (ii) there has been any material failure on the
part of Buyer to comply with any of its material obligations or to perform any
material covenants hereunder which failure, if capable of remedy, has not been
remedied within 30 days after receipt by the Buyer of notice thereof, or (iii)
any of the conditions set forth in Section 5.2 shall not have been fulfilled on
or prior to March 31, 1999 (other than by virtue of a breach of this Agreement
by the Corporation) and the fulfillment thereof shall not have been waived by
the Corporation, or (iv) a Qualified Overbidder is the successful bidder at an
Auction held pursuant to the Overbid Procedures Order, or (v) for any reason
whatsoever, the Bankruptcy Court has not entered the Sale Order by the date
falling 120 days after the Petition Date.
14.2 Effective Date.
--------------
A termination pursuant to Section 14.1(B) or (C) shall be effective
immediately upon delivery, by the party having the right to terminate, of a
notice of termination to the other party or parties.
32
<PAGE>
14.3 No Liability.
------------
In the event of a termination of this Agreement, as provided above, this
Agreement shall forthwith terminate and there shall be no liability on the part
of either the Corporation or Buyer, except (i) for liability arising from a
breach of this Agreement and (ii) as otherwise provided in Section 13 hereof.
14.4 Certain Definitions.
-------------------
"Action" shall mean any claim, action, suit, audit, proceeding or investigation,
whether at law, in equity or admiralty, and whether or not before any Tribunal.
"Agent" shall mean, with respect to any Person, such Person's officers,
directors, employees, independent contractors, agents and representatives.
"Affiliate" shall mean, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person.
"Agreement" shall mean this Asset Purchase Agreement.
"Antibody Vials" shall have the meaning assigned thereto in the Distribution
Agreement.
"Assets" shall mean all of the assets set forth and described in Exhibit 1.1(A)
hereto.
"Assumed Liabilities" shall have the meaning assigned thereto in Exhibit 1.2(A)
hereto.
"Assumption Motion" shall have the meaning assigned thereto in Section 1.4(B).
"Auction" shall have the meaning assigned thereto in Section 1.4(C)(viii).
Authority" shall mean each and every federal, state, municipal, foreign or other
government or governmental department, commission, board, bureau, agency or
instrumentality having proper jurisdiction over the Assets or the Business of
the Corporation.
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978, as heretofore and
hereafter amended, and codified as 11 U.S.C. Section 101, et seq.
"Bankruptcy Court" means the United States Bankruptcy Court for the Western
District of Washington, or any other court, having jurisdiction over the Case
from time to time.
33
<PAGE>
"Baxter" shall mean Baxter Healthcare Corporation, a Delaware corporation.
"Business" shall mean the business of the Corporation, as now conducted.
"Business Day" shall mean any day other than (a) a Saturday or Sunday or (b) a
----- ----
day on which commercial banks in the States of Washington or New York are
authorized or required by law to close.
"Buyer" shall have the meaning assigned thereto in the headnotes to this
Agreement.
"Case" means the case of the Corporation scheduled to be commenced, pursuant to
Section 1.4 hereof, in the Bankruptcy Court under chapter 11 of the Bankruptcy
Code.
"CEPRATE(R) System" shall mean the Corporation's CEPRATE(R) SC Stem Cell
Concentration System, including the device and the disposable kits used in
connection therewith.
"Closing" and "Closing Date" shall have the meanings assigned thereto in Section
1.3(A).
"Competing Transaction" shall have the meaning assigned thereto in Section
1.5(A).
"Control" shall mean the ability to direct, or cause the direction of, the
management and policies of a Person, whether by vote, contract or otherwise, and
shall be conclusively presumed in the case of ownership of 50% or more of the
equity interest in an entity and (in the case of trusts) where any such Person
is a trustee.
"Copyrights" shall mean United States and foreign copyrights, whether registered
or unregistered.
"Corporation" shall have the meaning assigned thereto in the headnotes to this
Agreement.
"Current Products" shall have the meaning assigned thereto in Section 2.10(B).
"Determination Date" shall have the meaning assigned thereto in Section 4.2(H).
"Disposable Kits" shall have the meaning assigned thereto in the Distribution
Agreement.
"Distribution Agreement" shall mean that certain agreement, dated as of October
28, 1998, by and between Baxter and the Corporation, relating to the
distribution, by Baxter, of CEPRATE(R) System disposable kits and antibody used
in connection therewith.
34
<PAGE>
"Encumbrance" shall mean any lien, charge, security interest, encumbrance or
claim, whether legal or equitable.
"Excluded Agreements" shall have the meaning assigned thereto in Exhibit 1.1(B).
"FDA" shall mean the U.S. Food and Drug Administration.
"Herein," "hereunder, hereof," "hereto," and words of similar import, shall be
deemed references to this Agreement as a whole and not to any particular section
or other provision of this Agreement.
"HHS" shall mean the United States Department of Health and Human Services.
"In the ordinary course of business" shall mean "in the ordinary course of
business and substantially consistent with prior practice".
"Included Agreements" shall have the meaning assigned thereto in Exhibit 1.1(A).
--------------
"Including" shall mean "including but not limited to."
"Initial Objection" shall have the meaning assigned thereto in Section
1.4(C)(iii).
"Initial Overbid" shall have the meaning assigned thereto in Section 1.4(C)(iv).
"Intellectual Property" shall mean Copyrights, Patents, Proprietary Information,
Trademarks, Trade Secrets and Software.
"Intellectual Property Right" shall mean any right possessed by any person or
entity which arises as a result of his or its ownership, license or use of any
Intellectual Property.
"Knowledge of the Corporation" and "awareness of the Corporation" and
variations thereof shall be deemed to refer to the actual knowledge and/or
awareness of the Relevant Persons plus any additional knowledge and/or awareness
such persons would have after performing a reasonable due diligence inquiry.
"Laws" shall mean any foreign, federal, state or local laws, statutes,
regulations, rules, codes or ordinances enacted, adopted, issued or promulgated
by any Authority or common law.
"License" shall mean any license, authorization, authority, approval or permit.
35
<PAGE>
"MRP System Current Products" shall mean the Assets listed in Section (9)(1) of
Exhibit 1.1(A).
"Material Adverse Effect" shall mean, with respect to any entity, property,
asset, liability or business, as the case may be, any event, change, or effect
that, when taken individually or together with all other adverse changes and
effects, is or is reasonably likely to be materially adverse to the condition
(financial or otherwise) of such entity, property, asset, liability or business,
or in the case of an entity, the operations, results of operations or prospects
of such entity and its subsidiaries, taken as a whole, or is or is reasonably
likely to prevent or materially delay consummation of the transactions
contemplated by this Agreement or otherwise to prevent performance of any of the
obligations under this Agreement.
"Material Contractor" shall mean any Person who (i) purchased from or provided
to the Corporation more than $15,000 of goods or services during the preceding
twelve calendar months or (ii) leased real or personal property to or licensed
rights to or from the Corporation for an aggregate amount in excess of $15,000
during the preceding twelve calendar months.
"Non-Assignable Contracts" shall have the meaning assigned thereto in Section
4.2(A).
"Non-Assumed Liabilities" shall have the meaning assigned thereto in Section
1.2(A).
"Order" shall mean any order, writ, judgment, injunction or decree of any
Tribunal or Authority.
"Objection/Overbid Deadline" shall have the meaning assigned thereto in Section
1.4(C)(iii).
"Overbid Procedures Motion" shall have the meaning assigned thereto in Section
1.4(B).
"Owned Software" shall mean all Software owned by the Corporation.
"Patents" shall mean United States and foreign patents, patent applications,
continuations, continuations-in-part, divisions, reissues, reexaminations,
extensions and disclosures.
"Patent Litigation" shall refer to Johns Hopkins University et al v. CellPro,
-----------------------------------------
Incorporated, Civil Action 94-105-RRM, currently pending in the United States
- ------------
District Court for the District of Delaware.
36
<PAGE>
"Permitted Encumbrances" shall mean (a) liens for taxes and other governmental
charges and assessments which are not yet due and payable, (b) liens of
landlords and liens of carriers, warehouseman, mechanics and materialmen and
other like liens arising in the ordinary course of business for sums not yet due
and payable, (c) liens on deposits or pledges to secure obligations under
workmen's compensation, social security or similar laws or to secure the
performance of statutory obligations, surety and appeal bonds, bids, leases,
governmental contracts and similar obligations, and (d) other liens,
encumbrances or imperfections on property which are not material in amount or do
not materially detract from the value of or materially impair the existing use
of the property affected by such lien, encumbrance(s) or imperfection.
"Person" shall mean any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, Authority or other entity.
"Petition" shall have the meaning assigned thereto in Section 1.4(A).
"Petition Date" shall have the meaning assigned thereto in Section 1.4(A).
"Plan" shall mean the plan of reorganization filed by the Corporation in the
Case.
"Post-Closing Transfer Date" shall have the meaning assigned thereto in Section
1.1(C).
"Proprietary Information" shall mean any materials or information related to the
Business (whether or not reduced to writing or other tangible form of expression
and whether or not patentable or protectable by copyright), including any which
was assigned to the Corporation by, or was developed for the Corporation in the
course of an employment or other relationship with the Corporation (in any
capacity) or through the use of the Corporation's facilities or resources by,
any of its employees, consultants or contractors. Proprietary Information also
includes third party information provided to the Corporation under an obligation
of confidentiality. By way of illustration but not limitation, Proprietary
Information includes resumes and other employee-candidate information,
promotional plans and strategies, written promotional materials, schedules,
administrative procedures and policies, internal administrative memoranda and
forms, lines of authority and management, techniques, designs, processes,
formulae, data, plans for research and market development, product development
and marketing, business plans and budgets, unpublished financial statements,
license arrangements, prices and cost of supplies and products and any other
information concerning actual or proposed products, employees, customers,
contractors and suppliers.
"Purchase Consideration" shall have the meaning assigned thereto in Section
1.1(D) hereof.
"Qualified Overbidders" shall have the meaning assigned thereto in Section
1.4(C)(viii).
37
<PAGE>
"RPP Motion" shall have the meaning assigned thereto in Section 1.4(B).
"Regulatory Assets" shall mean all of the Assets listed in Section (10) of
Exhibit 1.1(A).
"Relevant Persons" shall mean, collectively, all directors and officers of the
Corporation as of the date hereof, and any other person who, prior to the
Closing Date, shall succeed to the position now held by any of the foregoing
persons.
"Representatives" shall mean, with respect to any Person, such Person's
officers, directors, employees, independent contractors, agents and
representatives.
"SEC" shall have the meaning assigned thereto in section 3.6(A).
"Sale Hearing" shall have the meaning assigned thereto in Section 1.4(C)(i).
"Sale Motion" shall have the meaning assigned thereto in Section 1.4(B).
"Sale Order" shall have the meaning assigned thereto in Section 5.1(G).
"Securities Litigation" shall mean, collectively, the actions entitled Oxford
Systems, Inc. et al. v. CellPro, Inc., et al., Case No. C98-2988 and Florida
State Board of Administration v. CellPro, Inc., et al., Case No. C98-9688, in
each case pending in the U.S. Federal District Court for the Western District of
Washington.
"Settlement Agreement" shall mean that certain agreement, dated September 28,
1998, by and among the Corporation, Baxter, Johns Hopkins University and
Becton-Dickinson and Company relating to the settlement of all issues remaining
in the Patent Litigation and in Civil Action No. 94-244-RRM, in each case
pending in the United States District Court for the District of Delaware.
"Shares" shall have the meaning assigned thereto in Section 1.1(D).
"Software" shall mean computer software programs and software systems,
including, without limitation, all databases, compilations, tool sets,
compilers, higher level or "proprietary" languages, related documentation and
materials, whether in source code, object code or human readable form as well as
all Copyrights appurtenant thereto other than "shrinkwrap software" available
off-the-shelf at retail without customization.
"Statement of Defaults" shall have the meaning assigned thereto in Section
1.4(C)(iii).
"Taxes" shall mean all taxes, including without limitation all federal, state,
local, foreign and other income, franchise, sales, use, property, payroll,
withholding, environmental, alternative or add-on minimum and other taxes,
assessments, charges, duties, fees, levies or
38
<PAGE>
other governmental charges of any kind whatsoever, and all estimated taxes,
deficiency assessments, additions to tax, penalties and interest, and any
contractual or other obligations to indemnify or reimburse any person with
respect to any such assessment.
"Trade Secrets" shall mean confidential ideas, trade secrets, know-how,
inventions (whether or not patentable) and improvements thereto, concepts,
methods, processes, formulae, reports, data, customer lists, mailing lists,
business plans, or other proprietary information.
"Trademarks" shall mean United States, state and foreign trademarks, service
marks, logos, trade dress and trade names, whether registered or unregistered.
"Transaction Documents" shall mean, collectively, this Agreement, the
Settlement Agreement and the Distribution Agreement.
"Tribunal" shall mean any federal, state, local, municipal or foreign court,
arbitrator, arbitration panel or other tribunal.
"VIMRx Financial Statements" shall have the meaning assigned thereto in Section
3.6(B).
"VIMRx SEC Documents" shall have the meaning assigned thereto in Section 3.6(A).
15. Miscellaneous.
-------------
15.1 Entire Agreement; No Modification.
---------------------------------
This Agreement, including the Exhibits, Schedules and instruments delivered
pursuant hereto, sets forth the entire agreement and understanding between the
parties hereto as to the specific subject matter hereof and thereof, and merges
and supersedes all prior discussions, agreements and understandings of every
kind and nature between them with respect to the specific subject matter hereof
and thereof, and no party hereto shall be bound by any condition, definition,
warranty or representation other than as expressly provided for in this
Agreement. This Agreement shall not be changed or amended except by a writing
signed by the Corporation and the Buyer.
15.2 Waiver of Breach.
----------------
The waiver by a party of a breach or violation by the other party of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach or violation by any party of the same or any other provision
of this Agreement. No such
39
<PAGE>
waiver shall be effective unless in writing signed by the party claimed to have
made the waiver.
15.3 Benefit of Parties; Assignment.
------------------------------
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, legal representatives,
successors and permitted assigns. The Corporation shall not have the right to
assign or delegate any of its rights or obligations hereunder, except with the
prior written consent of Buyer. Buyer shall not have the right to assign this
Agreement, except that it may assign any of its rights, and delegate any of its
obligations, hereunder to any of its Affiliates and, after the Closing Date, to
any Person which shall have acquired all or substantially all of its assets (not
counting cash, cash equivalents and any real property or interests therein),
whether by sale of assets, merger or otherwise. Any purported assignment or
delegation made in violation of this Section 15.3 shall be null and void ab
initio.
15.4 Headings.
--------
The headings of the sections and paragraphs of this Agreement are inserted
for convenience of reference only and shall not constitute a part hereof.
15.5 Governing Law; Jurisdiction.
---------------------------
This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington, without giving effect to
its principles of conflicts of laws. For so long as the Corporation is subject
to the jurisdiction of the Bankruptcy Court, the parties hereto irrevocably
elect as the sole judicial forum for the adjudication of any matters arising
under or in connection with this Agreement, and consent to the jurisdiction of,
the Bankruptcy Court.
15.6 Multiple Counterparts; Execution by Fax.
---------------------------------------
This Agreement may be signed in any number of counterparts which, taken
together, shall constitute one and the same instrument. This Agreement may be
executed and delivered by exchange of facsimile copies showing the signatures of
the parties hereto, and those signatures need not be affixed to the same copy.
The facsimile copies showing the signatures of the parties will constitute
originally signed copies of the same agreement requiring no further execution.
15.7 Correspondence, Etc.
--------------------
The Corporation agrees to promptly deliver to Buyer any correspondence or
other documents or instruments received by it after the Closing Date pertaining
to the Assets.
40
<PAGE>
15.8 Exhibits, Schedules.
-------------------
All Exhibits and Schedules referred to in this Agreement are attached
hereto and are incorporated herein by reference as if fully set forth herein.
For purposes of this Agreement any item in a Schedule shall be deemed disclosed
only in connection with the specific representation or warranty to which it is
specifically referred.
15.9 Construction.
------------
The language in all parts of this Agreement shall in all cases be
construed as a whole according to its fair meaning, strictly neither for nor
against any party hereto, and without implying a presumption that the terms
thereof shall be more strictly construed against one party by reason of the rule
of construction that a document is to be construed more strictly against the
Person who himself or through his agent prepared the same, it being agreed that
representatives of both parties have participated in the preparation hereof.
15.10 Number and Gender.
-----------------
Whenever in this Agreement the singular is used, it shall include the
plural if the context so requires, and whenever the masculine gender is used in
this Agreement, it shall be construed as if the masculine, feminine or neuter
gender, respectively, has been used where the context so dictates, with the rest
of the sentence being construed as if the grammatical and terminological changes
thereby rendered necessary have been made.
15.11 Certain Understandings.
----------------------
(A) All accounting terms not specifically defined herein shall be
construed in accordance with GAAP.
(B) Relative to the determination of any period of time, "from" means
"from and including", "to" means "to but excluding" and "through" means "through
and including". (C) The term "party to" (e.g., in the case of being a party to
an agreement) shall be deemed also to refer to the concept of being "bound by"
(the agreement, etc.)
15.12 Publicity.
---------
No party to this Agreement shall issue or cause the publication of any
press release or other public announcement with respect to this Agreement or the
transaction contemplated hereby without first obtaining the consent of the other
party.
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the date first above written.
NEXELL THERAPEUTICS, INC.
By: /s/ L. William McIntosh
___________________________________
Name: L. William McIntosh
___________________________________
Title: President & CEO
___________________________________
CELLPRO, INCORPORATED
By: /s/ Mark J. Handfelt
___________________________________
Name: Mark J. Handfelt
___________________________________
Title: EVP & General Counsel
___________________________________
42
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
VIMRX Pharmaceuticals, Inc.:
We consent to incorporation by reference in registration statement (No.
333-15693) on Form S-8, registration statement (No. 333-02136) on Form S-3 and
registration statement (No. 333-69471) on Form S-2 of our report dated March 26,
1999, relating to the consolidated balance sheets of VIMRX Pharmaceuticals, Inc.
and Subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of operations changes in shareholders' equity and cash flows for the
years then ended which report appears in the December 31, 1998 annual report on
Form 10-K of VIMRX Pharmaceuticals, Inc.
KPMG LLP
Philadelphia, Pennsylvania
March 30, 1999
<PAGE>
Exhibit 23(b)
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statements on Form S-8 (File Nos. 333-03106 and 333-15693) and Form S-3 (File
No. 333-25469) of our report dated March 14, 1997 on the consolidated financial
statements of VIMRX Pharmaceuticals Inc. and subsidiaries (the "Company") for
the year ended December 31, 1996 included in the Company's 1998 Annual Report on
Form 10-K.
/s/ Richard A. Eisner & Company, LLP
New York, New York
March 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<CASH> 33,091,000 57,830,000 8,611,000
<SECURITIES> 0 0 38,300,000
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<INVENTORY> 2,389,000 2,227,000 0
<CURRENT-ASSETS> 38,772,000 65,214,000 47,259,000
<PP&E> 15,058,000 16,415,000 2,843,000
<DEPRECIATION> 4,116,000 951,000 195,000
<TOTAL-ASSETS> 87,601,000 121,947,000 51,692,000
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<OTHER-SE> 182,538,000 182,539,000 46,156,000
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<TOTAL-REVENUES> 13,443,000 5,002,000 0
<CGS> 8,166,000 4,630,000 0
<TOTAL-COSTS> 44,500,000 62,057,000 21,734,000
<OTHER-EXPENSES> (6,296,000) (5,441,000) (1,874,000)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 2,036,000 121,000 0
<INCOME-PRETAX> (34,963,000) (56,199,000) (19,860,000)
<INCOME-TAX> 0 0 0
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<NET-INCOME> (34,963,000) (56,199,000) (19,860,000)
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<EPS-DILUTED> (0.58) (1.02) (.50)
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