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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, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File No. 0-19153
NEXELL THERAPEUTICS 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.)
9 Parker, Irvine, California 92618
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(949) 470-9011
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
Common Stock Subscription Warrants
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 Common Stock held by non-affiliates of the
Registrant was approximately $426,009,264 on March 20, 2000 based on the closing
price of the Common Stock on such date. For purposes of this calculation,
shares owned by officers, directors, and 5% stockholders known to the Registrant
are deemed to be owned by affiliates.
The aggregate number of outstanding shares of Common Stock, $.001 par
value, of the Registrant was 73,736,357 on March 20, 2000.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement (the "2000 Proxy
Statement") to be filed pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year (April 28, 2000) are incorporated by reference in
Part III.
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 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 be 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 (including the timely
commencement and success of the Company's clinical trials and other research
endeavors, delays in receiving FDA or other regulatory approvals, the
development of competing therapies and/or technologies, the terms of any future
strategic alliances, and the possible need for additional capital), 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
Nexell Therapeutics Inc. ("Nexell" or the "Company") (formerly VIMRx
Pharmaceuticals Inc.) is an Irvine, California-based biotechnology company.
Nexell's principal subsidiary, Nexell of California, Inc. ("NCI") is developing
products utilizing cell selection technology in cell therapy for cancer and
other life-threatening diseases. NCI is a leader in cell selection technology
and currently sells cell selection products in Europe, the United States and
Canada. The Company previously operated two other biotechnology subsidiaries
engaged in the discovery and development of biopharmaceuticals, Innovir
Laboratories, Inc. ("Innovir") and Vimrx Genomics, Inc. ("VGI"), both of which
have ceased operations. Beginning in 1998, Nexell's principal business has been
NCI's cell therapy operations.
Business of NCI
NCI is engaged in the development, manufacture, marketing and distribution of
cell selection systems, including specialized instruments, biologicals,
reagents, sterile plastics sets and related products used in ex vivo stem cell
research and therapies. NCI's cell processing systems are used in the research
and clinical treatment of diseases, including various forms of cancer,
autoimmune diseases, gene therapy and dendritic cell therapy.
NCI currently markets Isolex Cell Selection systems that consist of automated,
sterile path instruments along with companion reagents/biologicals kits 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
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biological manipulation. For each selection procedure, the customer typically
uses one reagent kit and one disposables set. Consequently, the installed base
of cell selection instruments should generate a stream of future consumables
revenues in excess of the revenue resulting from the placement of the instrument
itself. NCI has offered 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. The Isolex(R) 300 Cell Separator is
currently marketed principally for therapeutic and/or research purposes in the
United States and Europe. In early 1999, NCI began introducing to the European
market 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.
Subsequently, in the third quarter of 1999, NCI introduced the next upgraded
version in Europe, version 2.5, with further enhancement to the Isolex(R) 300's
system features and performance. The Company intends to provide ongoing product
enhancements to keep the Isolex platform competitive.
In addition to the positive selection Isolex(R) Cell Separator, NCI 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.
NCI also markets various cell storage and handling products that are typically
utilized in the cell processing cycle by NCI's cell selection system customers.
These products include the following: Cryocyte(TM) containers used in the
freezing of blood components; Lifecell(R) X-FoldTM and Stericell(R) containers,
all of which provide a closed system environment for culturing 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. In addition, NCI markets an in vitro
tumor diagnostic product, the CytonexTM Immunocytochemistry ("ICC") kit. The
Company believes that these products are complementary to the Isolex cell
selection systems, and provide enhanced customer support.
For a description of the Company's customer sponsored research and development
programs, see "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Customer Sponsored Research and
Development Programs."
Relationship with Baxter Healthcare Corporation
Overview
The Company's significant operating activities began with its December 1997
acquisition of the business of the Immunotherapy Division (the "Division") of
the Biotech Business Group of Baxter Healthcare Corporation ("Baxter"). In
connection therewith, the Company entered into several agreements with Baxter by
which Baxter agreed to perform certain activities related to the Division. In
1999, the parties entered into additional agreements to restructure Baxter's
ownership interest in the Company and NCI and to modify their business
arrangements.
December 1997 - Acquisition of the Immunotherapy Division
In December 1997, the Company acquired substantially all of the assets of the
Division. In exchange for these assets, Baxter received (i) 11,000,000 shares of
Nexell Common Stock ("Common Stock"), (ii) 66,304 shares of the Company's Series
A Convertible Preferred Stock, convertible into Common Stock at a conversion
price of $5.50 per share, (iii) 19.5% of the outstanding common stock of NCI,
(iv) a warrant to purchase an additional 6% of the then outstanding common stock
of NCI for an aggregate $6,000,000, and (v) the right to receive payments up to
$21,000,000 from NCI upon the occurrence of certain future events. The
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$21,000,000 represents the maximum potential amount that could be paid by the
Company when, and if, certain FDA and European regulatory approvals are
obtained. As the amount of the contingent consideration, if any, was not
determinable nor was the achievement of the approvals considered probable at
the date of the acquisition, it was excluded from the determination of the cost
of the acquisition. In addition, Baxter purchased $30,000,000 principal amount
of NCI's 6 1/2% convertible subordinated debentures. Many of these terms have
been renegotiated as set forth below.
Marketing, Sales and Distribution Agreement ("Distribution Agreement"). NCI
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appointed Baxter as its exclusive worldwide marketing, sales and distribution
entity for NCI's Isolex(R) and Maxsep(R) products and reagent kits, with the
right of first offer with respect to acquiring such rights for NCI's future
products. NCI agreed to supply to Baxter products and kits at a discount to
NCI's suggested retail price. The Distribution Agreement was, by its terms, to
expire December 17, 2008. However, as described below, as of November 30, 1999,
the parties terminated the agreement.
Services Agreement. Baxter agreed to provide the following services as
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necessary to meet NCI's requirements: access to Baxter's Information Management
Center; quality and compliance training; access to the Baxter Institute for
Training and Development; and access to specific accounts through Baxter's
General Ledger and Fixed Assets Systems. NCI agreed to pay only for those
services requested. In addition, Baxter agreed to manufacture, warehouse and
manage inventory for certain clinical codes under protocols in accordance with
the terms of the Hardware and Disposables Supply Agreement and the Hardware and
Disposables Manufacturing Agreement and, at its option, to manufacture certain
prototype products for the research market at a cost to NCI of time and
materials plus 20%. Baxter's obligation to provide the services was extended
until June 30, 1999, at which time (as described below) the Services Agreement
was terminated.
Hardware and Disposables Manufacturing Agreement. Baxter agreed to
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manufacture on a non-exclusive basis for NCI certain Isolex(R) and Maxsep(R)
products and components and to complete assembly of Isolex(R) and Maxsep(R)
instruments and disposable sets. NCI agreed to pay Baxter's Fully Loaded Cost
for the products and components for the first three years, and Baxter's Fully
Loaded Cost plus 15% for the remaining years. Baxter's "Fully Loaded Cost"
means the cost to Baxter of manufacturing the items, including any royalties
payable by Baxter in connection with such manufacturing. The Agreement expires
on December 17, 2002.
Antibody Manufacturing and Storage Agreement. Baxter agreed to manufacture on
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a non-exclusive basis for NCI certain antibodies, reagents and reagent kits used
in connection with the Isolex(R) and Maxsep(R) products. NCI agreed to pay
Baxter's Fully Loaded Cost for the antibodies, reagents and reagent kits for the
first three years, and Baxter's Fully Loaded Cost plus 15% for the remaining
years. The Agreement expires on December 17, 2002.
Hardware and Disposables Supply Agreement. Baxter agreed to supply to NCI
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certain of Baxter's products and components in conjunction with the manufacture,
use and sale of Isolex(R) and Maxsep(R) products. Baxter granted to NCI the
exclusive worldwide royalty-free right to distribute such products and
components in connection with ex vivo cell processing, subject to certain
exceptions. NCI agreed to pay Baxter's Fully Loaded Cost for the products and
components for the first three years, Baxter's Fully Loaded Cost plus 15% for
the next two years and Baxter's Fully Loaded Cost plus 30% for the remaining
years. The Agreement expires on December 17, 2008.
License Agreements. Pursuant to four separate sublicense agreements, Baxter
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sublicensed to NCI its rights under the following licenses: license from Baxter
and Becton, Dickinson & Company to certain CD34+ cell population and related
antibody and method patents (the "First License"); license from Becton,
Dickinson & Company ("Becton Dickinson") to certain B cell antibodies; license
from Chiron Therapeutics to certain breast
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cancer antibodies; and license from Professor Bernd Dorken to certain B Cell
antibodies. In addition, pursuant to a royalty assignment and agreement, Baxter
assigned to NCI its rights to receive royalties under three sublicenses Baxter
had previously granted under the First License.
Non-Competition and Confidentiality Agreement. Each party agreed not to,
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directly or indirectly, engage in, render advisory services to an entity that
engages in, or be a joint venturer, partner, licensor or shareholder of more
than 2% of any entity that engages in, the marketing, sale or distribution of
any product that directly competes with certain products of the other. In the
case of Baxter's products, such protected products are for use in on-line
separation of human blood into its constituents. In the case of the Company's
and NCI's products, such protected products are for use in ex vivo cell
selection or genetic alteration and/or expansion in combination with such
selection. Baxter's non-competition obligations expire on the later of December
17, 2004, one year after the date on which Baxter does not own 10% of NCI's
common stock nor has a seat on NCI's board of directors, or the termination of
the Marketing, Sales and Distribution Agreement. The Company's obligations
expire on the later of December 17, 2004, or one year after the date on which
the Company does not have voting control of NCI nor has a seat on NCI's board of
directors. NCI's obligations expire on the later of December 17, 2010, or the
termination of the Hardware and Disposables Supply Agreement.
The Company and Baxter are also parties to a Registration Rights Agreement
dated December 17, 1997 whereby the Company has granted certain demand and
piggyback rights to Baxter.
The Company, certain current and former directors of the Company, and
Baxter are also parties to a Voting Agreement, dated December 17, 1997, pursuant
to which all parties agreed to vote all of their Common Stock in favor of one
Baxter-nominated director. In addition, Baxter has agreed to vote all of its
Common Stock in favor of the nominees for director recommended by the Company's
nominating committee, or, if there is no such committee, by a majority of the
Board of Directors. The Voting Agreement will remain in effect as long as
Baxter continues to own at least 3% of the Common Stock. Baxter's obligations
under the Voting Agreement will terminate if the "Threshold" (as set forth in a
Side Letter Agreement dated November 24, 1999 between the parties described
below) is met.
January 1999 through June 1999 - Transfers of Ownership and Assets
In early 1999, the Company and Baxter agreed that it would be in the best
interests of both parties to (i) restructure Baxter's ownership interests in the
Company and NCI, and (ii) modify certain business arrangements among the
Company, NCI and Baxter. In January 1999, the Company and Baxter agreed that
the Company would purchase Baxter's interest in NCI (other than Baxter's right
to milestone payments), resulting in the Company owning 100% of NCI. In
exchange for the common stock, warrant and convertible debentures of NCI then
held by Baxter, Baxter received (i) 3,000,000 shares of Common Stock, (ii) a
warrant to purchase an additional 5,200,000 shares of Common Stock at an
exercise price of $1.15 per share, (iii) a change in the conversion price of the
70,282 shares of Series A Convertible Preferred Stock then held by Baxter (an
increase from 66,304 shares resulting from dividends payable in kind) from $5.50
to $2.75 per share, and (iv) approximately $33,000,000 principal amount of the
Company's 6 1/2% convertible subordinated debentures (replacing the $30,000,000
principal amount of NCI's 6 1/2% convertible subordinated debentures, plus
accrued interest).
Following the closing on May 28, 1999 (which occurred after stockholder
approval of the transaction at the Company's May 25, 1999 annual meeting of
stockholders), NCI became a wholly owned subsidiary of the Company. As of
December 31, 1999, Baxter owns approximately 19% of the outstanding Common Stock
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without giving effect to the possible conversion or exercise by Baxter or others
of additional securities they own.
In June 1999, the Company and Baxter entered into a series of agreements
dated June 30, 1999 pursuant to which, among other things, Baxter transferred
the sales, marketing and distribution responsibilities for Isolex(R) and the
Company's other cell therapy products to the Company. Pursuant to an asset
transfer agreement, the Company agreed to purchase from Baxter the finished
goods inventory, copies of customer lists and accounting books and records,
hardware and related assets leased or owned, and agreements with customers and
service contracts, all relating to the products previously marketed and
distributed by Baxter under the Distribution Agreement. In addition, certain
Baxter personnel transferred to the Company and became part of the Company's
worldwide sales force. The purchase price for the transferred assets was equal
to the price Baxter as a distributor had originally paid to NCI for the finished
goods inventory plus the net book value of all other transferred assets. The
closing for the transfer of assets in the United States and Canada occurred on
June 30, 1999 and in the rest of the world occurred on November 30, 1999. For
the year ended December 31, 1999, the Company's cost of repurchasing the
inventory in the United States was approximately $1,000,000 and in the rest of
the world was approximately $2,000,000. Additionally, the Company purchased
approximately $1,200,000 in devices classified as fixed assets.
In connection with the asset transfer, the Company and Baxter also entered
into a royalty agreement pursuant to which Baxter will receive a royalty of 5%
on the Company's net sales of Isolex(R) and related cell therapy products from
January 1, 2001 until December 17, 2008. (Baxter would also be entitled to a
royalty of 5% on the Company's net sales of the foregoing products in excess of
$50,000,000 in the year 2000, which management feels highly unlikely to occur).
In addition, Baxter extended a $20,000,000 line of credit to the Company
pursuant to a credit agreement, which agreement terminated by its terms without
being drawn on, upon the closing of the November 1999 financing described below.
As of June 30, 1999 and November 30, 1999, respectively, the Services
Agreement and Distribution Agreement were terminated. The Company now has
direct control of sales of its Isolex(R) and cell therapy products through its
field sales group in the United States and its European headquarters in Belgium.
For regions outside the United States, Canada and Western Europe, NCI and its
European subsidiary are entering into arrangements with third party distributors
for distribution of the Isolex(R) and cell therapy products. The Company is
entering into distribution agreements with distributors unrelated to Baxter in
portions of Northern and Southern Europe and East Asia. In addition, NCI's
European subsidiary has executed an agreement with a Baxter subsidiary for
distribution in Eastern Europe, portions of North Africa and the Middle East.
NCI and its European subsidiary have also entered into several interim services
agreements with Baxter pursuant to which Baxter will continue to provide
services in Europe and certain other regions relating to warehouse and shipping,
information systems, general infrastructure and administrative support, quality
assurance and regulatory affairs.
Baxter has also agreed to continue to provide worldwide services relating
to the installation, repair and maintenance of NCI's cell therapy products
pursuant to the terms of several instrument services agreements dated June 30,
1999 and November 30, 1999 covering various regions of the world where such
products are sold. Pursuant to the agreements, NCI (or its European affiliate,
Nexell International SPRL) will provide training to Baxter personnel, and such
personnel will provide the services as requested by NCI or its customers. NCI
will pay for the services an amount equal to Baxter's Fully Loaded Cost, plus
15% in the case of the United States, Canada and Europe, and plus 20% in the
rest of the world. The instrument services agreements expire upon termination
of the Manufacturing Agreement.
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Notwithstanding the termination of the Distribution Agreement, the parties
have agreed that Baxter's obligations with respect to the delivery of Isolex(R)
and other cell therapy products under the Manufacturing Agreement, Antibody
Agreement and Supply Agreement shall remain in full force and effect.
The assets purchased from Baxter in conjunction with the termination of the
supply and manufacturing agreements were accounted for as an asset purchase for
cash. The types of items purchased include saleable inventory, Isolex(R)
devices that are located in customer sites both in the United States and in
Europe and minor amounts of promotional materials. The purchase price for the
inventory was equal to the price Baxter as a distributor had originally paid to
the Company. The Isolex(R) devices were purchased and recorded at their net
book value, which the Company believes approximated the fair market value.
November 1999 - Private Placement Financing
On November 24, 1999, the Company closed a private placement of its
securities to certain institutional investors pursuant to the terms of a
securities agreement (the "Securities Agreement"). The private placement
consisted of the issuance of (i) 63,000 shares of the Company's newly designated
Series B Cumulative Convertible Preferred Stock ("Series B Preferred Stock"),
convertible at the option of the holder at any time until November 24, 2006 (at
which time the conversion is automatic) into shares of Common Stock at $2.75 per
share, subject to anti-dilution adjustment in certain circumstances; (ii) one
right per share of Series B Preferred Stock to put such share to Baxter
International Inc. ("Baxter International"), an affiliate of Baxter, from
November 24, 2002 until November 24, 2004 unless earlier terminated (the "Put
Rights"); (iii) warrants to purchase up to 3,000,000 shares of Common Stock at a
purchase price of $3.00 per share, subject to anti-dilution adjustment in
certain circumstances, exercisable for five years; and (iv) a class of
performance warrants to purchase shares of Common Stock at a purchase price of
$.01 per share, subject to anti-dilution adjustment in certain circumstances,
exercisable after five years. The number of performance warrants that may be
exercised adjust based upon the closing price of the Common Stock at the date of
exercise, ranging from zero (if the closing price exceeds $5.00 per share) to
6,000,000 shares (if the closing price is equal to or less than $3.00 per
share). Net proceeds to the Company from the private placement were
approximately $60,400,000. The Company used a portion of the proceeds to retire
all of the approximately $33,900,000 of the Company's convertible debentures
held by Baxter, and intends to use the remainder of the proceeds for general
corporate purposes.
On November 24, 1999, the Company and Baxter International entered into an
agreement (the "Side Letter Agreement") to provide that the conversion price for
the Series B Preferred Stock purchased by Baxter International in the event the
Put Rights are exercised (the "Put Series B Preferred Stock") would be adjusted
on November 24, 2004 (or earlier, if 100% of the Series B Preferred Stock is put
to Baxter International) but only in the event that an amount in excess of
$15,000,000 is purchased by Baxter International, as follows: (i) for the Put
Series B Preferred Stock in an amount up to $53,000,000 (computed on the basis
of the liquidation preference for such stock) (the "Threshold"), the conversion
price would be adjusted to equal the closing price of the Common Stock on the
respective date or dates such Series B Preferred Stock was purchased by Baxter
International (including purchases below the $15,000,000 amount), less a 5%
discount (subject to a floor price equal to the closing price of the Common
Stock on November 24, 1999, unless shareholder approval is obtained if required
by the rules of the Nasdaq Stock Market); (ii) for the Put Series B Preferred
Stock in an amount in excess of the Threshold, then the conversion price would
be adjusted to equal the closing price of the Common Stock on November 24, 1999.
The dollar amount of the Put Series B Preferred Stock would be deemed to accrue
interest (payable in kind in shares of Series B Preferred Stock) from the
respective date or dates the Series B Preferred Stock is put to Baxter
International to the date the adjusted conversion price is determined, at a rate
equal to the applicable three-year U.S. Treasury Note rate at the date of each
such purchase, plus 100 basis points. In the event that the foregoing
conversion adjustments would not be permissible under Delaware law,
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the Company has agreed to take such action as is appropriate to exchange the Put
Series B Preferred Stock for an equal number of shares of a new series of
preferred stock of the Company, having the identical terms, conditions,
preferences and rights of the Series B Preferred Stock, except that it would
bear the conversion price adjustment described above.
The Company and Baxter International also entered into a Put Agreement
dated November 24, 1999 pursuant to which the parties made certain
representations to each other, and agreed to take certain actions in connection
with, and to provide for certain rights and remedies regarding the transactions
contemplated by, the Securities Agreement.
On December 17, 1999, pursuant to the terms of the Series A Preferred Stock
owned by Baxter, the Company issued 4,216 additional shares of Series A
Preferred Stock to Baxter representing dividends payable in kind.
Acquisition of CellPro Assets
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On January 29, 1999, the Company completed the purchase of certain assets of
CellPro Incorporated ("CellPro"). Assets purchased included substantially all
of CellPro's intellectual property rights, patents, antibodies and related cell
banks, and license rights. These assets were acquired in exchange for 1,882,215
shares of Common Stock with a fair market value of $3,000,000. The fair market
value was determined based upon the average closing price of the Common Stock
for the 15 business days which ended prior to the closing of $1.59 per share.
The transaction was accounted for as an asset purchase.
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 Dickinson and Johns Hopkins
University ("Johns Hopkins"). Baxter sublicensed these technologies to NCI in
December 1997.
In the course of patent infringement litigation brought against CellPro by
Becton Dickinson, 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 NCI'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 NCI's premarket approval application for the Isolex cell separation
systems, and (2) to withdraw its petition before the HHS requesting the exercise
of so-called "march-in rights" with respect to the patents underlying the CD34+
sublicense.
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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 NCI 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 NCI,
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. NCI began marketing the first of these kits, the
Cytonex(TM) Immunocyto Chemistry kit in mid-year 1999. The second diagnostic
product, the Tumor Enrichment Column (TEC(TM)), is in clinical testing under a
Phase II National Cancer Institute Small Business Innovation Program grant.
Innovir Laboratories, Inc.
In June 1998, the Company determined that the operations of its 85% owned
subsidiary, Innovir, no longer fit into the Company's long-term business
strategy. At that time, the Company had completed its funding commitments to
Innovir under its December 31, 1997 agreement, and notified Innovir that no
further funding would be provided. 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 completed technology sales and license arrangements during 1999 and will
continue to seek additional opportunities to out license its remaining
technology. Innovir's common stock was delisted from the Nasdaq Small-Cap Market
and later from the OTC Bulletin Board and now trades via "pink sheets"
maintained by the National Quotation Bureau, LLC.
Patents and Licenses
NCI
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NCI's intellectual property estate includes four general patent families:
1. Selection systems;
2. Bioreactor and culture systems;
3. Reagents for use in selection; and
4. Cell culture and 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 sub-licensed from Baxter.
At the time of the acquisition of NCI, Baxter granted to NCI sublicenses of
substantially all of Baxter's rights under four license agreements, and NCI
assumed substantially all of Baxter's obligations as licensee thereunder,
including payment of all royalties, annual maintenance fees and other required
payments. Two of
9
<PAGE>
the sublicenses are under licenses to Baxter from Becton Dickinson 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 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 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.
Nexell has also completed two worldwide licensing agreements with Diaclone
S.A. ("Diaclone") in Besancon, France. The first agreement grants Nexell an
exclusive license to Diaclone's CD2 antibody, the marker for all T cells. The
second agreement provides access to six additional antibodies, including CD138,
useful for purging myeloma cells; CD25, a T cell activation marker that may
facilitate the removal of alloreactive cells from a stem cell graft prior to
transplant; CD56 and CD16, markers for NK (natural killer) cells; CD14, a
monocyte marker; and CD4, the marker for T-helper cells.
In October 1999, the United States Patent and Trademark Office (the "Patent
Office") issued to NCI a patent relating to a peptide which binds to CD34+
antibody and releases CD34 cells, which is a critical component of the Isolex(R)
system. A similar patent has been issued in Europe and Australia. These
patents relate 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.
In 1999, the Patent Office issued two new patents to NCI and allowed one
additional patent 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. These patents compliment and extend previoiusly issued U.S. patents
on methods and use of these cells. An additional U.S. patent to which Nexell has
licensing rights from the National Institutes of Health ("NIH") was also
allowed. This patent relates to the use of substances that bind a retrovirus and
a cell to enhance the transduction (uptake and incorporation of retrovirus into
cells). A transduction process is a component of many retroviral vector gene
therapy procedures.
As part of the acquisition of intellectual property from CellPro, as discussed
above, NCI also has patent rights to one U.S. patent on culture expansion of
CD34 cells, and patents relating to CellPro's Ceprate(R) cell processing device.
In 1999, NCI was in receipt of two additional U.S. patents as part of the
CellPro acquisition relating to linking compounds to bind antibodies to other
moieties.
Other Intellectual Property
- ---------------------------
Certain of the Company's subsidiaries in the past had pursued development of
several potential therapeutic compounds. Hypericin, a chemically synthesized
analog of St. John's wort, was under investigation by the Company for treatment
of glioblastoma multiforme, a serious form of brain cancer, among other
diseases. The Company is completing Phase IIA clinical trials in a variety of
proliferative dermatological disorders at which time it will cease active
commercial development of this compound. The Company is considering out-
licensing the compound to other parties. Pursuant to an agreement dated June 1,
1988, as amended, between the Company and New York University and YEDA Research
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"), the Company was
10
<PAGE>
granted a limited worldwide exclusive license to commercialize and exploit
natural hypericin and synthetic hypericin.
VM301 is a drug candidate that was under investigation by the Company for
treatment of wound healing. The Company continues ongoing limited development
but intends to ultimately out-license VM301 to other parties. 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. See "Relationship with Baxter Healthcare Corporation."
Nexell also contracts with Dynal, a Swedish reagent company, for the supply of
paramagnetic beads for use in cell selection. The Company also contracts with
certain other companies for supply of monoclonal antibodies, reagents and/or
plastics.
Government Regulation
The Company has acquired or developed technologies which are intended to lead
to commercialization of diagnostic and therapeutic medical products. The
Company's products are currently undergoing, or will be required to undergo, the
difficult and costly approval process for development, manufacture and sale
established by the FDA, and may be subject as well to state and foreign
regulations.
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 containing
both the pre-clinical and clinical data 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 on a timely basis, if at all.
Medical devices follow a similar process for approval although the length and
difficulty of the process varies with the level of controls which the FDA
determines are necessary to insure their safety and effectiveness. Based on
these controls, the devices are put into three classes, i.e., Class I, Class II,
Class III. Two types of pre-market 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. A Pre-Market Approval ("PMA")
application is necessary for Class III, highest risk devices. It requires valid
scientific evidence, including clinical trials, to demonstrate the safety and
effectiveness of the device and usually requires tests similar to a filing for a
drug product. 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's principal product, the Isolex(R) 300i was cleared for marketing
in Europe in June 1996, in Canada in May 1999 and in the U.S. through the PMA
process in July 1999. The Company is conducting additional clinical studies with
several of its products to pursue additional indications for its products.
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
11
<PAGE>
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. 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, NCI faces competition from cell processing device companies. Like
NCI, there are several product-focused companies attempting to develop turn-key
devices for cell processing. Although the sale of CellPro's intellectual
property to NCI effectively eliminated CellPro as a competitor in the cell
separation market, other competitors or potential competitors remain, including
Miltenyi Biotec GmbH, Eligix, Inc., Novartis/SyStemix, and Aastrom Biosciences
Inc. NCI'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
Nexell had 150 full-time employees at December 31, 1999. The Company believes
that relations with its employees are satisfactory.
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 several 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.
12
<PAGE>
Executive Officers of the Company
The following is a list of current executive officers of the Company and of
individuals who may be deemed to be executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Richard L. Dunning 54 Chairman of the Board and Chief Executive
Officer
L. William McIntosh 54 Director, President and Chief Operating
Officer; Chief Executive Officer
William A. Albright, Jr. 42 Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
William Wong, Ph.D. 51 Executive Vice President, Business
Development
Dennis E. Van Epps, Ph.D. 53 Vice President, Research, NCI
Amy Ross, Ph.D. 46 Vice President, Diagnostics, NCI
David J. Hirsch 46 Vice President, Global Sales &
Administration, NCI
</TABLE>
___________________________
RICHARD L. DUNNING was elected Chairman of the Board of Directors in May
1999 and has been 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
Pharmaceuticals Company) from 1991-1995. Mr. Dunning also serves as a director
of Epoch Pharmaceuticals, Inc. and Endorex Corp.
L. WILLIAM McINTOSH was elected President and Chief Operating Officer of
the Company in May 1999, and has served since March 1, 1998 as President and
Chief Executive Officer of NCI. On March 16, 2000, Mr. McIntosh was elected to
the Board of Directors of the Company. 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 the Company, Mr. McIntosh
served as Senior Vice President Business Development, Commercial Operations for
Zynaxis, a biotechnology company with both drug delivery and diagnostic
technologies from 1993, and was an independent industry consultant who, for some
time, worked exclusively for SmithKline Beecham.
WILLIAM A. ALBRIGHT, JR. joined the Company as Senior Vice President, Chief
Financial Officer, Treasurer and Secretary in May 1999. Prior to joining the
Company he was a consultant to the healthcare industry. From 1996 to 1998, he
was Chief Financial Officer of LocalMed, Inc., a venture-stage medical device
company developing products for interventional cardiology. From 1994 to 1996,
he was Chief Financial Officer of Connetics Corp., a biopharmaceutical company.
He joined Connetics as the third employee and helped build the organization from
the venture-backed spin-off of Genentech Inc. into a freestanding publicly
traded company. Earlier in his career he held senior positions within the
medical device group of Eli Lilly and Company.
13
<PAGE>
WILLIAM WONG, Ph.D. has served as Executive Vice President, Business
Development of the Company since February 1998. Prior to joining the Company,
he served as Executive Director of Business Development of Intracel Corporation
from 1995, with responsibility for worldwide in-and out-licensing, development,
marketing partnerships and strategic alliances. Previously, he held the
position of Senior Vice President and General Manager of the Diagnostics
Division of Zynaxis Cell Science.
DENNIS E. VAN EPPS, Ph.D. joined NCI as Vice President of Research in January
1998. He is responsible for leading research efforts for the Company, doing
technology assessment and developing Company strategy. Prior to joining NCI he
was Vice President of Research for Baxter Healthcare Immunotherapy Division from
1993 to December 1997.
AMY ROSS, Ph.D. joined NCI as Vice President Diagnostics in December 1998.
Prior to joining NCI she was Senior Director of Diagnostic Applications at
CellPro, Inc. from 1995 where she established CellPro's MRDx Diagnostics
clinical laboratory.
DAVID J. HIRSCH joined NCI as Vice President, Global Sales and Administration
in April 1999. He has extensive executive and management experience in the
healthcare industry, having previously served as General Manager, GFI
Pharmaceutical Services, Inc. from 1997, Vice President and Chief Operating
Officer of the Cancer Therapy and Research Center Research Foundation from 1995,
Director, Sales Operations and Planning at Boehringer Mannheim Pharmaceuticals,
and as Director, Sales Operations and other sales management positions at
Schering-Plough, Inc.
ITEM 2. PROPERTIES.
The Company currently occupies a building at 9 Parker, Irvine, California
consisting of approximately 59,600 square feet. This facility is under a lease
which provides for a current monthly rental of $45,892 plus real estate taxes
and operating costs. The current term expires November 30, 2004 with two five-
year renewal options.
The Company occupies 2,343 square feet of office space at 2751 Centerville
Road, Suite 210, Wilmington, Delaware under a lease at a monthly rental of
$4,588. The lease expires on August 31, 2002. The Company expects to terminate
this lease during 2000, and based on current market conditions, incur only
modest additional one time expenses related to the early lease cancellation.
The Company also occupies 377 square meters (approximately 4,058 square feet)
of office space at I. Meyskensstraat 224, B-1780 Wemmel, Belgium under a lease
with a monthly rental of 168,333 BEF (approximately $4,000). The lease expires
on July 1, 2008 with options to terminate the lease in 2005 or 2008 with six
months notice.
ITEM 3. LEGAL PROCEEDINGS.
On March 2, 2000, the Company filed suit in the U.S. District Court in
Delaware (civil case number 00-141) against Miltenyi Biotec GmbH of Germany and
its related U.S. companies, Miltenyi Biotec, Inc. and AmCell Corporation. The
suit charges Miltenyi with patent infringement, breach of contract and deceptive
trade practices. Becton Dickinson & Company and The Johns Hopkins University,
both of whom have proprietary rights associated with Nexell's technology, have
joined with Nexell in the suit. Nexell intends to ask the court for damages and
injunctive relief. As of March 20, 2000, the defendants have not filed a formal
response to the suit.
14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Market Price of Common Stock
The Common Stock and the Common Stock Subscription Warrants are currently
traded on The Nasdaq Stock Market National Market System under the symbols NEXL
and NEXLW, respectively. Prior to May 26, 1999, the Common Stock and Warrants
traded on The Nasdaq Stock Market National Market System under the symbols VMRX
and VMRXW, respectively. The following table sets forth for the Common Stock
the high and low sales prices for each calendar quarter from January 1, 1998
through December 31, 1999.
<TABLE>
<CAPTION>
1998 High Low
- ---- ---- ---
<S> <C> <C>
First Quarter $2.06 $1.28
Second Quarter 1.88 1.13
Third Quarter 1.44 0.94
Fourth Quarter 1.50 0.97
</TABLE>
<TABLE>
<CAPTION>
1999
- ----
<S> <C> <C>
First Quarter 1.91 1.00
Second Quarter 2.44 1.03
Third Quarter 2.19 1.38
Fourth Quarter 1.56 1.03
</TABLE>
On March 20, 2000, there were 744 shareholders of record of the Common
Stock.
The Company has not paid a cash dividend and does not anticipate the
payment of cash dividends on Common Stock in the foreseeable future. The
holders of the Company's Series A Cumulative Convertible Preferred Stock and the
holders of the Company's Series B Cumulative Convertible Preferred Stock are
entitled to annual dividends. In addition, the terms of the Company's Amended
and Restated Certificate of Incorporation applicable to its Series B Cumulative
Convertible Preferred Stock limit the ability of the Company to pay dividends on
Common Stock.
Recent Sales of Unregistered Securities
On November 24, 1999, the Company entered into a Securities Agreement (the
"Securities Agreement") with John Hancock Mutual Life Insurance Company,
Metropolitan Life Insurance Company, Massachusetts Mutual Life Insurance
Company, The Lincoln National Life Insurance Company, and certain of their
affiliates (collectively, the "Purchasers"). Pursuant to the terms of the
Securities Agreement, the Company issued and sold to the Purchasers, for an
aggregate price of $63,000,000, 63,000 shares of newly-designated Series B
Cumulative Convertible Preferred Stock of the Company (the "Series B Preferred
Stock"), Put Rights (the "Put Rights") issued by Baxter International Inc.
("Baxter International"), Class A Warrants of the Company (the "Class A
Warrants"), and Class B Warrants of the Company (the "Class B Warrants").
Lehman Brothers acted as placement agent for the Company in this transaction and
received a placement fee of $2,205,000. The
15
<PAGE>
Company has used approximately $33,900,000 of the proceeds to retire convertible
subordinated debentures held by Baxter and will use the remainder for general
corporate purposes. Such securities were issued pursuant to the exemption from
registration provided under Section 4(2) of the Securities Act of 1933.
Under the terms of the Company's Certificate of Designation filed with the
Delaware Secretary of State on November 24, 1999 (the "Certificate of
Designation") each share of the Series B Preferred Stock is convertible at the
option of the holder at any time until November 24, 2006 (at which time
conversion is automatic), into Common Stock at a price of $2.75 per share,
subject to anti-dilution adjustment in certain circumstances. The Series B
Preferred Stock is convertible, in the aggregate, into 22,909,091 shares of
Common Stock (representing approximately 17.7% of pro forma fully-diluted shares
outstanding on November 24, 1999, using the treasury method). Holders of Series
B Preferred Stock do not have voting rights except as required by Delaware law
and for certain matters specified in the Certificate of Designation. Cash
dividends are payable semi-annually on the Series B Preferred Stock at the rate
of 3% of the liquidation preference. The other rights and preferences of the
Series B Preferred Stock are set forth in the Certificate of Designation.
The Put Rights provide the Purchasers with the ability to cause Baxter
International to purchase the Series B Preferred Stock from November 24, 2002
until November 24, 2004, unless terminated earlier under the circumstances
described in the Put Right Certificate. The purchase price to be paid by Baxter
International would reflect a per annum compounded return to the Purchasers
equal to 5.91%.
The Class A Warrants are exercisable for 15 business days commencing
November 24, 2004 (provided the Put Right has not been exercised), at an
exercise price of $.01 per share, subject to anti-dilution adjustment in certain
circumstances, into a number of shares of Common Stock, up to a maximum of
6,000,000 shares, that is dependent on the average of the last reported sale
prices of the Common Stock for the 10 trading days preceding November 24, 2004.
The maximum number of shares is issuable if the price of the Common Stock is
$3.00 or less, and no shares are issuable if the price of the Common Stock is
greater than $5.00. If the stock price is between $3.01 and $5.00, the number of
shares that is issuable decreases by 1,000,000 for each $.50 increment that the
stock price exceeds $3.00. The Class A Warrants may only be transferable
together with the Series B Preferred Stock.
The Class B Warrants are currently exercisable until December 16, 2004, for
an aggregate of 3,000,000 shares of Common Stock, at an exercise price of $3.00,
subject to anti-dilution adjustment in certain circumstances.
Under the terms of a Registration Rights Agreement dated November 24, 1999
between the Company and the Purchasers, the Company granted the Purchasers
certain demand registration rights commencing November 24, 2002, as well as
certain piggyback registration rights commencing November 24, 1999.
In connection with the foregoing, on November 24, 1999, the Company and
Baxter International entered into a Side Letter Agreement and a Put Agreement.
Also, in December 1999, the Company issued additional shares of Series A
Preferred Stock to Baxter pursuant to the exemption from registration provided
under Section 4(2) of the Securities Act of 1933. For a description of these
transactions, see "Item 1--Business--Relationship with Baxter Healthcare
Corporation--November 1999 Private Placement Financing."
As a result of the issuance of the Class A Warrants and certain other
recent transactions effected by the Company, the exercise price of the Company's
outstanding Common Stock Subscription Warrants (the "1996 Warrants") to purchase
Common Stock issued pursuant to a warrant agreement dated June 17, 1996 between
the Company and American Stock Transfer & Trust Company as warrant agent that
are listed on the Nasdaq Stock Market (NEXLW) has been adjusted from $1.50 per
share to $1.35 per share, each 1996 Warrant entitles the
16
<PAGE>
holder to purchase 1.107829 shares of Common Stock instead of one share of
Common Stock and the 2,199,993 1996 Warrants outstanding as of December 28, 1999
became exercisable in the aggregate for approximately 2,437,215 shares of Common
Stock instead of 2,199,993 shares of Common Stock. Furthermore, these additional
237,222 shares issuable upon exercise of the 1996 Warrants have not been
registered under the Securities Act of 1933 and unless and until such time as a
registration statement pertaining to such shares is in effect under the
Securities Act, such shares will constitute "restricted securities" under the
Securities Act and may only be sold or transferred in accordance with the
Securities Act or an exemption therefrom.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data have been derived from the Company's
audited financial statements. The Consolidated Statements of Operations Data
relating to the fiscal years 1997 through 1999 and the Consolidated Balance
Sheets Data at December 31, 1998 and 1999 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.
17
<PAGE>
Consolidated Statements of Operations Data:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue $ 14,961,000 $ 13,443,000 $ 5,002,000 -- --
Cost of goods sold 9,617,000 8,166,000 4,630,000 -- --
------------ ------------ ------------ ----------- ---------
Gross profit 5,344,000 5,277,000 372,000 -- --
Operating expenses:
Research and development 18,858,000 24,427,000 14,507,000 2,950,000 2,840,000
Purchased research and
development -- -- 39,862,000 14,484,000 --
General administrative and 13,684,000 13,823,000 7,627,000 4,300,000 2,272,000
goodwill amortization
Selling and marketing 7,768,000 3,625,000 61,000 -- --
Restructuring costs 502,000 2,625,000 -- -- --
------------ ----------- ------------ ------------ ---------
Total operating expense 40,812,000 44,500,000 62,057,000 21,734,000 5,112,000
------------ ------------ ------------ ------------ ----------
Operating loss (35,468,000) (39,223,000) (61,685,000) (21,734,000) (5,112,000)
Other (income) expense:
Royalty and licensing (income)
expense (855,000) (176,000) 150,000 100,000 100,000
Interest income (1,069,000) (2,972,000) (2,216,000) (1,792,000) (160,000)
Interest expense 1,903,000 2,036,000 196,000 329,000 2,000
Contract settlement -- 900,000 -- -- --
Minority interest in net loss of -- (4,161,000) (3,474,000) (116,000) --
consolidated subsidiaries
Other, net 226,000 113,000 (142,000) (395,000) 186,000
------------ ------------ ------------ ------------ ----------
Total other (income) expenses 205,000 (4,260,000) (5,486,000) (1,874,000) 128,000
Net loss (35,673,000) (34,963,000) (56,199,000) (19,860,000) (5,240,000)
------------ ------------ ------------ ------------ ----------
Preferred stock dividends (4,418,000) (3,988,000) (166,000) -- --
------------ ------------ ------------ ------------ ----------
Net loss applicable to common stock $(40,091,000) $(38,951,000) $(56,365,000) $ (19,860,000) $(5,240,000)
============ ============ ============ ============= ===========
Basic and diluted loss per share $(0.56) $(0.58) $(1.02) $(0.50) $(0.27)
============ ============ ============ ============ ==========
Weighted average number of shares of 71,443,000 67,284,000 55,457,000 39,399,000 19,748,000
common stock outstanding ============ ============ ============ ============ ==========
</TABLE>
Consolidated Balance Sheets Data:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working capital $ 28,031,000 $ 32,017,000 $ 61,354,000 $ 44,848,000 $ 391,000
Total assets 93,839,000 89,344,000 121,947,000 51,692,000 2,958,000
Total liabilities 10,625,000 40,529,000 34,239,000 3,01,000 2,698,000
Minority interest in subsidiary -- -- 4,161,000 2,381,000 --
Accumulated deficit (169,398,000) (133,533,000) (98,570,000) (42,371,000) (13,662,000)
Shareholders' equity 83,214,000 48,815,000 83,547,000 46,210,000 260,000
</TABLE>
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Customer Sponsored Research and Development Programs
The Company's cell therapy operations began in December 1997 upon the
acquisition of substantially all of the assets of the Division from Baxter. As
part of its efforts to research, develop and register its cell therapy products,
the Company participated in four major customer sponsored programs:
Field Performance Program (FPP) - the Company provides a supply of product
-------------------------------
at a discounted price sufficient to cover the cost of the product and other
ancillary costs.
Clinical Activities Team (CAT) - the Company provides product at no cost.
------------------------------
Research Activities Team (RAT) - the Company provides product at no cost.
------------------------------
Contract Research and Development Agreements (CRADA) - the Company provides
----------------------------------------------------
cash and/or product at no cost.
Since the Company did not acquire the Division until December 1997, it
incurred no FPP expenses during the 1997 reporting period. In 1998, the Company
provided equipment and supplies to research customers in the U.S. under the FPP
cost-recovery program. Customers reimbursed the Company for the cost of the
equipment and supplies. Customer reimbursements for these units were not
recognized as sales, but treated instead as a reduction in research and
development expenses. The aggregate value of FPP units shipped in each of 1998
and 1999 was approximately $1.1 million in net offset to research and
development expenses. Following the FDA clearance in July 1999 to market the
Isolex system in the U.S., the Company discontinued new FPP agreements. At that
time, the Company also began to convert existing FPP users into customers
purchasing product on commercial terms.
In December 1997, the Company assumed ongoing responsibility from Baxter to
support the CAT's activities. In 1997, these expenses totaled approximately
$40,000. In 1998, the CAT funding totaled approximately $400,000. In 1999, the
CAT program spending was approximately $200,000 in total. The largest
components of these expenses were supply of product to customers and grants to
support research activities.
The RAT had no expenses in 1997. In 1998, this program spent approximately
$15,000. Total expenses in 1999 were approximately $30,000.
The Company sponsored no CRADAs in 1997 and had no expenses as a result.
In 1998, the Company sponsored CRADAs totaled approximately $200,000. Total
CRADA spending in 1999 was approximately $5,000.
The Company's research and development expenditures, net of FPP recoveries,
for 1999, 1998 and 1997 were $18,858,000, $24,427,000 and $14,507,000,
respectively. In addition, the Company recorded a charge of $39,862,000 in 1997
for purchased in-process research and development.
Years Ended December 31, 1999 and 1998
Net sales in fiscal 1999 increased to $14,961,000 from $13,443,000 in
fiscal 1998, an increase of $1,518,000 or 11%. The increase reflects the launch
of the Isolex (R) 300i in the U.S. following FDA approval
19
<PAGE>
on July 2, 1999, offset by charges to repurchase $4,359,000 of inventory from
Baxter in 1999 related to the termination of the Marketing, Sales and
Distribution Agreement ("Distribution Agreement"). Through June 1999, Baxter had
exclusive worldwide distribution rights for NCI's products and, therefore, all
1998 sales and sales for the six months ended June 30, 1999 represent sales made
to Baxter. The Distribution Agreement specified that products were sold to
Baxter at the current global suggested retail price ("SRP") (independently
established by the Company) less a predetermined distributor margin of 30%. The
term of the Distribution Agreement was originally for eleven (11) years with
provisions to extend or terminate upon mutual agreement and allowed for annual
adjustments to the pricing structure. However, any price increases were limited
to actual increases in the fully loaded product cost and the increase in the
U.S. Consumer Price Index from the prior year. The effect of such future
increases in product cost on gross margins was minimal as the SRP was also tied
to the fully loaded cost increases. The Distribution Agreement provided for an
increased distributor margin based on the extent to which Baxter was able to
meet or exceed agreed upon sales projections contained in the Distribution
Agreement for that year. See Item 1 - "Relationship with Baxter Healthcare
Corporation" regarding termination of the Distribution Agreement in 1999.
In 1999 and 1998, the Company sold to Baxter $8,032,000 and $13,443,000,
respectively, of products, including reagent kits, disposables, Cryocyte,
Lifecell and other products. Products were sold to Baxter at SRP less the
predetermined distributor margin of 30%.
The gross profit in fiscal 1999 increased to $5,344,000 from $5,277,000, an
increase of $67,000 or 1%. The gross profit percentage in 1999 was 36% versus
39% in 1998. The decline in the gross profit percentage relates to costs
recorded related to the restructuring of the Distribution Agreement in 1999 that
were not included in Nexell results in 1998.
Research and development expenses decreased $5,569,000 or 23% from
$24,427,000 in 1998 to $18,858,000 in 1999. The decrease resulted primarily
from changes made in late 1998 to discontinue all Innovir operations and related
research and development activities and scaling back research programs within
the Company for development programs other than Hypericin and VM301. The
remaining research and development spending is primarily related to the cell
therapy business. Approximately $17.6 million of the research and development
spending in 1999 related to the cell therapy business as compared to
approximately $16.1 million in 1998.
General and administrative expenses and goodwill amortization decreased
$139,000 or 1% to $13,684,000 in 1999 from $13,823,000 in 1998. This decrease
was primarily due to the closing of Innovir operations and the relocation of the
Company's headquarters to Irvine, California. This was partially offset by the
creation of a European headquarters upon completion of the restructuring of the
Distribution Agreement. Amortization of goodwill, patents, trademarks and other
intangibles of $3,530,000 and $3,135,000 related to the acquisition of NCI from
Baxter is included in 1999 and 1998 results, respectively. Such amortization is
expected to approximate $3,878,000 in 2000.
Selling and marketing expenses increased to $7,768,000 in 1999 from
$3,625,000 in 1998, an increase of $4,143,000 or 114%. The increase relates to
1) the ramp up of marketing efforts for the U.S. launch of the Isolex (R) 300
and Isolex(R) 300i, which received final approval from the FDA on July 2, 1999,
and 2) the assumption of the direct sales and distribution responsibilities from
Baxter related to the restructuring of the Distribution Agreement on June 30,
1999.
Restructuring costs of $502,000 recorded in 1999 relate to the relocation
of the corporate headquarters. In January 1999, the Company announced that it
intended to acquire 100% of its 80.5% held subsidiary, NCI, and to restructure
the Company by changing its name from VIMRX Pharmaceuticals Inc. to Nexell
Therapeutics Inc. and to relocate its corporate headquarters to Irvine,
California. In conjunction with the closure of the
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former headquarters in Wilmington, Delaware, eight employees were terminated and
substantially all of the existing office furniture and fixtures were disposed
of. The 1998 restructuring costs of $2,625,000 relate to the closure of the
Innovir operations. In 1998, the Company had discontinued funding its 85% owned
subsidiary, Innovir, and in order to reduce operating expenses, Innovir closed
all operations. All employees were terminated and fixed assets of the closed
facilities were sold. See note 4 to the Consolidated Financial Statements.
The Company recorded net losses of $157,000, $9,862,000 and $10,049,000 in
1999, 1998 and 1997, respectively, related to the operations of Innovir. Due to
the cessation of Innovir-related activity, such losses are not expected to be
material in the future. The remaining termination payments of $381,000 were
accrued as of December 31, 1998 and paid in 1999. The Company does not expect
the closure of Innovir to have a material effect on future liquidity or capital
resources. The Company is not aware of any remaining Innovir related
commitments or contingencies.
Net royalty and licensing income increased $679,000 to $855,000 in 1999
from 1998 primarily related to the sale and licensing of certain Innovir assets
to Ribozyme Pharmaceuticals Inc. and Amgen, Inc.
Interest income decreased from $2,972,000 in 1998 to $1,069,000 in 1999 due
to a lower average cash and cash equivalents balance in 1999 primarily as a
result of cash used in operations of approximately $30 million.
A contract settlement was recorded in the third quarter of 1998 related to
the termination of a research agreement with Columbia University, while no such
expense was recorded in 1999.
The minority interest in the net loss of a consolidated subsidiary was
fully recognized in 1998, and therefore, no such offset was recorded in 1999.
The foregoing resulted in a net loss of $35,673,000 for fiscal 1999, an
increased loss of $710,000 or 2% from fiscal 1998.
Years Ended December 31, 1998 and 1997
Sales in fiscal 1998 were $13,443,000 as compared to sales in fiscal 1997
of $5,002,000. The 1998 sales reflect the first full year of sales to Baxter
under the Distribution Agreement. The 1997 sales were comprised of two
components. Initial product sales to Baxter were $574,000 upon completion of
the acquisition of the NCI business during December, 1997. Additionally, as part
of the Asset Purchase Agreement, NCI purchased all of the field inventory
(finished goods) and Baxter was required to re-purchase it from NCI for
$4,428,000.
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 NCI acquisition in December 1997 reflecting the initial purchase of
inventory by NCI's sole distributor, Baxter.
The gross profit percentage was 39% in 1998 as compared to 7% in 1997. In
1997, gross profit was impacted by purchase price adjustments resulting
primarily from the fair value assigned to the majority of finished goods
purchased from and sold back to Baxter in 1997. In accordance with APB 16, the
fair value of 80.5% of the finished goods acquired from Baxter was written up to
its net realizable value (e.g., selling price) as it was sold back to Baxter
shortly thereafter. Thus, there was no gross profit recognized on sales of
those goods. A gross profit of $372,000 was recognized on the remaining 19.5%
of the sales to Baxter, as Baxter retained 19.5% ownership in NCI and such
finished goods were valued at historical carrying amounts. The
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1998 gross profit is significantly greater than that of 1997 because it was not
impacted by the purchase price adjustments described herein.
Research and development expenses were $24,427,000 in 1998, an increase of
$9,920,000 from 1997. This increase resulted principally from the inclusion of
a full year of activity in 1998 related to NCI as compared to one-half month's
activity in 1997 subsequent to completion of the acquisition of the NCI business
from Baxter. The NCI research and development projects targeted the ex vivo
cell research used in the clinical treatment of certain diseases, primarily
various forms of cancer and resulted in an increase in research and development
expenses of $15,658,000. This increase was offset by decreases in research and
development spending by VGI ($3,464,000), Nexell ($856,000) and Innovir
($1,418,000). The VGI decrease was the result of the November 1998 termination
of the research agreement between Nexell and Columbia University. The reduction
in Nexell spending was related to the decrease in clinical trials efforts for
Hypericin and VM301 in 1998 as compared to 1997. Innovir operations were
discontinued in late 1998 and research and development spending throughout the
year had been scaled back in anticipation of the business closure. See
"Customer Sponsored Research and Development Programs," above. For further
information regarding purchased in-process research and development during 1997,
see note 3 to the Consolidated Financial Statements.
General and administrative expenses and amortization of goodwill increased
to $13,823,000 in 1998 from $7,627,000 in 1997, an increase of $6,196,000 or
81%. This increase is due principally to the inclusion of a full year of NCI
spending ($8,512,000) offset by decreases in expenses related to Nexell and
Innovir.
Selling and marketing expenses relate to the NCI operations and were
$3,625,000 in 1998, an increase from $61,000 in 1997. The 1998 results include a
full year's activity including increased marketing efforts in Europe and in the
United States in preparation for expected product approvals by the FDA. The
1997 results included one-half month's spending in December 1997, subsequent to
the acquisition of the assets of NCI from Baxter. The agreements with Baxter
provided for co-marketing of the NCI products during the 1998 period, while
Baxter provided the direct field sales effort and physical distribution of
products. Baxter received a 30% distributor margin against SRPs in exchange for
the services it provided to NCI.
Restructuring costs in 1998 include expenses related to the shutdown of
Innovir's facilities (see note 4 to the Consolidated Financial Statements and
the discussion above of restructuring for the years ended December 31, 1999 and
1998).
Net royalty and licensing income of $176,000 was recorded in 1998 as
compared to royalty expense of $150,000 in 1997. The 1997 expense reflects
royalties of $50,000 paid to New York University ("NYU") and YEDA Research
Development Company, Ltd. ("YEDA") related to a second amendment to an exclusive
worldwide license to commercialize and exploit synthetic hypericin compounds in
November of 1997 and $100,000 to Columbia University related to the Company's
license for VM201. The hypericin license agreement expires on the later of the
expiration of the licensors' patent or 15 years from the first commercial sale
of products under the agreement. The Company did not recognize any royalty
income during 1997. In 1998, $100,000 was paid to NYU and YEDA under the
amended hypericin license and $276,000 of royalty income was received from
CellPro related to the Company's CD34+ sublicense from Baxter. Based on an
agreement with Baxter, the Company received the domestic portion of CellPro's
royalty payments in 1998, pending approval of the Isolex(R) System. No CellPro
royalties were received in 1999, and no further royalties are expected.
Interest income increased $756,000 or 34% from 1997 to 1998 due to an
increase in the average funds available for investment. Interest expense
increased $1,840,000 principally due to the interest on the long-term debt due
to a related party.
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Minority interest in net loss of a consolidated subsidiary increased
$687,000 or 20% due principally to the inclusion of NCI in 1998, offset by a
decrease in the participation of the minority interest in the losses of Innovir.
The foregoing resulted in a net loss of $34,963,000 for fiscal 1998, a
$21,236,000 or 38% decrease from fiscal 1997 net loss.
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 $28,695,000 in cash and cash equivalents as of December 31,
1999 as compared to $33,091,000 in cash and cash equivalents as of December 31,
1998 and working capital of $28,031,000 at December 31, 1999 as compared to
$32,017,000 at December 31, 1998. The decrease in cash and working capital
positions resulting from the cash used in the operations of the Company of
$27,851,000 and cash used in investing activities of $3,172,000 were offset by
$26,632,000 cash provided by financing activities. See Item 5 - "Market for
Registrant's Common Equity and Related Stockholder Matters - Recent Sales of
Unregistered Securities," for a description of the Company's $63,000,000
November 1999 private placement financing. Cash dividends are payable on the
Series B Preferred Stock issued thereunder at the rate of 3% of the liquidation
preference, payable semi-annually and will be approximately $1,900,000 per year.
Cash used in operating activities in 1999 of $27,851,000, increased
approximately $4,588,000 or 17% over the cash used in operating activities in
the year ended December 31, 1998. The increase is primarily due to the increase
in trade receivables and other current assets.
At this time, the Company does not have any specific plans to acquire any
company. The Company, in the ordinary course of business, routinely explores
possible business transactions that may lead to an acquisition. In general, in
order to conserve cash, the Company's preference is to use its stock as
consideration for any potential acquisition.
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 through at least fiscal 2000.
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 has experienced no material disruption in the operation of its
business as a result of the transition from 1999 to 2000. The Company spent
approximately $750,000 in 1998 to upgrade its systems which brought it into Year
2000 compliance. Throughout 1999, another $5,000 was spent to upgrade smaller
computer applications to ensure complete Year 2000 compliance. No future costs
are anticipated with respect to Year 2000 compliance. The Company's product
lines all operate independently of the date or time of day; thus, the transition
to the year 2000 has not affected their operation. The Company continues to
monitor its' IT and non-IT systems, as well as its vendors, suppliers and
partners to ensure continued Year 2000 compliance.
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Although the Company will take all practical measures to prevent future problems
related with the Year 2000 issue, such problems and failures may occur which
could seriously affect the Company's operations. Because of the unprecedented
nature of such problems, the extent of the effect on the Company's operations,
if any, cannot be determined.
New & Proposed Accounting Pronouncements
In June 1998, Statement of Financial Accounting Standards No. 133 -
"Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133)
was issued, as amended, and is effective for all periods of fiscal years
beginning after June 15, 2000. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS No.
133 requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company believes that implementation of SFAS No. 133 will
have no material impact on its financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
In the normal course of business, operations of the Company are exposed
to risks associated with fluctuations in interest rates and foreign currency
exchange rates.
Interest Rate 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 risks 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 to the possibility that the issuer of the bond will not be able to
make principal and interest payments. The Company addresses these risks by
actively monitoring the fund's performance and investment holdings. The Company
does not enter into financial instruments for trading or speculative purposes.
The Company's interest income is most sensitive to fluctuations in the
general level of U.S. interest rates. In this regard, changes in U.S. interest
rates affect the interest earned on the Company's cash as well as the value of
the mutual fund in which excess cash is invested.
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's investment of excess cash in a mutual 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. The fund's portfolio managers make all investment
decisions and the Company has no control over such investment decisions or the
fund's use of derivatives.
Foreign Currency Risk
Changes in foreign exchange rates, and in particular a strengthening of the
U.S. dollar, may negatively affect the Company's consolidated sales and gross
margins as expressed in U.S. dollars. To date, the Company has not entered into
any foreign exchange contracts to hedge its exposure to foreign exchange rate
fluctuations.
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However, as its international operations grow, the Company may enter into
foreign exchange contracts to manage its foreign exchange risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Financial Statements on page F-1.
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts for the Years ended
December 31, 1999, 1998, and 1997.
All other financial statement schedules are omitted because they are not
applicable or the required information is disclosed in the Consolidated
Financial Statements or notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Certain of the information required in response to this item is
incorporated by reference to the 2000 Proxy Statement. See also "Executive
Officers of the Company" hereinabove.
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this item is incorporated by
reference to the 2000 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required in response to this item is incorporated by
reference to the 2000 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required in response to this item is incorporated by
reference to the 2000 Proxy Statement.
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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.
Exhibit Description
Number -----------
------
2.4 Asset Purchase Agreement dated October 10, 1997 by and
among Baxter Healthcare Corporation ("Baxter"), the Company
and NCI (1)
2.5 Asset Acquisition Agreement dated February 18, 1999, by and
among Baxter, the Company and NCI (2)
2.6 Securities Agreement dated as of November 24, 1999 among the
Company and the Purchasers named in Schedule I thereto
(certain schedules are omitted and the Company agrees to
furnish supplementally a copy to the Commission upon
request) (3)
3.1 The Company's Amended and Restated Certificate of
Incorporation as amended to date (3)
3.2 The Company's Amended and Restated By-Laws as amended to
date (3)
4.4 Warrant Agreement dated June 17, 1996 between the Company and
American Stock Transfer & Trust Company (4)
4.5 The Certificate of Amendment of the Certificate of
Incorporation of the Company filed with the Delaware Secretary
of State on December 16, 1997 creating the Series A Preferred
Stock and amendments subsequent thereto (included in Exhibit
3.1 above)
4.6 The Certificate of Amendment of the Certificate of
Incorporation of the Company filed with the Delaware Secretary
of State on May 25, 1999 modifying the Series A Preferred
Stock (included in Exhibit 3.1 above)
4.7 The Company's Series 1 6 1/2% Convertible Subordinated
Debenture Due November 30, 2004 issued May 28, 1999 to
Baxter (5)
4.8 The Company's Series 2 6 1/2% Convertible Subordinated
Debenture Due November 30, 2004 issued May 28, 1999 to
Baxter (5)
4.9 The Company's Certificate of Designation filed with the
Delaware Secretary of State on November 24, 1999 creating the
Series B Preferred Stock (included in Exhibit 3.1 above)
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<PAGE>
Exhibit Description
Number -----------
------
10.3 The Company's Amended and Restated 1990 Incentive and Non-
Incentive Stock Option Plan, as amended to date*
10.9 Employment letter agreement dated June 21, 1994 between the
Company and Alfonso J. Tobia (6)*
10.11 The Company's 1995 Outside Directors Stock Option Plan (7)*
10.12 Letter agreement dated August 7, 1995 between the Company and
Lindsay A. Rosenwald, M.D. (7)*
10.13 Stock Option Agreement dated August 7, 1995 between the
Company and Lindsay A. Rosenwald, M.D. (7)*
10.14 Consulting and Stock Option Agreement dated November 17, 1995
between the Company and Eric A. Rose, M.D. (7)*
10.15 Stock Option Agreement dated November 17, 1995 between the
Company and Donald G. Drapkin (7)*
10.16 The Company's 1996 Non-Employee Director Restricted Stock
Award Plan (7)*
10.18 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. (8)
10.19 The Company's 1997 Incentive and Non-Incentive Stock Option
Plan, as amended to date*
10.20 Employment Agreement dated October 30, 1996 between the
Registrant and Richard L. Dunning (4)*
10.21 Employment Agreement dated August 26, 1996 between the
Registrant and David A. Jackson, Ph.D (4)*
10.22 Factor IX Research Agreement dated March 28, 1997 between
Registrant and the Trustees of Columbia University in the City
of New York (9)
10.24 Employment Agreement dated May 19, 1997 between the Company
and L. William McIntosh (10)*
10.24(a) Letter Agreement dated May 28, 1998 between NCI and L. William
McIntosh (2)*
10.24(b) Letter Agreement dated May 28, 1998 between the Company and
L. William McIntosh (2)*
10.25 Hardware and Disposables Manufacturing Agreement between NCI
and Baxter, dated as of December 17, 1997 (11)
10.26 Antibody Manufacturing and Storage Agreement between NCI and
Baxter, dated as of December 17, 1997 (12)
10.27 Hardware and Disposables Supply Agreement between NCI and
Baxter, dated as of December 17, 1997 (13)
10.28 Marketing, Sale and Distribution Agreement between NCI and
Baxter, dated as of December 17, 1997 (14)
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<PAGE>
10.29 Non-Competition and Confidentiality Agreement between the
Company and Baxter, dated as of December 17, 1997 (15)
10.30 Sublicense (Chiron) between NCI and Baxter, dated as of
December 17, 1997 (16)
10.31 Sublicense (Dorken) between NCI and Baxter, dated as of
December 17, 1997 (17)
10.32 Sublicense (First Becton-Dickinson) between NCI and Baxter,
dated as of December 17, 1997 (18)
10.33 Sublicense (Second Becton-Dickinson) between NCI and Baxter,
dated as of December 17, 1997 (19)
10.34 Warrant, dated December 31, 1997, issued by Innovir to the
Company (20)
10.35 Agreement, dated December 31, 1997, between the Company and
Innovir relating to future equity purchases (20)
10.37 Termination Agreement dated November 11, 1998 between the
Company, VGI and Columbia (21)
10.38 Asset Purchase Agreement, dated October 28, 1998, between
CellPro, Incorporated and NCI (2)
10.39 The Company's Common Stock Purchase Warrant issued May 28,
1999 to Baxter (5)
10.40 Asset Transfer Agreement dated June 30, 1999 among the
Company, NCI and Baxter (22)
10.41 Royalty Agreement dated June 30, 1999 among the Company, NCI
and Baxter (22)
10.42 Credit Agreement dated June 30, 1999 between the Company and
Baxter (22)
10.43 Letter Agreement dated as of April 15, 1999 between the
Company and Richard L. Dunning (23)*
10.44 Letter Agreement dated as of August 20, 1999 between the
Company and L. William McIntosh (23)*
10.45 Letter Agreement dated as of April 15, 1999 between the
Company and David A. Jackson, Ph.D. (23)*
10.46 Form of Put Right Certificate (3)
10.47 Form of Class A Warrant (3)
10.48 Form of Class B Warrant (3)
10.49 Registration Rights Agreement dated as of November 24, 1999
among the Company and the Investors identified therein (3)
10.50 Side Letter Agreement dated as of November 24, 1999 among the
Company, Baxter International, Inc. and the other parties
signatory thereto (3)
10.51 Put Agreement dated as of November 24, 1999 between the
Company and Baxter International, Inc. (3)
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<PAGE>
Exhibit Description
Number -----------
------
10.52 Voting Agreement dated December 17, 1997 among Baxter, the
Company and certain other parties
10.53 Registration Rights Agreement dated December 17, 1997 between
Baxter and the Company
10.54 Non-Incentive Stock Option Agreement dated November 9, 1999
between the Company and Joseph A. Mollica*
10.55 Non-Incentive Stock Option Agreement dated November 9, 1999
between the Company and Richard L. Casey*
10.56 Non-Incentive Stock Option Agreement dated November 9, 1999
between the Company and Richard C. Piazza*
10.57 Non-Incentive Stock Option Agreement dated November 9, 1999
between the Company and Victor W. Schmitt*
10.58 Non-Incentive Stock Option Agreement dated November 9, 1999
between the Company and Victor W. Schmitt*
10.59 Stock Option Agreement dated March 12, 1996 between the
Company and Donald G. Drapkin*
10.60 Amendment dated May 25, 1999 to Consulting and Stock Option
Agreement dated November 17, 1995 between the Company and
Eric A. Rose, M.D.*
10.61 Amendment dated May 25, 1999 to Stock Option Agreement dated
November 17, 1995 between the Company and Donald G. Drapkin*
10.62 Form of Indemnification Agreement between the Company and
Members of the Board of Directors
10.63 Amendment dated November 30, 1999 to Asset Transfer Agreement
dated June 30, 1999, among the Company, NCI and Baxter
21 List of Subsidiaries
23(a) Consent of KPMG LLP
24 Power of Attorney (included with signature page)
27 Financial Data Schedule
__________
Note: The Company's Commission File No. for all filings is No. 0-19153.
* Denotes management contract or compensatory plan or arrangement.
(1) Filed as the same numbered Exhibit to the Company's Current Report on Form
8-K 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, 1998 and incorporated herein by
reference thereto.
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<PAGE>
(3) Filed as the same numbered Exhibit to the Company's Current Report on Form
8-K filed December 7, 1999 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 and incorporated herein by
reference thereto.
(5) Filed as the same numbered Exhibit to the Company's Current Report on Form
8-K filed June 29, 1999 and incorporated herein by reference thereto.
(6) Filed as the same numbered Exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein by
reference thereto.
(7) Filed as the same numbered Exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein by
reference thereto.
(8) Filed as the same numbered Exhibit to the Company's Current Report on Form
8-K filed March 21, 1997 and incorporated herein by reference thereto.
(9) Filed as the same numbered Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 and incorporated herein by
reference thereto.
(10) Filed as the same numbered Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997 and incorporated herein
by reference thereto.
(11) Filed as Exhibit number 10.1 to the Company's Current Report on Form 8-K
filed January 2, 1998 and incorporated herein by reference thereto.
(12) Filed as Exhibit number 10.2 to the Company's Current Report on Form 8-K
filed January 2, 1998 and incorporated herein by reference thereto.
(13) Filed as Exhibit number 10.3 to the Company's Current Report on Form 8-K
filed January 2, 1998 and incorporated herein by reference thereto.
(14) Filed as Exhibit number 10.4 to the Company's Current Report on Form 8-K
filed January 2, 1998 and incorporated herein by reference thereto.
(15) Filed as Exhibit number 10.5 to the Company's Current Report on Form 8-K
filed January 2, 1998 and incorporated herein by reference thereto.
(16) Filed as Exhibit number 10.6 to the Company's Current Report on Form 8-K
filed January 2, 1998 and incorporated herein by reference thereto.
(17) Filed as Exhibit number 10.7 to the Company's Current Report on Form 8-K
filed January 2, 1998 and incorporated herein by reference thereto.
(18) Filed as Exhibit number 10.8 to the Company's Current Report on Form 8-K
filed January 2, 1998 and incorporated herein by reference thereto.
(19) Filed as Exhibit number 10.9 to the Company's Current Report on Form 8-K
filed January 2, 1998 and incorporated herein by reference thereto.
30
<PAGE>
(20) Filed as the same numbered Exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1997 and incorporated herein by
reference thereto.
(21) Filed as the same number Exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998 and incorporated herein by
reference thereto.
(22) Filed as the same number Exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999 and incorporated herein by
reference thereto.
(23) Filed as the same number Exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999 and incorporated herein by
reference thereto.
(b) Reports on Form 8-K.
On December 7, 1999 the Company filed a Current Report on Form 8-K, the
date of the report of which was November 24, 1999, announcing the closing
of a private placement financing with certain institutional investors.
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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.
Nexell Therapeutics Inc.
By: /s/ Richard L. Dunning
---------------------------
Richard L. Dunning
Chairman of the Board and
Chief Executive Officer
Dated: March 30, 2000
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Richard L. Dunning, L. William McIntosh and William A.
Albright, Jr. or any one of them acting alone, his true and lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments to this Report on Form 10-K, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard L. Dunning Chairman of the Board and Chief Executive March 30, 2000
- -------------------------------------- Officer (Principal Executive Officer)
Richard L. Dunning
/s/ L. William McIntosh Director, President and Chief Operating Officer March 30, 2000
- --------------------------------------
L. William McIntosh
/s/ William A. Albright, Jr. Senior Vice President, Chief Financial March 30, 2000
- -------------------------------------- Officer, Treasurer and Secretary (Principal
William A. Albright, Jr. Financial and Accounting Officer)
/s/ Donald G. Drapkin Director March 30, 2000
- --------------------------------------
Donald G. Drapkin
/s/ Victor W. Schmitt Director March 30, 2000
- --------------------------------------
Victor W. Schmitt
/s/ Eric A. Rose, M.D. Director March 30, 2000
- --------------------------------------
Eric A. Rose, M.D.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard L. Casey Director March 30, 2000
- --------------------------------------
Richard L. Casey
/s/ Joseph A. Mollica Director March 30, 2000
- --------------------------------------
Joseph A. Mollica
/s/ C. Richard Piazza Director March 30, 2000
- --------------------------------------
C. Richard Piazza
</TABLE>
33
<PAGE>
NEXELL THERAPEUTICS INC. and subsidiaries
Index to Financial Statements
Consolidated Financial Statements
Independent Auditors' Report F-2
Consolidated Balance Sheets at December 31, 1999 and 1998 F-3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 1999, 1998 and 1997 F-5 to F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-7
Notes to Consolidated Financial Statements F-8 to F-33
F-1
<PAGE>
NEXELL THERAPEUTICS INC. and subsidiaries
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nexell Therapeutics Inc.:
We have audited the accompanying consolidated balance sheets of Nexell
Therapeutics Inc. and subsidiaries (formerly VIMRx Pharmaceuticals Inc.) as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1999. 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Nexell
Therapeutics Inc. and subsidiaries (formerly VIMRx Pharmaceuticals Inc.) as of
December 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
Orange County, California
February 4, 2000
F-2
<PAGE>
NEXELL THERAPEUTICS INC. and subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
December 31,
-------------------------------------------
Assets 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 28,695,000 $ 33,091,000
Trade receivables net of allowance for doubtful accounts
of $26,000 in 1999 2,033,000 --
Receivables from related party 1,248,000 4,193,000
Inventory 4,409,000 2,389,000
Other current assets 2,271,000 842,000
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 38,656,000 40,515,000
- -------------------------------------------------------------------------------------------------------------------------
Fixed assets, net 10,932,000 10,942,000
Intangible assets, net 43,191,000 37,635,000
Other assets 1,060,000 252,000
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 93,839,000 $ 89,344,000
- -------------------------------------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 3,194,000 $ 1,964,000
Accounts payable due to related party 4,279,000 3,722,000
Accrued expenses 3,152,000 2,544,000
Long-term debt current portion -- 96,000
Capital leases current portion -- 172,000
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 10,625,000 8,498,000
Long-term debt due to related party -- 32,031,000
Total liabilities 10,625,000 40,529,000
- -------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies and other matters (notes 8 and 14) -- --
Shareholders' equity:
Convertible preferred stock; $.001 par value, 1,150,000 shares
authorized
Series A; 74,498 and 70,282 issued and outstanding at 100 100
December 31, 1999 and 1998, respectively (liquidation
value $74,685,000 and $70,458,000)
Series B; 63,000 issued and outstanding at December 31,
1999 (liquidation value $63,192,000) 100 --
Common stock; $.001 par value, 160,000,000 shares authorized, 73,000 68,000
72,714,951 and 67,830,189 shares issued and outstanding at
December 31, 1999 and, 1998, respectively
Additional paid-in capital 252,741,800 182,537,900
Unearned compensation (198,000) (278,000)
Accumulated other comprehensive income (loss) (5,000) 20,000
Accumulated deficit (169,398,000) (133,533,000)
- -------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 83,214,000 48,815,000
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 93,839,000 $ 89,344,000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
NEXELL THERAPEUTICS INC. and subsidiaries
Consolidated Statement of Operations
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 14,961,000 $ 13,443,000 $ 5,002,000
Cost of goods sold 9,617,000 8,166,000 4,630,000
- ------------------------------------------------------------------------------------------------------------------------------------
Gross profit 5,344,000 5,277,000 372,000
Operating expenses:
Research and development 18,858,000 24,427,000 14,507,000
Purchased research and development -- -- 39,862,000
General and administrative 9,903,000 10,221,000 7,215,000
Goodwill and intangible amortization 3,781,000 3,602,000 412,000
Selling and marketing 7,768,000 3,625,000 61,000
Restructuring costs 502,000 2,625,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 40,812,000 44,500,000 62,057,000
- ------------------------------------------------------------------------------------------------------------------------------------
Operating loss (35,468,000) (39,223,000) (61,685,000)
Other (income) expenses:
Royalty and licensing (income) expense (855,000) (176,000) 150,000
Interest income (1,069,000) (2,972,000) (2,216,000)
Interest expense 1,903,000 2,036,000 196,000
Contract settlement -- 900,000 --
Minority interest in net loss of consolidated subsidiaries -- (4,161,000) (3,474,000)
Other, net 226,000 113,000 (142,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other (income) expenses 205,000 (4,260,000) (5,486,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss (35,673,000) (34,963,000) (56,199,000)
Preferred stock dividends (4,418,000) (3,988,000) (166,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss applicable to common stock $ (40,091,000) $ (38,951,000) $(56,365,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per share $ (0.56) $ (0.58) $ (1.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares of common stock outstanding 71,443,000 67,284,000 55,457,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
NEXELL THERAPEUTICS INC. and subsidiaries
Consolidated Statement of Changes in Shareholder's Equity
<TABLE>
<CAPTION>
Preferred Stock Common Stock
-------------------------------------------------- Additional
Shares Amount Shares Amount paid-in capital
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 - - - - -
Net loss - - - - -
Net unrealized gain in investment
securities - - - - -
Translation adjustment - - - - -
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 - - - -
Net loss - - - - -
Translation adjustment - - - - -
Comprehensive loss
- ----------------------------------------------------------------------------------------------------------------
Balance - December 31, 1998 70,282 100 67,830,189 68,000 182,537,900
Issuance of shares in
connection with exercise of
underwriter options - - 481,140 1,000 921,000
Issuance of Series B shares in
connection with private placement,
net of issuance costs of $2,577,000 63,000 100 - - 60,422,900
Preferred dividends 4,216 - - - -
Issuance of shares in connection with
acquisition of CellPro - - 1,882,215 2,000 2,998,000
Retirement of CellPro shares - - (627,405) (1,000) (627,000)
Issuance of shares in connection with
exchange in interest in subsidiary - - 3,000,000 3,000 6,279,000
Issuance of shares in exchange for
certain Innovir preferred shares - - 70,000 - 153,000
Non-cash exercise of options - - 78,812 - (24,000)
Amortization of options - - - -
Option repricing - - - - 81,000
Net loss - - - - -
Translation adjustment - - - - -
Comprehensive loss
- ----------------------------------------------------------------------------------------------------------------
Balance - December 31, 1999 137,498 $200 72,714,951 $73,000 $252,741,800
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Accumulated Other
Unearned Comprehensive Income Accumulated Comprehensive
Compensation (Loss) Deficit Total Loss
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1996 (800,000) (151,000) (42,371,000) 46,210,000
Exercise of directors' options
($.75 - $.94 per share) -- -- -- 418,000
Issuance of common stock to
Columbia University -- -- -- 700,000
Exercise of warrants ($1.50 per share) -- -- -- 299,000
Exercise of directors' options -- -- -- 17,000
Issuance of shares in connection with
acquisition of Ribonetics -- -- -- --
Exercise of consultant options -- -- -- 8,000
Issuance of shares in connection
with acquisition of Immunotherapy -- -- -- 91,632,000
Amortization of options 351,000 -- -- 351,000
Net loss -- -- (56,199,000) (56,199,000) (56,199,000)
Net unrealized gain in investment
securities -- 143,000 -- 143,000 143,000
Translation adjustment -- (32,000) -- (32,000) (32,000)
-------
Comprehensive loss (56,088,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1997 (449,000) (40,000) (98,570,000) 83,547,000
Issuance of shares in connection with
acquisition of Immunotherapy -- -- -- --
Exercise of special options -- -- -- --
Amortization of options 171,000 -- -- 171,000
Preferred dividends -- -- -- --
Net loss -- -- (34,963,000) (34,963,000) (34,963,000)
Translation adjustment -- 60,000 -- 60,000 60,000
------
Comprehensive loss $ (34,903,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1998 (278,000) 20,000 (133,533,000) 48,815,000
Issuance of shares in connection with
exercise of underwriter options -- -- -- 922,000
Issuance of Series B shares in
connection with private placement,
net of issuance costs of $2,577,000 -- -- -- 60,423,000
Preferred dividends -- -- (192,000) (192,000)
Issuance of shares in connection with
acquisition of CellPro -- -- -- 3,000,000
Retirement of CellPro shares -- -- -- (628,000)
Issuance of shares in connection with
exchange in interest in subsidiary -- -- -- 6,282,000
Issuance of shares in exchange for
certain Innovir preferred shares -- -- -- 153,000
Non-cash exercise of options -- -- -- (24,000)
Amortization of options 161,000 -- -- 161,000
Option repricing (81,000) -- -- --
Net loss -- -- (35,673,000) (35,673,000) (35,673,000)
Translation adjustment -- (25,000) -- (25,000) (25,000)
-------
Comprehensive loss $ (35,698,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1999 $ (198,000) $ (5,000) $(169,398,000) $ 83,214,000
</TABLE>
F-6
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Consolidated Statement of Cash Flow
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Years Ended December 31,
----------------------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ........................................................ $(35,673,000) $(34,963,000) $(56,199,000)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization ................................ 6,999,000 6,610,000 1,232,000
Noncash compensation ......................................... 161,000 171,000 430,000
Accrued interest on long-term debt............................ 1,901,000 1,956,000 --
Purchased in process research and development ................ -- -- 39,862,000
Loss from disposal of equipment .............................. 163,000 -- --
Closure of facilities and related costs ...................... 112,000 2,265,000 --
Minority interest in net loss ................................ -- (4,161,000) (3,474,000)
Changes in operating assets and liabilities
Increase in trade accounts receivable ...................... (2,033,000) -- --
(Increase) decrease in other current assets and other
assets ................................................... (4,468,000) 967,000 4,038,000
(Increase) decrease in receivable from related party ....... 2,945,000 1,147,000 (4,138,000)
Increase in accounts payable and accrued expenses .......... 1,485,000 766,000 1,190,000
Increase in accounts payable to related party .............. 557,000 1,979,000 --
- ----------------------------------------------------------------------------------------------------------------
Net cash used in operating activities ........................... (27,851,000) (23,263,000) (17,059,000)
- ----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net sales of short-term investments .......................... -- -- 38,300,000
Sale of marketable securities ................................ -- -- 214,000
Purchases of equipment ....................................... (3,323,000) (1,128,000) (683,000)
Proceeds from sale of equipment .............................. 151,000 -- --
Cash acquired in acquisition ................................. -- -- 28,138,000
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities ............. (3,172,000) (1,128,000) 65,969,000
- ----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from sales of preferred common stock, net ........... 60,423,000 -- --
Proceeds from issuance of common stock in connection with
the exercise of warrants/options ........................... 922,000 -- 742,000
Purchase/retirement of common stock .......................... (628,000) -- --
Repayment of long-term debt .................................. (34,029,000) -- --
Repayment of capital leases .................................. (56,000) (386,000) (503,000)
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities ............. 26,632,000 (386,000) 239,000
- ----------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash ......................... (5,000) 38,000 70,000
Net increase (decrease) in cash and cash equivalents ............ (4,396,000) (24,739,000) 49,219,000
Cash and cash equivalents at beginning of period ................ 33,091,000 57,830,000 8,611,000
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period ...................... $ 28,695,000 $ 33,091,000 $ 57,830,000
- ----------------------------------------------------------------------------------------------------------------
Supplemental disclosures:
Cash paid for interest ....................................... $ 3,934,000 $ 79,000 $ 121,000
Cash paid for taxes .......................................... -- -- --
- ----------------------------------------------------------------------------------------------------------------
Non cash investing and financing activities:
In March 1997, the Company issued 200,000 shares of Common Stock valued at
$700,000 to Columbia University related to a research agreement.
In December 1997, the Company issued 11,000,000 and 404,120 shares of Common
Stock with an aggregate value of $91,632,000 to Baxter Healthcare Corporation
and Lazard Freres, respectively, in connection with the acquisition of 80.5%
of Nexell of California Inc.
In January 1999, the Company issued 1,882,215 shares of Common Stock valued at
$3,000,000 in exchange for certain intangible assets.
In May 1999, the Company issued 3,000,000 shares of Common Stock valued at
$6,282,000 to Baxter Healthcare Corporation in exchange for its minority
interest in Nexell of California Inc.
In June 1999, the Company issued 70,000 shares of Common Stock valued at
$153,000 to certain Innovir shareholders in exchange for their outstanding
Innovir preferred stock.
In December 1999 and 1998, respectively, the Company issued 4,216 and 3,978
shares of Series A Preferred Stock as in-kind dividends.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(1) The Business
Operations
Nexell Therapeutics Inc. ("Nexell" or the "Company") (formerly
VIMRx Pharmaceuticals Inc.) is an Irvine, California-based
biotechnology company. Nexell's principal subsidiary, Nexell of
California, Inc. ("NCI") is developing products utilizing cell
selection technology in cell therapy for cancer and other life-
threatening diseases. NCI is a leader in cell selection technology and
currently sells cell selection products in Europe, the United States
and Canada. The Company previously operated two other biotechnology
subsidiaries engaged in the discovery and development of
biopharmaceuticals, Innovir Laboratories, Inc. ("Innovir") and Vimrx
Genomics, Inc. ("VGI"), both of which have ceased operations. Beginning
in 1998, Nexell's principal business has been NCI's cell therapy
operations.
Risks
The Company is subject to those risks associated with any
biotechnology 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.
Consolidation
The accompanying consolidated financial statements include the
accounts of Nexell, NCI and its subsidiaries, VIMRx Genomics, Inc.
("VGI"), Innovir Laboratories, Inc. ("Innovir") and its subsidiaries.
All significant intercompany balances and transactions have been
eliminated.
F-8
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Foreign Currency Translation
The financial position and results of operations of the
Company's foreign subsidiaries are determined using local currency as
the functional currency. Assets and liabilities of these subsidiaries
are translated at the exchange rate in effect at each year-end. Income
statement accounts are translated at the average rate of exchange
prevailing during the year. Translation adjustments resulting from the
use of differing exchange rates from period to period are included in
accumulated other comprehensive income (loss) in shareholders' equity.
Gains and losses resulting from foreign currency transactions included
in the Company's results of operations were not material in any of the
periods presented.
Cash and Cash Equivalents
Cash and cash equivalents of $28.7 million and $33.1 million
at December 31, 1999 and 1998, respectively, consist of money market
deposits, bank deposits, commercial paper with original maturities of
less than three months, and a mutual fund which invests in short
duration bonds. For purposes of the consolidated 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.
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. Equipment held for sale is
valued at its fair value less costs to sell.
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 represents the excess of acquisition costs over the
fair value of net assets of purchased businesses and is being amortized
on a straight-line basis over 12.5 years. Other intangibles primarily
consist of patents, trademarks, license agreements and the estimated
fair value of the workforce acquired in the NCI transaction discussed
below. Such intangibles are being amortized on a straight-line basis
over periods from 4 to 15 years.
F-9
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
In 1998, when management determined that Innovir's operations
would be shut down and the employment of the workforce would be
discontinued (see note 4), the remaining value of the related goodwill,
$517,000, was charged to expense.
Other Assets
Other assets consist of investments (see note 6), security
deposits which will be recovered upon termination of the related
leases, prepaid VAT deposits and a long-term prepaid royalty.
Revenue Recognition
The Company recognizes revenue from the sale of instruments,
biologicals, reagents and related products at the time such products
are shipped from the finished goods warehouse. Upon shipment, title and
risk of loss transfers to the customer and the earnings process is
considered complete. Except for warrantied defects, sales of the
Company's products are not subject to right of return.
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
The Company accounts for stock-based compensation arrangements
with employees using the intrinsic-value method pursuant to Accounting
Principles Board Opinion No. 25 (APB No. 25) Accounting For Stock
Issued To Employees, and related interpretations. Accordingly, no
accounting recognition is given to stock options issued to employees
that are granted at fair market value until they are exercised. Pro
forma net loss and net loss per share are presented in note 11 as if
the fair value method had been applied.
F-10
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Stock options issued to non-employees are recorded at the fair
value of the stock options at the performance commitment date. Upon
exercise, net proceeds, including income tax benefit realized, are
credited to equity.
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 stock outstanding and potentially dilutive
common shares 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.
Stock options and warrants, excluding Class B performance
warrants (see note 10), to purchase 19,840,836, 11,487,425, and
9,758,650 shares of Common Stock were outstanding at December 31, 1999,
1998 and 1997, respectively. Stock options and warrants outstanding
were not included in the computation of diluted earnings per share as
the Company incurred losses in all periods presented.
Impairment of Long-Lived Assets
The Company reviews fixed assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable.
Recoverability of these assets is measured by comparison of its
carrying amount, including the unamortized portion of any allocated
goodwill, to future undiscounted cash flows the assets are expected to
generate. If fixed assets and certain identifiable intangibles are
considered to be impaired, the impairment to be recognized equals the
amount by which the carrying value of the assets, including any
allocated goodwill, exceeds fair market value. Measurement of the
amount of impairment may be based on appraisal, market values of
similar assets or estimates of future discounted cash flows resulting
from use and ultimate disposition of the asset.
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.
F-11
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Comprehensive Loss
Comprehensive loss consists of net loss, net unrealized gains
on securities and foreign currency translation adjustments and is
presented in the table below. Accumulated other comprehensive income
(loss) is included as a component of shareholders' equity.
<TABLE>
<CAPTION>
1999 1998 1997
--------------- -------------- --------------
<S> <C> <C> <C>
Net loss $(35,673,000) $(34,963,000) $(56,199,000)
Net unrealized gain
in investment securities -- -- 143,000
Translation adjustment (25,000) 60,000 (32,000)
-------------- ------------- -------------
Total comprehensive loss ($35,698,000) $(34,903,000) $(56,088,000)
============== ============= =============
</TABLE>
The cumulative foreign currency translation adjustment
included as a component of accumulated other comprehensive income (loss)
was $(5,000), $20,000, and ($40,000) at December 31, 1999, 1998 and
1997, respectively.
No income tax expense or benefit was allocated to the net
unrealized gain in investments or to the foreign currency translation
adjustments recorded in 1999, 1998 and 1997, respectively, due to the
Company's significant net operating loss tax carryforwards.
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 contingent assets and
liabilities as of the dates of the balance sheets and revenues and
expenses for the periods presented. Actual results could differ from
those estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentation.
(3) Acquisitions
Acquisition of 80.5% of the Immunotherapy 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, for 11,000,000 shares of the Company's Common Stock
and 66,304 shares of the Company's Series A Preferred Stock; and the
transfer of such intangible assets to
F-12
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
a newly organized subsidiary, NCI, in exchange for 80.5% of NCI's
common stock. Concurrently, NCI acquired the tangible assets,
business, trademarks and certain obligations of the Division in
exchange for the payment to Baxter of 19.5% of NCI's common stock and
a warrant entitling Baxter to purchase an additional 6% of NCI's
common stock for $6,000,000. In addition, the Company purchased
$10,000,000 principal amount of NCI'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.
The fair values of the 11,000,000 shares of the Company's
Common Stock, the 66,304 shares of the Company's Series A Preferred
Stock and the warrant to purchase an additional 6% of NCI's common
stock were $23,696,000, $66,304,000 and $2,100,000, respectively, as of
the closing date of December 17, 1997.
Nexell's acquisition of 80.5% of NCI has been accounted for as
a purchase and the operating results of the Company include those of
NCI for the period from December 17, 1997 (date of acquisition) to
December 31, 1997. The purchase price of $93,000,000 was allocated as
follows:
<TABLE>
<CAPTION>
<S> <C>
Tangible assets $14,441,000
In-process research and development 37,712,000
Goodwill 29,761,000
Patents and Trademarks 7,230,000
Workforce 3,490,000
Other 366,000
-----------
$93,000,000
</TABLE> ===========
The technological feasibility of the purchased in-process
research and development related to the NCI acquisition was not
established as of the acquisition date. Therefore, the entire amount
has been expensed in the period ended December 31, 1997. The goodwill,
patents and trademarks are being amortized on a straight-line basis
over 12.5 years and the estimated fair value of the workforce is being
amortized on a straight-line basis over 15 years.
As a result of the acquisition of the Division, the Company
recorded a $37.7 million charge for purchased in-process research and
development. Purchased in-process research and development ("IPR&D")
consisted of the development efforts associated with the Isolex(R) 300i
cellular selection device and related kits at the date of acquisition.
This was the principal technology being developed by the acquired
business and represented its principal product line. These products are
qualified for treatment as IPR&D in those countries where their
regulatory approvals for targeted indications have not been granted,
and the Company is expending resources in clinical trials to achieve
regulatory approval. At the acquisition date, a cumulative amount of
approximately $81.9 million had been spent on research and development
associated with the IPR&D projects, and a total of approximately $46.8
million was expected to be incurred before completion of the projects.
The R&D budget for 1998 indicated that roughly one-third of R&D
spending was associated with clinical, regulatory/QA, and manufacturing
development activities. The remaining R&D spending was dedicated to
research, cell biology, engineering, technical affairs, administration,
and the maintenance of the Company's facilities.
F-13
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Consequently, the remaining cost of completing clinical trials for
existing programs was significant but a minor element of overall R&D
spending.
The fair values assigned to the IPR&D projects, an estimate of
remaining R&D spending, and their planned dates of completion as of
December 17, 1997 were as follows:
<TABLE>
<CAPTION>
Remaining Completion
Project Fair Value R&D (1) Date
------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C>
Selection Kits - N. America $20.84 million $13.06 mil. 1998
Selection Kits - Europe 10.41 million 15.08 mil. 1998
Selection Kits - Japan 5.51 million 2.84 mil. 1999
Selection Kits - Intercontinental/Asia 7.60 million 2.50 mil. 1998
Isolex Device Sales (6.65 million) 13.32 mil. 1998
</TABLE>
Note: (1) Total R&D spending attributed to the indicated market
from acquisition date through year of introduction for specific
selection kits then under development. May include significant
R&D spending associated with future indications not then
classified as in-process research and development. Not on
present value basis.
The values of these projects were determined through a
discounted cash flow methodology, employing management's projection of
operating cash flows expected to result from anticipated sales of such
products and included in the calculation of cash flows all projected
costs associated with developing the technology into commercially
viable products. A risk-adjusted discount rate was applied to the
projected cash flows in the development of the fair values of the
projects.
The most material risk impacting completion and
commercialization of the IPR&D projects is associated with the
successful completion of clinical trials and the granting of
regulatory approval for sale in each of the target markets. Such
regulatory approval is not assured and represents a source of
substantial risk to the realization of a return on investment in the
IPR&D projects.
The Company believes that the assumptions used in determining
the estimates of the costs to develop the in-process research and
development into commercially viable products were reasonable at the
time of the acquisition. No assurance can be given, however, that the
underlying assumptions used to estimate revenues, operating expenses
and cash flows, the remaining project development costs, or the
remaining events leading to regulatory approval and ultimate
commercialization of the products will transpire as estimated.
The purchased in-process research and development represented
approximately 40% of the purchase price.
The acquired in-process research & development was valued
through application of a discounted cash flow methodology applied to
the operating cash flow projected to be contributed by each of the
development projects. The financial projection employed in this
valuation was that which was employed by NCI in making its
determination of consideration to be paid for the assets and
F-14
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
assumed liabilities of the company at the closing date. Included in
the calculation of operating cash flow discounted to fair value in
this case was consideration of charges for other assets employed in
the realization of the return on the in-process research & development
assets, specifically representing patents, trademarks, and the
assembled workforce.
Material cash flows for the projects were projected to begin
within one to two years from the date of acquisition and following
regulatory approval for the projects, as granted by the FDA or by the
relevant local regulatory authority for international markets. Such
cash flows, in line with management's projection described above in
item a), were projected through the year 2006. Beyond that year, it was
expected that additional indications not under development at
acquisition would become increasingly material in total revenues of the
company.
There were only limited product sales at the acquisition date,
representing certain products that have been sold in Europe on a
limited basis. In 1994, Baxter launched a series of monoclonal
antibodies in Europe to leverage the MaxSep(R) instrument. The
MaxSep(R) instrument and certain B-Cell antibodies received CE Mark in
1996 while certain breast cancer antibodies received CE Mark in 1997.
Gross and operating profit margins for the indications in development
at acquisition were projected to be comparable to those recognized from
these products already being sold in Europe.
The most significant and uncertain assumptions that affected
the valuation concerned the risk of failure to achieve successful
completion of clinical trials to establish the efficacy of the
technology and to enable the Company to obtain regulatory approval for
sale in each of the target markets. Such regulatory approval is not
assured and represents a source of substantial risk to the realization
of a return on investment in the IPR&D projects.
In determining the fair value of acquired in-process research
and development, management employed all financial and operational
information available at the acquisition date, including the business
plan and projection upon which the negotiated consideration was based.
Management also commissioned an outside valuation to assist them in
their responsibility for determining the fair value of acquired assets,
including in-process research & development. Ultimately, based upon
such available information and advice, management has assumed
responsibility for the determination of the fair value of acquired
in-process research & development.
The Company has since received FDA approval in the United
States for certain of the Isolex products and began marketing the
products commercially in July 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 agreed to (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 NCI; (iv) provide engineering and product development services
and certain transitional services for NCI; (v) sublicense certain
technology to NCI; and (vi) comply with a noncompetition 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 approvals are achieved. The
$21,000,000 represents the maximum potential amount that could be paid
by the Company when, and
F-15
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
if, certain FDA and European regulatory approvals are obtained and is
not related to the provision of services by Baxter. As the amount of
the contingent consideration, if any, was not determinable nor was the
achievement of the approvals considered probable at the date of
acquisition, it was excluded from the determination of the cost of the
acquisition. Upon obtaining the respective regulatory approval, the
Company will record a liability for the related contingent
consideration and an increase to goodwill to be amortized over the
remaining estimated useful life of the originally recorded goodwill of
12.5 years.
Baxter provides manufacturing services to the Company on an
ongoing basis with respect to NCI's products at cost, and marketing
services are provided at a certain margin.
Acquisition of Minority Interest in NCI
In May 1999, Nexell changed its name from VIMRX Pharmaceuticals
Inc. to Nexell Therapeutics Inc. and acquired the minority interest of
Baxter in the Company's principal business unit and then 80.5%
subsidiary, NCI. NCI is now a wholly-owned subsidiary of Nexell.
Baxter retained its right to certain milestone payments from NCI.
Baxter's 19.5% interest in NCI (consisting of common stock,
warrants and convertible subordinated debentures), was exchanged for:
. 3,000,000 shares of Common Stock;
. An adjustment of the conversion price of the 70,282
outstanding shares of the Company's Series A Preferred Stock
owned by Baxter from $5.50 per share to $2.75 per share,
which Series A Preferred Stock is convertible after June 17,
1999 into approximately 25,577,000 shares of Common Stock,
subject to adjustment for stock splits and combinations,
certain dividends and distributions and reclassification,
exchange or substitution;
. A warrant expiring May 27, 2006 to purchase 5,200,000 shares
of Common Stock at a price of $1.15 per share, subject to
adjustment from time to time in the event of cash dividends,
stock dividends, stock subdivision, stock splits, stock
combinations or reverse stock splits; and
. Approximately $33,000,000 principal amount of 6 l/2%
Convertible Subordinated Debentures ("Debentures")
(replacing the $30,000,000 principal amount of NCI's 6 l/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. The Debentures bore interest at 6 l/2% per annum
and were due November 30, 2004. Interest was to accrue until
November 30, 2002, and, together with one-third of the
outstanding principal, was to be payable annually commencing
November 30, 2002. Approximately $22,000,000 in principal
amount of Debentures was to be convertible into Common Stock
commencing November 30, 2002 at the discretion of Baxter,
and approximately $11,000,000 in principal amount of
Debentures was to be convertible only
F-16
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
with permission of the Company. The Debentures were retired
in November 1999 in connection with the Company's private
placement financing. See note 10.
As a result of the May 1999 transaction, the Company recorded
approximately $6,282,000 in additional goodwill which is equal to the
fair market value of the common stock issued. Such goodwill is being
amortized over twelve years.
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 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.
VHL was a 100%-owned subsidiary of the Company prior to the
Innovir transaction. As indicated in note 2, the goodwill, which had an
estimated useful life of three years, was completely written off in
1998. In 1998, the Company purchased additional shares, the fair value
of which was $6,157,710, the market value at the time of purchase, and
was accounted for by the purchase method in accordance with APB Opinion
No. 16.
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 common 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 1996.
During the year ended December 31, 1998, the Company purchased
additional shares of Innovir (at market price) which increased its
ownership interest to approximately 85%.
F-17
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
As discussed in note 4, the Company discontinued funding of
Innovir and Innovir closed its three operating locations in late 1998.
In June 1999, the Company issued 70,000 shares of Common Stock
to certain Innovir shareholders in exchange for their outstanding
Innovir preferred shares. The Innovir shareholders are unrelated third
parties to the Company. The transaction was recorded as an additional
investment in Innovir by the Company, by retiring the preferred Innovir
stock and issuing the new Common Stock. The net impact on the
consolidated financial statements was a charge to expense and an
increase in paid in capital. The 70,000 shares of Common Stock were
valued at $153,000 based on the current market close price on the date
of the transaction.
Acquisition of CellPro Assets
On January 29, 1999, the Company completed the purchase of
certain assets of CellPro Incorporated ("CellPro"). Assets purchased
included substantially all of CellPro's intellectual property rights,
patents, antibodies and related cell banks, and license rights. These
assets were acquired in exchange for 1,882,215 shares of Common Stock
with a fair market value of $3,000,000. The fair market value was
determined based upon the average closing price of the Common Stock for
the 15 business days which ended prior to the closing, or $1.59 per
share. The transaction was accounted for as an asset purchase and the
purchase price was allocated to patents and licenses.
In March 1999, the Company repurchased from CellPro and retired 627,405
shares of Common Stock.
F-18
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(4) Restructuring Costs
In 1998, the Company 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, with termination payments
completed in 1999.
Fixed assets of the closed facilities, consisting mainly of
laboratory equipment, were sold or are held for sale. Approximately
$100,000 and $275,000 of fixed assets held for sale were included in
fixed assets, net, on the accompanying consolidated balance sheets as
of December 31, 1999 and 1998. The fixed asset impairment charge was
determined as the difference between the net book value of the assets
and the estimated net proceeds from sale.
The following table presents the Innovir related restructuring
activities:
<TABLE>
<CAPTION>
Balance Balance
Restructuring Applied/ December 31, Applied/ December 31,
Provision Cash Payments 1998 Cash Payments 1999
-------------------- ---------------- -------------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Severance related $711,000 ($330,000) $381,000 ($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 ($381,000) ---
==================== ================ ==================== ================ ============
</TABLE>
The Company recorded net losses of $157,000, $9,862,000, and
$10,049,000 in 1999, 1998 and 1997, respectively, related to the
operations of Innovir. Due to the cessation of Innovir-related
activity, such losses are not expected to be material in the future.
The remaining termination payments were accrued as of December 31, 1998
and paid in 1999. The Company does not expect the closure of Innovir to
have a material effect on future liquidity or capital resources. The
Company is not aware of any remaining Innovir related commitments or
contingencies.
In January 1999, the Company announced that it intended to
acquire 100% of its 80.5% held subsidiary, NCI, and to restructure the
Company by changing its name from VIMRx Pharmaceuticals
F-19
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Inc. to Nexell Therapeutics Inc. and relocating its corporate
headquarters to Irvine, California. This transaction was completed in
May 1999. In conjunction with the closure of the former headquarters in
Wilmington, Delaware, the Company recorded a restructuring charge of
$502,000 comprised of $390,000 in severance related costs and a fixed
asset impairment charge of $112,000. Due to the office closure, the
Company decided to dispose of substantially all of the existing office
furniture and fixtures. Based upon an independent third-party appraisal
of the furniture and fixtures, the Company recorded a charge of
approximately $112,000 at the time such assets were removed from
service to reduce the assets' carrying amount to the estimated fair
value of $25,000. All such assets were sold in 1999.
In addition, eight employees were terminated as a result of
the restructuring and move of the Company's headquarters. The employees
were notified in January 1999 of their pending termination and the
termination benefits they were to receive. All severance related
payments of $390,000 were made prior to December 31, 1999.
(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 Common Stock (valued at
$700,000), which collectively were allocated to purchased research and
development which was immediately expensed. Under the terms of the
Agreement, VGI provided funding to Columbia of $4.8 million and $1.2
million in 1998 and 1997, respectively. No additional funding was
provided due to the termination of the Agreement discussed below.
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.
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
and was released from all obligations to Columbia under those
agreements. The $900,000 termination payment is presented as "Contract
settlement" on the accompanying consolidated statements of operations.
No assets were written off nor were any liabilities assumed as a result
of the termination of this agreement.
F-20
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Agreements with Baxter
As described in note 3, the Company is party to numerous
contracts with Baxter.
Under the terms of the Hardware and Disposable Manufacturing
Agreement, the Antibody Manufacturing and Storage Agreement and the
Hardware and Disposables Supply Agreement, NCI purchased products from
Baxter, and Baxter purchased products from NCI under the Marketing,
Sales and Distribution Agreement (see note 7).
In 1999, the Company terminated certain agreements with Baxter
whereby the Company assumed direct control for all sales and
distribution of its products. As a result, the Company repurchased
$4,359,000 of inventory previously sold to Baxter. Additionally, the
Company entered into a royalty agreement pursuant to which Baxter will
receive a royalty of 5% of net sales of Isolex and related cell therapy
products from January 1, 2001 through December 17, 2008. Baxter will
also be entitled to a royalty of 5% of net sales in excess of
$50,000,000 in the year 2000.
Hypericin Agreement
Pursuant to an agreement with New York Universtiy and YEDA
Research Development Co., Ltd., the Company was granted a worldwide
exclusive license to commercialize and exploit natural hypericin and
synthetic hypericin compounds to inactivate viruses and retroviruses 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 the licensors under the agreements 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 to
$100,000 are due until the later of the expiration of the licensors'
patent or 15 years from the first commercial sale of products under the
agreement. The minimum annual royalty was paid during 1999, 1998 and
1997.
The Hypericin license agreement covers thirteen patents and
patent applications. Seven patents have been issued in the United
States, with expiration dates from February 2007 to April 2013. For the
remaining unissued U.S. patents, the earliest expiration date will be
seventeen years from the date of issue. The foreign patents, all of
which are counterparts to the U.S. patents, have been issued in various
countries with various expiration dates (85 individual foreign patents
by country issued for the 13 patents). Most of the foreign patents have
20-year terms, and none of the foreign patents will expire before its
U.S. counterpart expires. The Company has not recorded any commercial
sales under the agreement to date.
F-21
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(6) Investments
At December 31, 1999 and 1998, substantially all of the
Company's excess cash was invested in a mutual fund which, for
financial statement purposes, is considered to be a cash equivalent.
Amounts invested in the mutual fund were $28,113,000 and $31,993,000 at
December 31, 1999 and 1998, respectively. During 1997, the Company
realized a net gain of approximately $170,000 on the sale of its
available for sale investments, which is included in "other income" on
the accompanying consolidated statements of operations.
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 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 Innovir's subsidiary, Ribonetics. During 1996,
the Company recorded a charge to operations of $350,000 representing
the excess over the fair value of the securities at the date of
purchase. During 1997, Epoch's stock price was depressed over a
prolonged period and the Company determined that the decline was other
than temporary. As such, the investment was written down to its market
value of $214,000, and is included in "other assets" on the
accompanying consolidated balance sheets. Such write-down resulted in
a charge of $236,000 to the 1997 consolidated statement of operations.
On August 13, 1999 Innovir closed the sale of a family of
patents and patent applications to Ribozyme Pharmaceuticals, Inc.
("RPI"), a Boulder, Colorado-based company engaged in the research and
development of ribozyme technology. The patent and patent applications
sold are related to certain proprietary chemically modified ribozymes.
In the sale, Innovir received $25,000 cash, 134,000 shares of RPI
common stock and seven-year warrants to purchase 350,000 additional
shares of RPI common stock at $12.00 per share.
The investments in Epoch and RPI are accounted for under the
cost method as neither of the investments represent more than 20
percent of the voting stock of the investee and the Company does not
exercise significant influence over the investee's operations and
financial policies.
(7) Supplemental Balance Sheet Information
Fixed assets consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Office and laboratory equipment $14,076,000 $13,013,000
Computers 1,841,000 717,000
Leasehold improvements 1,432,000 1,328,000
----------- -----------
17,349,000 15,058,000
----------- -----------
Less: accumulated depreciation 6,417,000 4,116,000
----------- -----------
Fixed assets, net $10,932,000 $10,942,000
=========== ===========
</TABLE>
F-22
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
Miscellaneous accrued expenses $596,000 $347,000
Professional fees 256,000 388,000
Accrued payroll and related costs 1,656,000 848,000
Closure of facilities and related costs --- 381,000
Relocation 534,000 441,000
Royalties 110,000 139,000
---------- ----------
$3,152,000 $2,544,000
========== ==========
</TABLE>
Intangible assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------
1999 1998
----------------------------
<S> <C> <C>
Goodwill $36,075,000 $31,030,000
Patents and Trademarks 10,230,000 7,230,000
Workforce 3,490,000 3,490,000
Other 1,260,000 1,135,000
----------- -----------
51,055,000 42,885,000
Less: accumulated amortization 7,864,000 5,250,000
----------- -----------
Intangible assets, net $43,191,000 $37,635,000
=========== ===========
</TABLE>
Accounts receivables from related parties are due primarily from Baxter.
The 1999 and 1998 receivables from related party of $1,248,000 and $4,193,000,
respectively, are related to receivables due on product sales under the
Marketing, Sales and Distribution Agreement. The decrease is due to the
restructuring of the agreements with Baxter and the resultant increase in trade
receivables.
Accounts payable due to related parties are due primarily to Baxter. The
$4,279,000 and $3,722,000 due in 1999 and 1998, respectively, relate to payments
due for purchases of inventory under the Hardware and Disposables Manufacturing,
Hardware and Disposables Supply, Antibody Manufacturing and Storage, and
Services Agreements.
The various agreements with Baxter provide for net 60 day payment terms and
net payments are settled by check or bank wires within the 60 day terms. The
Agreements provide for right of offset between the Company and Baxter.
(8) Leases
The Company leases its facilities and certain equipment under noncancelable
operating leases expiring through November 2004. The facility lease provides for
monthly rental payments adjusted
F-23
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
yearly based upon the consumer price index. Rental expense for the years
ended December 31, 1999, 1998 and 1997 for operating leases aggregated
approximately $969,000, $930,000, and $632,000, respectively.
At December 31, 1999, the future minimum lease commitments under these
leases are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, Operating Leases
----------------------- ----------------
<S> <C>
2000 $689,000
2001 639,000
2002 625,000
2003 579,000
2004 545,000
----------
Total minimum lease payments $3,077,000
</TABLE>
The Company had no outstanding capital leases as of December 31, 1999.
The Company terminated all capital leases during 1999 and the equipment was
returned to the lessors. The Company has maintained an accrued liability of
$116,000 for potential future payments which may be due to the lessors
subsequent to the disposition of the previously leased equipment as the
Company is liable for any loss realized by the lessors.
(9) Long Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
---------- ------------
<S> <C> <C>
Convertible debt payable to
related party -- $32,031,000
Note payable to warrantholder -- 96,000
-----------
Total long-term debt -- 32,127,000
Less Current installments -- 96,000
-----------
Long-term debt, excluding current installments -- $32,031,000
===========
</TABLE>
Convertible Debt Payable to Related Party
In connection with the Company's purchase of 80.5% of NCI, Baxter
purchased $30,000,000 of NCI's subordinated debentures which were due in
November 2004. The debentures bore interest at a rate of 6.5% which was to
be initially payable in November 2002. At December 31, 1998, accrued
interest amounted to $2,031,000 and was included in long-term debt. During
1999, the debentures were exchanged for debentures issued by the Company
and such debentures were repaid from proceeds of the November 1999 private
placement financing (see note 10).
F-24
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Term Note Payable to Warrantholder
The term note provided for interest, payable quarterly, at a rate of
8% per annum. The noteholder (State of New York) held a lien on all the
assets of Innovir. In connection with the issuance of the term note,
Innovir issued a warrant which provided the holder with the right to
acquire an aggregate of 40,000 shares of Innovir's common stock at $6.25
per share. Any accrued but unpaid interest related to the term note could
also be used to acquire additional shares of common stock at a price of
$6.25 per share. The warrant expired on February 10, 1998.
During November 1996, the payment terms of the term note were amended
(the "Amended Note") and related accrued and unpaid interest as of that
date was deferred. In consideration for such amendment, Innovir issued a
second warrant, which expires on November 21, 2001, to the noteholder to
purchase 20,000 shares of Innovir's common stock at $1.50 per share. The
fair value of the warrant, as determined by the Board of Directors of
Innovir, totaled approximately $16,000. Such amount was accounted for as
deferred financing cost and amortized over the remaining life of the
Amended Note. The Amended Note was repaid in full in 1999.
For the years ended December 31, 1999, 1998, and 1997 interest expense
was $1,903,000, $2,036,000, and $196,000.
(10) Shareholders' Equity
The Company is authorized to issue up to 160,000,000 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. The Company is authorized to issue up to 1,150,000 shares of
preferred stock, of which 74,498 shares of Series A Preferred and 63,000
shares of Series B Preferred are outstanding.
Series A Preferred Stock rights are as follows:
On May 25, 1999, the shareholders of the Company approved certain
changes to the terms of the Series A Preferred Stock through an amendment
to the Certificate of Incorporation to:
. Set the conversion price of the Series A Preferred Stock at $2.75
per share. The Certificate of Incorporation previously provided
that the conversion price be set in July 1999 based on the market
price of the Common Stock at that time, subject to a maximum
conversion price of $7.50 per share and a minimum conversion
price of $5.50 per share.
. Eliminate the anti-dilution provision reducing the conversion
price of the Series A Preferred Stock in the event the Company
were to issue Common Stock, or securities convertible into Common
Stock, prior to June 17, 1999 at a price below the conversion
price then in effect.
F-25
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
The shareholders also approved an amendment to increase the authorized
Common Stock from 120,000,000 shares to 160,000,000 shares, and to create
and authorize 1,000,000 additional new shares of preferred stock.
Holders of Series A shares have no voting rights and are entitled to
receive dividends payable in-kind 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 Series A shares are not
subject to any mandatory redemption or sinking fund provisions.
At December 31, 1999 and 1998, Series A share dividends amounting to
$4,227,000 and $3,988,000, respectively, were payable. As of December 17,
1999, $4,216,000 of in-kind dividends were declared by the Board of
Directors.
Series B Preferred Stock rights are as follows:
On November 24, 1999, the Company entered into a Securities Agreement
(the "Securities Agreement") with John Hancock Mutual Life Insurance
Company, Metropolitan Life Insurance Company, Massachusetts Mutual Life
Insurance Company, The Lincoln National Life Insurance Company, and certain
of their affiliates (the "Purchasers").
Pursuant to the terms of the Securities Agreement, the Company issued
and sold to the Purchasers, for an aggregate price of $63,000,000, 63,000
shares of newly-designated Series B Cumulative Convertible Preferred Stock
of the Company (the "Series B Preferred Stock"), Put Rights (the "Put
Rights") issued by Baxter, Class A Warrants of the Company (the "Class A
Warrants"), and Class B Warrants of the Company (the "Class B Warrants").
Each share of the Series B Preferred Stock is convertible at the
option of the holder at any time until November 24, 2006 (at which time
conversion is automatic), into Common Stock at a price of $2.75 per share,
subject to anti-dilution adjustment in certain circumstances. The Series B
Preferred Stock is convertible, in the aggregate, into 22,909,091 shares of
Common Stock (representing approximately 17.7% of pro forma fully-diluted
shares outstanding as of November 24, 1999, using the treasury method).
Holders of Series B Preferred Stock do not have voting rights except
as required by Delaware law and for certain matters specified in the
Certificate of Designation. Cash dividends are payable on the Series B
Preferred Stock at the rate of 3% of the liquidation preference, payable
semi-annually. No dividends may be declared or paid on the Common Stock or
Series A Preferred Stock if dividends on Series B Preferred Stock are in
arrears. Also, in the event of any cash dividends on Common Stock, the
holders of Series B Preferred Stock are entitled to participate on an as-if
converted basis.
The Put Rights provide the Purchasers with the ability to cause Baxter
to purchase the Series B Preferred Stock from November 24, 2002 until
November 24, 2004, unless terminated earlier under the circumstances
described in the Put Right Certificate. The purchase price to be paid by
Baxter would reflect a per annum compounded return to the Purchasers equal
to 5.91%.
F-26
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
The Class A Warrants are exercisable for 15 business days commencing
November 24, 2004 (provided the Put Right has not been exercised), at an
exercise price of $.01 per share, subject to anti-dilution adjustment in
certain circumstances, into a number of shares of Common Stock, up to a
maximum of 6,000,000 shares, that is dependent on the average of the last
reported sale prices of the Common Stock for the 10 trading days preceding
November 24, 2004. The maximum number of shares is issuable if the price of
the Common Stock is $3.00 or less, and no shares are issuable if the price
of the Common Stock is greater than $5.00. If the stock price is between
$3.01 and $5.00, the number of shares that is issuable decreases by
1,000,000 for each $.50 increment that the stock price exceeds $3.00. The
Class A Warrants may only be transferable together with the Series B
Preferred Stock.
The Class B Warrants are currently exercisable until December 16,
2004, for an aggregate of 3,000,000 shares of Common Stock, at an exercise
price of $3.00, subject to anti-dilution adjustment in certain
circumstances.
At December 31, 1999 Series B Preferred cash dividends amounting to
$192,000 were accrued and are payable beginning in May 2000.
(11) Stock Option Plans
Stock Option Plans - Employees, Directors and Consultants
The Company has four stock option plans (the "1990 Plan," the "1995
Director's Plan," the "1997 Plan," and the "1998 Plan") and Consultant
Option Agreements.
Under the 1990 Plan, 2,400,000 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, directors, consultants, agents, independent contractors, and
others who contribute to the Company's success. The terms of the options
may be up to ten 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, and are generally granted at the market close price on the
day prior to the grant. The options accelerate upon a change in control as
defined in the 1990 Plan. At December 31, 1999, there were 3,000 options
available for grant under the 1990 Plan. Generally, options vest 25% per
annum on the anniversary date of grant.
In August 1995, the Company adopted the 1995 Director's 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
Common Stock at date of grant. All of the options were granted to Directors
under the 1995 Director's Plan and no further options are available for
grant. As of December 31, 1999, 200,000 options were outstanding and
exercisable. The original expiration date of November 17, 2000 was extended
to November 17, 2003 by the Board during 1999, subject to shareholder
approval.
F-27
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
On May 25, 1999, the 1997 Plan was amended to increase the number of
shares of Common Stock issuable upon exercise of options granted under the
1997 Plan from 2,000,000 to 3,000,000 shares. 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, directors, consultants,
agents, independent contractors and others who contribute to the Company's
success. The terms of the options may be up to ten 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, and are generally
granted at the market close price on the day prior to the grant. The
options accelerate upon a change in control as defined in the 1997 Plan. At
December 31, 1999, there were 566,200 options available for grant under the
1997 Plan. Generally, options vest 25% per annum on the anniversary date of
grant.
Under the terms of the 1998 Plan, up to an aggregate of (i) 1,000,000
shares of NCI common stock and (ii) 3,000,000 shares of Common Stock of the
Company were 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, directors, consultants, agents, independent
contractors and others who contribute to the Company's success. 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 originally provided for an
exercise price of $5.00 per share of NCI common stock (approximately $1.67
per share of Common Stock of the Company in the event such options became
exercisable for the Company's Common Stock). As a result of NCI becoming a
wholly owned subsidiary of the Company in May 1999, all outstanding options
converted automatically to options to purchase Common Stock of the Company.
The options accelerate upon a change in control as defined in the 1998
Plan. At December 31, 1999, there were 157,412 options available for grant
under the 1998 Plan. Generally, options vest at 25% per annum on the
anniversary date of the grant.
The Company has Consultant Option Agreements with certain Consultants
who were also directors of the Company. A total of 1,300,000 options were
granted under these consulting agreements with a five year term with an
exercise price of $.94. The original expiration date of November 16, 2000
was extended to November 16, 2003 by the Board during 1999, subject to
shareholder approval. If the shareholders approve the extension of the
expiration date, the Company will record a significant non-cash
compensation charge in such reporting period. In 1995, the aggregate value
of these options was determined to be $351,000 and is being amortized over
the vesting period. A total of 200,000 options with a ten year term at an
exercise price of $1.47 were granted in connection with a March 1996
agreement whereby certain directors agreed to guaranty operating funds if
needed through September 1996.
F-28
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Presented below is a summary of stock option plans activity for the
years shown:
<TABLE>
<CAPTION>
Weighted Avg. Options Weighted Avg.
Options Exercise Price Exercisable Exercise Price
---------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 3,945,000 $ 1.59 --
Granted ............... 615,000 2.24 --
Exercised ............. (520,000) .80 --
Cancelled ............. (131,250) 1.66 --
---------- -------- ----------- -------
Balance at December 31, 1997 3,908,750 1.79 1,615,951 $1.4012
Granted ............... 4,306,800 1.66 --
Exercised ............. -- -- --
Cancelled ............. (578,025) 1.94 --
---------- -------- ----------- -------
Balance at December 31, 1998 7,637,525 $ 1.71 2,548,775 $ 1.56
Granted ............... 3,166,700 1.52 --
Exercised ............. (78,812) .69 --
Cancelled ............. (1,765,125) 2.58 --
---------- -------- ----------- -------
Balance at December 31, 1999 8,960,288 $ 1.49 4,292,981 $ 1.36
========== ======== =========== =======
</TABLE>
The following table summarizes information for options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS OUTSTANDING
-------------------------------------------------- ----------------------------------
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices As of 12/31/1999 Contractual Life Exercise Price As of 12/31/1999 Exercise Price
- ---------------------------------- ----------------- ---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$0.0010 $0.4380 160,000 6.27 $0.2741 115,000 $0.3810
$0.9375 $0.9375 1,500,000 3.68 $0.9375 1,500,000 $0.9375
$1.0000 $1,4700 646,000 8.56 $1.3763 275,000 $1.3702
$1.5000 $1.5000 1,360,000 7.21 $1.5000 990,833 $1.5000
$1.5300 $1.6600 872,250 8.47 $1.6008 314,167 $1.6072
$1.6700 $1.6700 3,830,588 8.42 $1.6700 777,981 $1.6700
$1.6900 $2.1250 443,450 7.82 $1.8619 215,000 $1.8856
$2.1560 $2.1560 3,000 9.52 $2.1560 0 $0.0000
$2.1880 $2.1880 40,000 9.51 $2.1880 0 $0.0000
$2.8125 $2.8125 105,000 7.11 $2.8125 105,000 $2.8125
- --------------------------------- ------------------ ---------------- -------------- ---------------- --------------
$0.0010 $2.8125 8,960,288 7.38 $1.4941 4,292,981 1.3552
</TABLE>
Note: Option prices and quantities for the 1998 Plan have been adjusted due
to the conversion from options for NCI stock to options for Nexell stock as
described above.
F-29
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
At December 31, 1999, there were 726,612 additional shares available
for grant under the Plans. The per share weighted-average fair value of the
options granted during 1999, 1998 and 1997 are estimated at $1.30 per
share, $1.20 per share and $1.85 per share, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Expected dividend yield 0% 0% 0%
Expected volatility 109% 88% 110%
Risk free interest rate 5.6% 5.3% 6.2%
Expected Life 5 years 5 years 5 years
------- ------- -------
</TABLE>
The Company applies APB 25 in accounting for its employee 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:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net Loss:
As reported $40,091,000 $38,951,000 $56,365,000
Pro forma $42,869,000 $41,307,000 $57,533,000
Loss per share:
As reported $0.56 $0.58 $1.02
Pro forma $0.60 $0.61 $1.04
</TABLE>
Nonemployee Director Restricted Stock Award Plan
The Company has 400,000 restricted shares outstanding to non-employee
directors under the 1996 Nonemployee Director Restricted Stock Award Plan.
The estimated value of $400,000 was amortized over the vesting period
through May 1999.
Warrants to Acquire Common Stock
As of December 31, 1999, the Company had 2,199,193 Common Stock
Subscription Warrants (the "Warrants") (Nasdaq National Market NEXLW)
outstanding to purchase 2,437,215 shares of Common Stock at an exercise
price of $1.35 per share, exercisable through June 20, 2006. The Warrants,
which have been issued pursuant to a Warrant Agreement dated June 17, 1996,
previously had an exercise price of $1.50 per share and had been
exercisable for 2,199,193 shares, but the exercise price and exchange ratio
were adjusted as a result of additional issuances of derivative securities
by the Company in 1999 (see note 3).
F-30
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
In December 1996, the Company issued other warrants to an individual
to purchase 365,000 shares of common stock at an exercise price of $.01 per
share, exercisable through May 21, 2006. 121,667 warrants were exercised in
the year ended December 31, 1997. As of December 31, 1999, 243,333 were
outstanding.
In May 1999, the Company issued warrants to Baxter to purchase
5,200,000 shares of Common Stock at an exercise price of $1.15 in exchange
for warrants Baxter had held in NCI (see note 3).
In November 1999 the Company issued Class A Warrants and Class B
Warrants to certain institutional investors (see note 10).
As of December 31, 1999, there were a total of 10,880,548 warrants
outstanding and exercisable at a weighted-average exercise price of $1.68.
Compensation Expense
The grant of nonemployee director restricted stock was charged to
unearned compensation in shareholders' equity at the intrinsic value and is
recognized in expense over the vesting period of four years. The fair value
of the stock options granted to certain consultants, who are also
directors, was estimated on the date of grant using the Black-Scholes
option pricing model and charged to unearned compensation in shareholders'
equity and is recognized in expense over the vesting period of five years.
Compensation expense recognized under the Nonemployee Director
Restricted Stock Award Plan and for stock options granted to certain
consultants, who are also directors, was $161,000, $171,000 and $351,000 in
1999, 1998 and 1997, respectively.
(12) Employee Benefit Plans
Effective January 1, 1998, the Company established a defined
contribution plan which is available to all employees 18 years or older.
Participants may contribute up to 15% of their compensation and are 100%
vested in their contributions. The Company matches 50% of each
participant's contribution up to a maximum of 3% of a participant's
compensation. The Company's matching contributions totaled approximately
$250,000 and $202,000 for the years ended December 31, 1999 and 1998,
respectively.
(13) Income Taxes
As of December 31, 1999, the Company has net operating loss
carryforwards for federal and state income tax purposes of approximately
$131,394,000 and $79,897,000, respectively, which will expire beginning in
the year 2000 through the year 2019 if not utilized. Of the $131,394,000 in
federal net operating losses, $36,823,000 is restricted based on separate
return limitation year rules. These losses can only be used to offset
income from the subsidiaries in which the losses originated.
F-31
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
As of December 31, 1999, the Company has tax credit carryforwards for
federal and state income tax purposes of approximately $3,257,000 and
$1,028,000 respectively, which are available to offset future tax
liabilities if any, through 2019.
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 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.
The components of the deferred taxes at December 31, 1999 and 1998 are
as follows:
<TABLE>
1999 1998
---- ----
<S> <C> <C>
Net operating loss carryforwards $ 49,355,000 $ 35,581,000
Research tax credit carryforwards 4,285,000 2,548,000
Capitalized R & D expenses 3,262,000 --
Purchased R&D 13,491,000 14,112,000
Accrued expenses and other 3,279,000 349,000
------------ ------------
Total deferred tax asset 73,672,000 52,590,000
Valuation allowance (73,672,000) (52,590,000)
------------ ------------
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 assets, the deferred tax assets are fully offset by a valuation
allowance at December 31, 1999 and 1998.
(14) Contingencies
The Company is involved in various 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-32
<PAGE>
NEXELL THERAPEUTICS INC. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(15) Geographic Information
The Company operates in one industry segment; the development,
manufacture and marketing and distribution of specialized instruments,
biologicals, reagents, sterile plastic sets and related products used in ex
vivo cell research and therapies.
<TABLE>
<CAPTION>
Year ended December 31,
Revenues by geographic area 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
United States $ 14,451,000 $ 13,443,000 $ 5,002,000
Rest of World 510,000 --- ---
------------ ------------ -------------
14,961,000 13,443,000 5,002,000
============ ============ =============
Operating loss by geographic area:
United States (34,869,000) (35,091,000) (58,505,000)
Rest of World (599,000) (4,132,000) (3,180,000)
------------ ------------ -------------
(35,468,000) (39,223,000) (61,685,000)
Identifiable assets:
United States 92,481,000 88,941,000 120,542,000
Belgium 1,188,000 --- ---
Rest of World 170,000 403,000 1,405,000
------------ ------------ -------------
93,839,000 89,344,000 121,947,000
============ ============ =============
Depreciation and amortization:
United States 6,987,000 6,312,000 983,000
Belgium 12,000 --- ---
Rest of World --- 298,000 249,000
------------ ------------ -------------
6,999,000 6,610,000 1,232,000
============ ============ =============
Capital expenditures:
United States 3,054,000 1,102,000 227,000
Belgium 269,000 --- ---
Rest of World --- 26,000 456,000
------------ ------------ -------------
$ 3,323,000 $ 1,128,000 $ 683,000
============ ============ =============
</TABLE>
Revenues for Rest of World represents product sales to customers primarily
located in Europe.
Prior to 1999, all sales were made to Baxter in the United States for
global distribution. The Company reported all sales within the United States,
while Baxter distributed products within the United States and throughout the
world. The Company operated foreign subsidiaries in the United Kingdom and
Germany. In 1998, management adopted a plan to close the operations of those
subsidiaries. The 1998 and 1997 operating losses for Rest of World resulted
solely from the operations of those two subsidiaries. The 1999 operating loss
for Rest of World is mainly the result of the operations of the Company's
Belgium subsidiary, which was established in 1999.
The Company generated approximately 67%, 100% and 100% of revenues from
one customer, Baxter, in 1999, 1998 and 1997, respectively.
F-33
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
Balance at Balance
Beginning At End
Of Year Additions Deductions Of Year
------- --------- ---------- -------
<S> <C> <C> <C> <C>
1999 Allowance for
Doubtful Accounts -- $26,000 (a) -- $26,000
1998 Allowance for
Doubtful Accounts -- -- -- --
1997 Allowance for
Doubtful Accounts -- -- -- --
</TABLE>
- ------------------------------------------
(a) Provision charged to earnings
S-1
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description Method of Filing
Number ----------- ----------------
- -------
<C> <S> <C>
2.4 Asset Purchase Agreement dated October 10, 1997 by and among Baxter
Healthcare Corporation ("Baxter"), the Company and NCI (1)
2.5 Asset Acquisition Agreement dated February 18, 1999, by and among
Baxter, the Company and NCI (2)
2.6 Securities Agreement dated as of November 24, 1999 among
the Company and the Purchasers named in Schedule I thereto
(certain schedules are omitted and the Company agrees to
furnish supplementally a copy to the Commission upon
request) (3)
3.1 The Company's Amended and Restated Certificate of Incorporation as
amended to date. (3)
3.2 The Company's Amended and Restated By-Laws as amended to date (3)
4.4 Warrant Agreement dated June 17, 1996 between the Company and American
Stock Transfer & Trust Company (4)
4.5 The Certificate of Amendment of the Certificate of Incorporation of the
Company filed with the Delaware Secretary of State on December 16, 1997
creating the Series A Preferred Stock and amendments subsequent thereto
(included in Exhibit 3.1 above)
4.6 The Certificate of Amendment of the Certificate of
Incorporation of the Company filed with the Delaware
Secretary of State on May 25, 1999 modifying the Series A
Preferred Stock (included in Exhibit 3.1 above)
4.7 The Company's Series 1 6 1/2% Convertible Subordinated Debenture Due
November 30, 2004 issued May 28, 1999 to Baxter (5)
4.8 The Company's Series 2 6 1/2% Convertible Subordinated Debenture Due
November 30, 2004 issued May 28, 1999 to Baxter (5)
4.9 The Company's Certificate of Designation filed with the
Delaware Secretary of State on November 24, 1999 creating
the Series B Preferred Stock (included in Exhibit 3.1
above)
10.3 The Company's Amended and Restated 1990 Incentive and Non-Incentive Filed herewith
Stock Option Plan, as amended to date electronically
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description Method of Filing
Number ----------- ----------------
- -------
<C> <S> <C>
10.9 Employment letter agreement dated June 21, 1994 between the Company and
Alfonso J. Tobia (6)
10.11 The Company's 1995 Outside Directors Stock Option Plan (7)
10.12 Letter agreement dated August 7, 1995 between the Company and
Lindsay A. Rosenwald, M.D. (7)
10.13 Stock Option Agreement dated August 7, 1995 between the Company and
Lindsay A. Rosenwald, M.D. (7)
10.14 Consulting and Stock Option Agreement dated November 17, 1995 between
the Company and Eric A. Rose, M.D. (7)
10.15 Stock Option Agreement dated November 17, 1995 between the Company and
Donald G. Drapkin (7)
10.16 The Company's 1996 Non-Employee Director Restricted Stock Award Plan.
(7)
10.18 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. (8)
10.19 The Company's 1997 Incentive and Non-Incentive Stock Option Plan, as Filed herewith
amended to date electronically
10.20 Employment Agreement dated October 30, 1996 between the Registrant and
Richard L. Dunning. (4)
10.21 Employment Agreement dated August 26, 1996 between the Registrant and
David A. Jackson, Ph.D. (4)
10.22 Factor IX Research Agreement dated March 28, 1997 between
Registrant and the Trustees of Columbia University in the
City of New York (9)
10.24 Employment Agreement dated May 19, 1997 between the Company and L.
William McIntosh (10)
10.24(a) Letter Agreement dated May 28, 1998 between NCI and L. William McIntosh
(2)
10.24(b) Letter Agreement dated May 28, 1998 between the Company and L. William
McIntosh (2)
10.25 Hardware and Disposables Manufacturing Agreement between NCI and Baxter,
dated as of December 17, 1997 (11)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description Method of Filing
Number ----------- ----------------
- -------
<C> <S> <C>
10.26 Antibody Manufacturing and Storage Agreement between NCI and Baxter,
dated as of December 17, 1997 (12)
10.27 Hardware and Disposables Supply Agreement between NCI and Baxter, dated
as of December 17, 1997 (13)
10.28 Marketing, Sale and Distribution Agreement between NCI and Baxter, dated
as of December 17, 1997 (14)
10.29 Non-Competition and Confidentiality Agreement between the Company and
Baxter, dated as of December 17, 1997 (15)
10.30 Sublicense (Chiron) between NCI and Baxter, dated as of December 17,
1997 (16)
10.31 Sublicense (Dorken) between NCI and Baxter, dated as of December 17,
1997 (17)
10.32 Sublicense (First Becton-Dickinson) between NCI and Baxter, dated as of
December 17, 1997 (18)
10.33 Sublicense (Second Becton-Dickinson) between NCI and Baxter, dated as of
December 17, 1997 (19)
10.34 Warrant, dated December 31, 1997, issued by Innovir to the Company (20)
10.35 Agreement, dated December 31, 1997, between the Company and Innovir
relating to future equity purchases (20)
10.37 Termination Agreement dated November 11, 1998 between the Company, VGI
and Columbia (21)
10.38 Asset Purchase Agreement, dated October 28, 1998, between CellPro,
Incorporated and NCI (2)
10.39 The Company's Common Stock Purchase Warrant issued May 28, 1999 to
Baxter (5)
10.40 Asset Transfer Agreement dated June 30, 1999 among the Company, NCI and
Baxter (22)
10.41 Royalty Agreement dated June 30, 1999 among the Company, NCI and Baxter
(22)
10.42 Credit Agreement dated June 30, 1999 between the Company and Baxter (22)
10.43 Letter Agreement dated as of April 15, 1999 between the Company and
Richard L. Dunning (23)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description Method of Filing
Number ----------- ----------------
- -------
<C> <S> <C>
10.44 Letter Agreement dated as of August 20, 1999 between the Company and L.
William McIntosh (23)
10.45 Letter Agreement dated as of April 15, 1999 between the Company and
David A. Jackson, Ph.D. (23)
10.46 Form of Put Right Certificate (3)
10.47 Form of Class A Warrant (3)
10.48 Form of Class B Warrant (3)
10.49 Registration Rights Agreement dated as of November 24, 1999 among the
Company and the Investors identified therein (3)
10.50 Side Letter Agreement dated as of November 24, 1999 among the Company,
Baxter International, Inc. and the other parties signatory thereto (3)
10.51 Put Agreement dated as of November 24, 1999 between the Company and
Baxter International, Inc. (3)
10.52 Voting Agreement dated December 17, 1997 among Baxter, the Company and Filed herewith
certain other parties electronically
10.53 Registration Rights Agreement dated December 17, 1997 between Baxter and Filed herewith
the Company electronically
10.54 Non-Incentive Stock Option Agreement dated November 9, 1999 between the Filed herewith
Company and Joseph A. Mollica electronically
10.55 Non-Incentive Stock Option Agreement dated November 9, 1999 between the Filed herewith
Company and Richard L. Casey electronically
10.56 Non-Incentive Stock Option Agreement dated November 9, 1999 between the Filed herewith
Company and Richard C. Piazza electronically
10.57 Non-Incentive Stock Option Agreement dated November 9, 1999 between the Filed herewith
Company and Victor W. Schmitt electronically
10.58 Non-Incentive Stock Option Agreement dated November 9, 1999 between the Filed herewith
Company and Victor W. Schmitt electronically
10.59 Stock Option Agreement dated March 12, 1996 between the Company and Filed herewith
Donald G. Drapkin electronically
10.60 Amendment dated May 25, 1999 to Consulting and Stock Option Agreement Filed herewith
dated November 17, 1995 between the Company and Eric A. Rose, M.D. electronically
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description Method of Filing
Number ----------- ----------------
- -------
<C> <S> <C>
10.61 Amendment dated May 25, 1999 to Stock Option Agreement dated November Filed herewith
17, 1995 between the Company and Donald G. Drapkin electronically
10.62 Form of Indemnification Agreement between the Company and Members of the Filed herewith
Board of Directors electronically
10.63 Amendment dated November 30, 1999 to Asset Transfer Agreement dated June Filed herewith
30, 1999, among the Company, NCI and Baxter electronically
21 List of Subsidiaries Filed herewith
electronically
23(a) Consent of KPMG LLP Filed herewith
electronically
24 Power of Attorney (included with signature page)
27 Financial Data Schedule Filed herewith
electronically
(1) Filed as the same numbered Exhibit to the Company's Current Report on Form 8-K 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, 1998 and incorporated herein by reference thereto.
(3) Filed as the same numbered Exhibit to the Company's Current Report on Form 8-K filed December
7, 1999 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 and incorporated herein by reference thereto.
(5) Filed as the same numbered Exhibit to the Company's Current Report on Form 8-K filed June 29,
1999 and incorporated herein by reference thereto.
(6) Filed as the same numbered Exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 and incorporated herein by reference thereto.
(7) Filed as the same numbered Exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 and incorporated herein by reference thereto.
(8) Filed as the same numbered Exhibit to the Company's Current Report on Form 8-K filed March 21,
1997 and incorporated herein by reference thereto.
(9) Filed as the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997 and incorporated herein by reference thereto.
(10) Filed as the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 and incorporated herein by reference thereto.
(11) Filed as Exhibit number 10.1 to the Company's Current Report on Form 8-K filed January 2, 1998
and incorporated herein by reference thereto.
(12) Filed as Exhibit number 10.2 to the Company's Current Report on Form 8-K filed January 2, 1998
and incorporated herein by reference thereto.
(13) Filed as Exhibit number 10.3 to the Company's Current Report on Form 8-K filed January 2, 1998
and incorporated herein by reference thereto.
(14) Filed as Exhibit number 10.4 to the Company's Current Report on Form 8-K filed January 2, 1998
and incorporated herein by reference thereto.
(15) Filed as Exhibit number 10.5 to the Company's Current Report on Form 8-K filed January 2, 1998
and incorporated herein by reference thereto.
(16) Filed as Exhibit number 10.6 to the Company's Current Report on Form 8-K filed January 2, 1998
and incorporated herein by reference thereto.
(17) Filed as Exhibit number 10.7 to the Company's Current Report on Form 8-K filed January 2, 1998
and incorporated herein by reference thereto.
(18) Filed as Exhibit number 10.8 to the Company's Current Report on Form 8-K filed January 2, 1998
and incorporated herein by reference thereto.
(19) Filed as Exhibit number 10.9 to the Company's Current Report on Form 8-K filed January 2, 1998
and incorporated herein by reference thereto.
(20) Filed as the same numbered Exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by reference thereto.
(21) Filed as the same number Exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 and incorporated herein by reference thereto.
(22) Filed as the same number Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 and incorporated herein by reference thereto.
(23) Filed as the same number Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999 and incorporated herein by reference thereto.
</TABLE>
<PAGE>
EXHIBIT 10.3
AMENDED AND RESTATED
1990 INCENTIVE AND NON-INCENTIVE
STOCK OPTION PLAN
OF
NEXELL THERAPEUTICS INC.
(FORMERLY NAMED VIMRx PHARMACEUTICALS INC.)
(AS AMENDED THROUGH MARCH 16, 2000)
1. Purpose of Plan.
The purpose of this Incentive and Non-Incentive Stock Option Plan ("Plan") is to
further the growth and development of VIMRx Pharmaceuticals Inc. ("Company") and
any subsidiaries thereof by encouraging selected employees, directors and other
persons who contribute and are expected to contribute materially to the
Company's success to obtain a proprietary interest in the Company through the
ownership of stock, thereby providing such persons with an added incentive to
promote the best interests of the Company and affording the Company a means of
attracting to its service persons of outstanding ability.
2. Stock Subject to the Plan.
An aggregate of 2,400,000 shares of the Company's Common Stock, $.001 par value
("Common Stock") subject, however, to adjustment or change pursuant to paragraph
12 hereof, shall be reserved for issuance upon the exercise of options which may
be granted from time to time in accordance with the Plan ("Options"). Such
shares may be, in whole or in part, authorized but unissued shares or issued
shares which have been reacquired by the Company. If, for any reason, an Option
shall lapse, expire or terminate without having been exercised in full, the
unpurchased shares covered thereby shall again be available for purposes of the
Plan.
3. Administration.
(a) Except as provided in paragraph (c) below, the Plan shall be
administered by the Committee. The Board of Directors shall appoint the
Committee from among its members. Such Committee shall be composed of two
or more Directors who, to the extent practicable, shall be "outside
directors" as defined in regulations under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and "non-employee
directors" as defined by Regulation 240.16b-3 under the Securities
Exchange Act of 1934, as amended. Such Committee shall have and may
exercise any and all of the powers relating to the administration of the
Plan and the grant of Options thereunder as are set forth in subparagraph
3(b) hereof as the Board of Directors shall confer and delegate. The
Board of Directors shall have power at any time to fill vacancies in, to
change the membership of, or to discharge such Committee. The Committee
shall select one of its members as its chairman and shall hold its
meetings at such time and at such places as it shall deem advisable. A
majority of such Committee shall constitute a quorum and such majority
shall determine its action. Any action may be taken without a meeting by
written consent of all the members of the Committee. The Committee shall
keep minutes of its proceedings and shall report the same to the Board of
Directors at the meeting next succeeding.
(b) The Committee shall administer the Plan and, subject to the
provisions of the Plan, shall have sole authority in its discretion to
determine the persons to whom, and the time or times at which, Options
shall be granted; the number of shares to be subject to each such Option;
the provisions regarding exercisability of each Option; the expiration
date of each Option; whether the Option shall contain a "cashless
exercise" provision; whether all or any portion of the Options shall be
incentive stock options ("Incentive Options") qualifying under Section
422A of the Code or stock options which do not so qualify ("Non-Incentive
Options"); whether a Non-Incentive Option shall have limited
transferability as permitted under the Plan; and whether a Non-Incentive
Option granted to a non-employee shall terminate following the non-
employee's termination of engagement in performing services for the
Company or its subsidiaries pursuant to Section 9 of the Plan. Both
Incentive Options and Non-Incentive Options may be granted to the same
person at the same time provided each type of Option is clearly
designated. In making such determinations, the Committee may take into
account the nature of the services rendered by such persons, their
present and potential contribution to the Company's success and such
other factors as the Committee in its sole discretion may deem relevant.
Subject to the express provisions of the Plan, the Committee shall also
have authority to interpret the Plan; to prescribe, amend and rescind
rules and regulations relating thereto; to determine the terms and
provisions of the respective Option Agreements, which shall be
substantially in the forms attached hereto as Exhibit A and Exhibit B; to
amend the provisions of outstanding Options to provide for accelerated
exercisability or the extension of the expiration date of such Options;
and to make all other determinations necessary or advisable for the
administration of the Plan, all of which determinations shall be
conclusive and not subject to review.
(c) The Board of Directors may administer the Plan, in lieu of and with
the same powers as the Committee, with respect to any Options granted or
to be granted under the Plan, provided that such administration is
consistent with the provisions of Section 162(m) of the Code.
<PAGE>
4. Eligibility for Receipt of Options.
(a) Incentive Options. Incentive Options may be granted only to employees
(including officers) of the Company and/or any of its subsidiaries. A
director of the Company or any subsidiary who is not an employee of the
Company or of one of its subsidiaries is not eligible to receive
Incentive Options under the Plan. Further, Incentive Options may not be
granted to any person who, at the time the Incentive Option is granted,
owns (or is considered as owning within the meaning of Section 425(d) of
the Code) stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any subsidiary (10%
Owner), unless at the time the Incentive Option is granted to the 10%
Owner, the option price is at least 110% of the fair market value of the
Common Stock subject thereto and such Incentive Option by its terms is
not exercisable subsequent to five years from the date of grant. The
aggregate fair market value (determined as of the time an Incentive
Option is granted) of the shares of the Company's Common Stock initially
purchasable upon exercise of an Incentive Option during any calendar year
may not exceed $100,000.
(b) Non-Incentive Options. Non-Incentive Options may be granted to any
employees (including employees who have been granted Incentive Options),
directors, consultants, agents, independent contractors and other persons
whom the Board of Directors (or Committee) determines will contribute to
the Company's success.
(c) The maximum number of shares that may be subject to options under
this Plan granted during any calendar year to any executive officer of
the Company is 800,000 shares.
(d) In the event on outstanding Incentive Option or a portion thereof no
longer qualifies as an incentive stock option under Section 422A of the
Code, such Option or portion thereof, as applicable, thereafter shall be
deemed a Non-Incentive Option under the Plan.
5. Option Price.
The purchase price of the shares of Common Stock under each Option shall be
determined by the Committee, which determination shall be conclusive and not
subject to review, but in no event shall the purchase price be less than 100% of
the fair market value of the Common Stock on the date of grant in the case of
Incentive Options (110% of fair market value in the case of Incentive Options
granted to a 10% Owner) and 50% of the fair market value of the Common Stock on
the date of the grant in the case of Non-Incentive Options.
For purposes of the Plan, unless the Committee determines otherwise, the "fair
market value" of a share of Common Stock as of a certain date shall be the
closing sale price of the Common Stock on The Nasdaq Stock Market or, if the
Common Stock is not then traded on The Nasdaq Stock Market, such national
securities exchange on which the Common Stock is then traded, on the trading
date immediately preceding the date fair market value is being determined. The
Committee may make such other determination of fair market value, based on other
factors, as it shall deem appropriate.
For purposes of the Plan, the date of grant of an Option shall be the date on
which the Committee shall by resolution duly authorize such Option.
6. Term of Options.
The term of each Option shall be such number of years as the Committee shall
determine, subject to earlier termination as herein provided, but in no event
more than ten years from the date such Option is granted.
7. Exercise of Options.
(a) Each Option shall be exercisable to the extent determined by the
Committee, but in no event shall an Option be exercisable until at least
six months from the date of grant, except as otherwise provided in
paragraph 13 herein.
(b) An Option may not be exercised for fractional shares of the Company's
Common Stock.
(c) Except as provided in paragraphs 9, 10 and 11 hereof, and unless
determined otherwise by the Committee with respect to Non-Incentive
Options granted to non-employees, no Option shall be exercisable unless
the holder thereof shall have been an employee, director, consultant,
agent, independent contractor or other person employed by or engaged in
performing services for the Company and/or a subsidiary continuously from
the date of grant to the date of exercise.
(d) The exercise of an Option shall be contingent upon receipt from the
holder thereof of a written representation that at the time of such
exercise it is the optionee's then present intention to acquire the
Option shares for investment and not with a view to the distribution or
resale thereof (unless a Registration Statement covering the shares
purchasable upon exercise of the Options shall have been declared
effective by the Securities and Exchange Commission) and upon receipt by
the Company of cash, or a check to its order, for the full purchase price
of such shares. The Committee may, in its discretion, include a "cashless
exercise" provision in the applicable Option Agreement, in which event
the optionee will be permitted (i) to deliver previously owned shares of
Common Stock with a fair market value equal to the exercise price in
payment of the full purchase price of such shares, or (ii) to request
that the Company withhold shares of Common Stock issuable upon
<PAGE>
exercise of such Option with a fair market value equal to the exercise
price of the shares being purchased under the Option (thereby reducing
the number of shares issuable upon exercise of the Option).
(e) The holder of an Option shall have none of the rights of a
stockholder with respect to the shares purchasable upon exercise of the
Option until a certificate for such shares shall have been issued to the
holder upon due exercise of the Option.
(f) The proceeds received by the Company upon exercise of an Option shall
be added to the Company's working capital and be available for general
corporate purposes.
8. Transferability of Options.
No Option granted pursuant to the Plan shall be transferable otherwise than by
will or the laws of descent or distribution and an Option may be exercised
during the lifetime of the holder only by such holder, provided, however, that
the Committee may provide for transferability of a Non-Incentive Option to an
optionee's family members or family trusts.
9. Termination of Employment or Engagement.
(a) Except as provided in paragraph (b) below, In the event the
employment of the holder of an Option shall be terminated by the Company
or a subsidiary for any reason other than by reason of death or
disability, or the engagement of a non-employee holder of a Non-Incentive
Option shall be terminated by the Company or a subsidiary for any reason,
such holder may, within three months from the date of such termination,
exercise such Option to the extent such Option was exercisable by such
holder at the date of such termination. Notwithstanding the foregoing, no
Option may be exercised subsequent to the date of its expiration. Absence
on leave approved by the employer corporation shall not be considered an
interruption of employment for any purpose under the Plan. In addition,
at the discretion of the Committee, the exercisability of an outstanding
Non-Incentive Option may be extended to a date determined by the
Committee but not beyond ten years from the date of grant.
(b) The Committee may, in its discretion, at the time of grant or by
amending the applicable outstanding Non-Incentive Option, delete the
foregoing termination provision with respect to a Non-Incentive Option
granted to a non-employee of the Company or its subsidiaries.
(c) Nothing in the Plan or in any Option Agreement granted hereunder
shall confer upon any Optionholder any right to continue in the employ of
the Company or any subsidiary or obligate the Company or any subsidiary
to continue the engagement of any Optionholder or interfere in any way
with the right of the Company or any such subsidiary to terminate such
Optionholder's employment or engagement at any time.
10. Disability of Holder of Option.
If the employment of the holder of an Option shall be terminated by reason of
such holder's disability, such holder may, within twelve months from the date of
such termination, exercise such option to the extent such Option was exercisable
by such holder at the date of such termination. Notwithstanding the foregoing,
no Option may be exercised subsequent to the date of its expiration.
11. Death of Holder of Option.
If the holder of any Option shall die while in the employ of, or while
performing services for, the Company or one or more of its subsidiaries (or
within six months following termination of employment due to disability), the
Option theretofore granted to such person may be exercised, but only to the
extent such Option was exercisable by the holder at the date of death (or, with
respect to employees, the date of termination of employment due to disability)
by the legatee or legatees of such person under such person's Last Will, or by
such person's personal representative or distributees, within twelve months from
the date of death but in no event subsequent to the expiration date of the
Option.
12. Adjustments Upon Changes in Capitalization.
If at any time after the date of grant of an Option, the Company shall by stock
dividend, split-up, combination, reclassification or exchange, or through merger
or consolidation or otherwise, change its shares of Common Stock into a
different number or kind or class of shares or other securities or property,
then the number of shares covered by such Option and the price per share thereof
shall be proportionately adjusted for any such change by the Committee whose
determination thereon shall be conclusive.
13. Acceleration of Exercisability Upon Change in Control.
Upon the occurrence of a "change in control" of the Company (as defined below),
all outstanding Options shall become immediately fully exercisable. For purposes
of the Plan, a "change in control" of the Company shall mean (i) the acquisition
at any time by a "person" or "group" (as such terms are used Sections 13(d) and
14(d)(2) of the Exchange Act of beneficial ownership (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities representing 50%
or more of the combined voting power in the election of directors of the then
outstanding securities of the Company or any successor or the Company; (ii) the
termination of service of directors, for any reason other than death, disability
or
<PAGE>
retirement from the Board of Directors, during any period of two consecutive
years or less, of individuals who at the beginning of such period constituted a
majority of the Board of Directors, unless the election of or nomination for
election of each new director during such period was approved by a vote of at
least two-thirds of the directors still in office who were directors at the
beginning of the period; (iii) approval by the stockholders of the Company of
any merger, consolidation, or statutory share exchange as a result of which the
Common Stock shall be changed, converted or exchanged (other than a merger,
consolidation or share exchange with a wholly-owned Subsidiary) or liquidation
of the Company or any sale or disposition of 80% or more of the assets or
earning power or the Company; or (iv) approval by the stockholders of the
Company of any merger, consolidation, or statutory share exchange to which the
Company is a party as a result of which the persons who were stockholders
immediately prior to the effective date of the merger, consolidation or share
exchange shall have beneficial ownership of less than 50% of the combined voting
power in the election of directors of the surviving corporation; provided,
however, that no change in control shall be deemed to have occurred if, prior to
such time as a change in control would otherwise be deemed to have occurred, the
Company's Board of Directors deems otherwise.
14. Vesting of Rights Under Options.
Neither anything contained in the Plan nor in any resolution adopted or to be
adopted by the Committee, the Board of Directors or the stockholders of the
Company shall constitute the vesting of any rights under any Option. The vesting
of such rights shall take place only when a written Option Agreement,
substantially in the form of the Incentive Stock Option Agreement attached
hereto as Exhibit A or the Non-Incentive Stock Option Agreement attached hereto
as Exhibit B, shall be duly executed and delivered by and on behalf of the
Company and the person to whom the Option shall be granted.
15. Withholding Taxes.
Whenever under the Plan shares are to be issued in satisfaction of the exercise
of Options granted thereunder, the Company shall have the right to require the
recipient to remit to the Company an amount sufficient to satisfy federal, state
and local withholding tax requirements prior to the delivery of any certificate
or certificates for such shares.
16. Termination and Amendment.
The Plan, which was adopted by the Board of Directors on July 10, 1990 and
approved by the shareholders of the Company, shall terminate on July 9, 2000 and
no Option shall be granted under the Plan after such date. The Board of
Directors may at any time prior to such date terminate the Plan or make such
modifications or amendments thereto as it shall deem advisable, provided,
however, that shareholder approval shall be required:
(i) to increase the number of shares reserved for issuance under the
Plan;
(ii) to materially increase the benefits accruing to participants under
the Plan;
(iii) to materially modify the requirements of eligibility for
participation in the Plan; or
(iv) if otherwise required to comply with the incentive stock option
provisions of Section 162(m) of the Code or the listed company
requirements of The Nasdaq Stock Market or of a national securities
exchange on which the Common Stock is then traded,
and, provided, further, that no modification or amendment shall adversely affect
the rights of a holder of an Option previously granted under the Plan without
such holder's written consent.
<PAGE>
EXHIBIT 10.19
1997 INCENTIVE AND NON-INCENTIVE
STOCK OPTION PLAN
OF
NEXELL THEAPEUTICS INC.
(FORMERLY NAMED VIMRx PHARMACEUTICALS INC.)
1. Purpose of Plan.
The purpose of this Incentive and Non-Incentive Stock Option Plan
("Plan") is to further the growth and development of VIMRx Pharmaceuticals Inc.
("Company") and any subsidiaries thereof by encouraging selected employees,
directors and other persons who contribute and are expected to contribute
materially to the Company's success to obtain a proprietary interest in the
Company through the ownership of stock, thereby providing such persons with an
added incentive to promote the best interests of the Company and affording the
Company a means of attracting to its service persons of outstanding ability.
2. Stock Subject to the Plan.
An aggregate of 3,000,000 shares of the Company's Common Stock, $.001
par value ("Common Stock") subject, however, to adjustment or change pursuant to
paragraph 12 hereof, shall be reserved for issuance upon the exercise of options
which may be granted from time to time in accordance with the Plan ("Options").
Such shares may be, in whole or in part, as the committee appointed by the Board
of Directors to administer the Plan (hereinafter, the "Committee") shall from
time to time determine, authorized but unissued shares or issued shares which
have been reacquired by the Company. If, for any reason, an Option shall lapse,
expire or terminate without having been exercised in full, the unpurchased
shares covered thereby shall again be available for purposes of the Plan.
3. Administration.
(a) Except as provided in paragraph (c) below, the Plan shall be
administered by the Committee. The Board of Directors shall appoint the
Committee from among its members. Such Committee shall be composed of two or
more Directors who, to the extent practicable, shall be "outside directors" as
defined in regulations under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), and "non-employee directors" as defined by
Regulation 240.16b-3 under the Securities Exchange Act of 1934, as amended.
Such Committee shall have and may exercise any and all of the powers relating to
the administration of the Plan and the grant of Options thereunder as are set
forth in subparagraph 3(b) hereof as the Board of Directors shall confer and
delegate. The Board of Directors shall have power at any time to fill vacancies
in, to change the membership of, or to discharge such Committee. The Committee
shall select one of its members as its chairman and shall hold its meetings at
such time and at such places as it shall deem advisable. A majority of such
Committee shall constitute a quorum and such majority shall determine its
action. Any action may be taken without a meeting by written consent of all the
members of the Committee. The Committee shall keep minutes of its proceedings
and shall report the same to the Board of Directors at the meeting next
succeeding.
(b) The Committee shall administer the Plan and, subject to the
provisions of the Plan, shall have sole authority in its discretion to determine
the persons to whom, and the time or times at which, Options shall be granted;
the number of shares to be subject to each such Option; the provisions regarding
exercisability of each Option; the expiration date of each Option; whether the
Option shall contain a "cashless exercise" provision; whether all or any portion
of the Options shall be incentive stock options ("Incentive Options") qualifying
under Section 422A of the Code or stock options which do not so qualify ("Non-
Incentive Options"); whether a Non-Incentive Option shall have limited
transferability as permitted under the Plan; and whether a Non-Incentive Option
granted to a non-employee shall terminate following the non-employee's
termination of engagement in performing services for the Company or its
subsidiaries pursuant to Section 9 of the Plan. Both Incentive Options and Non-
Incentive Options may be granted to the same person at the same time provided
each
<PAGE>
type of Option is clearly designated. In making such determinations, the
Committee may take into account the nature of the services rendered by such
persons, their present and potential contribution to the Company's success and
such other factors as the Committee in its sole discretion may deem relevant.
Subject to the express provisions of the Plan, the Committee shall also have
authority to interpret the Plan; to prescribe, amend and rescind rules and
regulations relating thereto; to determine the terms and provisions of the
respective Option Agreements, which shall be substantially in the forms attached
hereto as Exhibit A and Exhibit B; to amend the provisions of outstanding
Options to provide for accelerated exercisability or the extension of the
expiration date of such Options; and to make all other determinations necessary
or advisable for the administration of the Plan, all of which determinations
shall be conclusive and not subject to review.
(c) The Board of Directors may administer the Plan, in lieu of and
with the same powers as the Committee, with respect to any Options granted or to
be granted under the Plan, provided that such administration is consistent with
the provisions of Section 162(m) of the Code.
4. Eligibility for Receipt of Options.
(a) Incentive Options. Incentive Options may be granted only to
employees (including officers) of the Company and/or any of its subsidiaries. A
director of the Company or any subsidiary who is not an employee of the Company
or of one of its subsidiaries is not eligible to receive Incentive Options under
the Plan. Further, Incentive Options may not be granted to any person who, at
the time the Incentive Option is granted, owns (or is considered as owning
within the meaning of Section 425(d) of the Code) stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or any
subsidiary (10% Owner), unless at the time the Incentive Option is granted to
the 10% Owner, the option price is at least 110% of the fair market value of the
Common Stock subject thereto and such Incentive Option by its terms is not
exercisable subsequent to five years from the date of grant. The aggregate fair
market value (determined as of the time an Incentive Option is granted) of the
shares of the Company's Common Stock initially purchasable upon exercise of an
Incentive Option during any calendar year may not exceed $100,000.
(b) Non-Incentive Options. Non-Incentive Options may be granted to
any employees (including employees who have been granted Incentive Options),
directors, consultants, agents, independent contractors and other persons whom
the Board of Directors (or Committee) determines will contribute to the
Company's success.
(c) The maximum number of shares that may be subject to options under
this Plan granted during any calendar year to any executive officer of the
Company is 800,000 shares.
(d) In the event an outstanding Incentive Option or a portion thereof
no longer qualifies as an incentive stock option under Section 422A of the Code,
such Option or portion thereof, as applicable, thereafter shall be deemed a Non-
Incentive Option under the Plan.
5. Option Price.
The purchase price of the shares of Common Stock under each Option
shall be determined by the Committee, which determination shall be conclusive
and not subject to review, but in no event shall the purchase price be less than
100% of the fair market value of the Common Stock on the date of grant in the
case of Incentive Options (110% of fair market value in the case of Incentive
Options granted to a 10% Owner) and 50% of the fair market value of the Common
Stock on the date of the grant in the case of Non-Incentive Options.
For purposes of the Plan, unless the Committee determines otherwise,
the "fair market value" of a share of Common Stock as of a certain date shall be
the closing sale price of the Common Stock on The Nasdaq Stock Market or, if the
Common Stock is not then traded on The Nasdaq Stock Market, such national
securities exchange on which the Common Stock is then traded, on the trading
date immediately preceding the date the fair market value is being determined.
The Committee may make such other
<PAGE>
determination of fair market value, based on other factors, as it shall deem
appropriate.
For purposes of the Plan, the date of grant of an Option shall be the
date on which the Committee shall by resolution duly authorize such Option.
6. Term of Options.
The term of each Option shall be such number of years as the Committee
shall determine, subject to earlier termination as herein provided, but in no
event more than ten years from the date the Option is granted.
7. Exercise of Options.
(a) Each Option shall be exercisable to the extent determined by the
Committee, but in no event shall an Option be exercisable until at least six
months from the date of grant, except as otherwise provided in Paragraph 13
herein.
(b) An Option may not be exercised for fractional shares of the
Company's Common Stock.
(c) Except as provided in paragraphs 9, 10 and 11 hereof, and unless
determined otherwise by the Committee with respect to Non-Incentive Options
granted to non-employees, no Option shall be exercisable unless the holder
thereof shall have been an employee, director, consultant, agent, independent
contractor or other person employed by or engaged in performing services for the
Company and/or a subsidiary continuously from the date of grant to the date of
exercise.
(d) The exercise of an Option shall be contingent upon receipt from
the holder thereof of a written representation that at the time of such exercise
it is the optionee's then present intention to acquire the Option shares for
investment and not with a view to the distribution or resale thereof (unless a
Registration Statement covering the shares purchasable upon exercise of the
Options shall have been declared effective by the Securities and Exchange
Commission) and upon receipt by the Company of cash, or a check to its order,
for the full purchase price of such shares. The Committee may, in its
discretion, include a "cashless exercise" provision in the applicable Option
Agreement, in which event the optionee will be permitted (i) to deliver
previously owned shares of Common Stock with a fair market value equal to the
exercise price in payment of the full purchase price of such shares, or (ii) to
request that the Company withhold shares of Common Stock issuable upon exercise
of such Option with a fair market value equal to the exercise price of the
shares being purchased under the Option (thereby reducing the number of shares
issuable upon exercise of the Option).
(e) The holder of an Option shall have none of the rights of a
stockholder with respect to the shares purchasable upon exercise of the Option
until a certificate for such shares shall have been issued to the holder upon
due exercise of the Option.
(f) The proceeds received by the Company upon exercise of an Option
shall be added to the Company's working capital and be available for general
corporate purposes.
8. Transferability of Options.
No Option granted pursuant to the Plan shall be transferable otherwise
than by will or the laws of descent or distribution and an Option may be
exercised during the lifetime of the holder only by such holder, provided,
however, that the Committee may provide for transferability of a Non-Incentive
Option to an optionee's family members or family trusts.
9. Termination of Employment or Engagement.
(a) Except as provided in paragraph (b) below, in the event the
employment of the holder of an Option shall be terminated by the Company or a
subsidiary for any reason other than by reason of death or disability, or the
engagement of a non-employee holder of a Non-Incentive Option shall be
terminated by
<PAGE>
the Company or a subsidiary for any reason, such holder may, within three months
from the date of such termination, exercise such Option to the extent such
Option was exercisable by such holder at the date of such termination.
Notwithstanding the foregoing, no Option may be exercised subsequent to the date
of its expiration. Absence on leave approved by the employer corporation shall
not be considered an interruption of employment for any purpose under the Plan.
In addition, at the discretion of the Committee, the exercisability of an
outstanding Non-Incentive Option may be extended to a date determined by the
Committee but not beyond ten years from the date of grant.
(b) The Committee may, in its discretion, at the time of grant or by
amending the applicable outstanding Non-Incentive Option, delete the foregoing
termination provision with respect to a Non-Incentive Option granted to a non-
employee of the Company or its subsidiaries.
(c) Nothing in the Plan or in any Option Agreement granted hereunder
shall confer upon any Optionholder any right to continue in the employ of the
Company or any subsidiary or obligate the Company or any subsidiary to continue
the engagement of any Optionholder or interfere in any way with the right of the
Company or any such subsidiary to terminate such Optionholder's employment or
engagement at any time.
10. Disability of Holder of Option.
If the employment of the holder of an Option shall be terminated by
reason of such holder's disability, such holder may, within twelve months from
the date of such termination, exercise such option to the extent such Option was
exercisable by such holder at the date of such termination. Notwithstanding the
foregoing, no Option may be exercised subsequent to the date of its expiration.
11. Death of Holder of Option.
If the holder of any Option shall die while in the employ of, or while
performing services for, the Company or one or more of its subsidiaries (or
within six months following termination of employment due to disability), the
Option theretofore granted to such person may be exercised, but only to the
extent such Option was exercisable by the holder at the date of death (or, with
respect to employees, the date of termination of employment due to disability)
by the legatee or legatees of such person under such person's Last Will, or by
such person's personal representative or distributees, within twelve months from
the date of death but in no event subsequent to the expiration date of the
Option.
12. Adjustments Upon Changes in Capitalization.
If at any time after the date of grant of an Option, the Company shall
by stock dividend, split-up, combination, reclassification or exchange, or
through merger or consolidation or otherwise, change its shares of Common Stock
into a different number or kind or class of shares or other securities or
property, then the number of shares covered by such Option and the price per
share thereof shall be proportionately adjusted for any such change by the
Committee whose determination thereon shall be conclusive.
13. Acceleration of Exercisability Upon Change in Control.
Upon the occurrence of a "change in control" of the Company (as
defined below), all outstanding Options shall become immediately fully
exercisable. For purposes of the Plan, a "change in control" of the Company
shall mean (i) the acquisition at any time by a "person" or "group" (as such
terms are used Sections 13(d) and 14(d)(2) of the Exchange Act of beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities representing 50% or more of the combined voting power
in the election of directors of the then outstanding securities of the Company
or any successor or the Company; (ii) the termination of service of directors,
for any reason other than death, disability or retirement from the Board of
Directors, during any period of two consecutive years or less, of individuals
who at the beginning of such period constituted a majority of the Board of
Directors, unless the election of or nomination for election of each new
director during such period was approved by a vote of at least two-thirds of the
directors still in office who were directors at the beginning of the period;
(iii)
<PAGE>
approval by the stockholders of the Company of any merger, consolidation, or
statutory share exchange as a result of which the Common Stock shall be changed,
converted or exchanged (other than a merger, consolidation or share exchange
with a wholly-owned Subsidiary) or liquidation of the Company or any sale or
disposition of 80% or more of the assets or earning power or the Company; or
(iv) approval by the stockholders of the Company of any merger, consolidation,
or statutory share exchange to which the Company is a party as a result of which
the persons who were stockholders immediately prior to the effective date of the
merger, consolidation or share exchange shall have beneficial ownership of less
than 50% of the combined voting power in the election of directors of the
surviving corporation; provided, however, that no change in control shall be
deemed to have occurred if, prior to such time as a change in control would
otherwise be deemed to have occurred, the Company's Board of Directors deems
otherwise.
14. Vesting of Rights Under Options.
Neither anything contained in the Plan nor in any resolution adopted
or to be adopted by the Committee, the Board of Directors or the stockholders of
the Company shall constitute the vesting of any rights under any Option. The
vesting of such rights shall take place only when a written Option Agreement,
substantially in the form of the Incentive Stock Option Agreement attached
hereto as Exhibit A or the Non-Incentive Stock Option Agreement attached hereto
as Exhibit B, shall be duly executed and delivered by and on behalf of the
Company and the person to whom the Option shall be granted.
15. Withholding Taxes.
Whenever under the Plan shares are to be issued in satisfaction of the
exercise of Options granted thereunder, the Company shall have the right to
require the recipient to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such shares.
16. Termination and Amendment.
The Plan, which was adopted by the Board of Directors on February 6,
1997 and is subject to stockholder approval, shall terminate on February 6, 2007
and no Option shall be granted under the Plan after such date. The Board of
Directors may at any time prior to such date terminate the Plan or make such
modifications or amendments thereto as it shall deem advisable, provided,
however, that shareholder approval shall be required:
(i) to increase the number of shares reserved for issuance under the
Plan;
(ii) materially increase the benefits accruing to participants under
the Plan;
(iii) materially modify the requirements of eligibility for
participation in the Plan; or
(iv) if otherwise required to comply with the incentive stock option
provisions of Section 162(m) of the Code or the listed company
requirements of The Nasdaq Stock Market or of a national
securities exchange on which the Common Stock is then traded,
and, provided, further, that no modification or amendment shall adversely affect
the rights of a holder of an Option previously granted under the Plan without
such holder's written consent.
<PAGE>
EXHIBIT 10.52
VOTING AGREEMENT
This Voting Agreement ("Agreement") is made this 17th day of December 17, 1997
among Baxter Healthcare Corporation, a Delaware corporation ("Baxter"), Lindsay
A. Rosenwald, M.D., an individual ("Rosenwald"), Paramount Capital Asset
Management Inc., a Delaware corporation ("Paramount"), Donald Drapkin, an
individual ("Drapkin"), Richard L. Dunning, an individual ("Dunning"), Laurence
D. Fink, an individual ("Fink"), and Eric A. Rose, an individual ("Rose"), and
any other signatory set forth on the signature page hereto (collectively, the
"Stockholders").
WHEREAS, the Stockholders each hold shares of the common stock (the "Stock") of
VIMRx Pharmaceuticals Inc., a Delaware corporation (the "Company") or options to
acquire Stock; and
WHEREAS, as a condition to Baxter's agreement to sell its immunotherapy business
relating to certain ex vivo cell therapy to the Company (the "Sale"), and as an
inducement for Baxter to enter into the Asset Purchase Agreement, dated as of
October 10, 1997 (the "Asset Purchase Agreement") among the Company, Baxter, and
BIT Acquistion Corp., a Delaware corporation ("Newco"), the Stockholders and
Baxter have agreed to enter into this Agreement, to be specifically enforceable
against each of them, pursuant to which they agree to vote their shares of the
Stock in the manner and for the purpose specified herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,, the
Stockholders and Baxter hereby agree as follows:
1. Voting Agreement. (a) Each of the Stockholders hereby agrees to vote all of
the Stock beneficially owned, directly or indirectly, by him or it (and all
Stock issued pursuant to the exercise of stock options) in favor of the Baxter
nominated director in connection with Baxter's right to nominate a director to
the VIMRx Board of Directors pursuant to Section 6.2(E) of the Asset Purchase
Agreement; provided, however, that nothing contained herein shall prevent any
Stockholder from transferring, selling or otherwise disposing of Stock held by
such Stockholder provided any such transferee agrees in a written instrument
satisfactory to Baxter to be bound by the terms hereof; and further provided,
that the obligations of such transferee shall be void as to any transferee
purchasing Stock pursuant to Rule 144 or a registered offering under the
Securities Act of 1933. It is expressly understood and agreed by each of the
Stockholders and Baxter that this Agreement is intended to, and does hereby,
create and constitute a voting agreement within the meaning of Section 218(c) of
the General Corporation Law of the State of Delaware, as amended, and not a
voting trust agreement under Section 218(a) thereof.
(b) Baxter hereby agrees to vote all of the Stock beneficially owned,
directly or indirectly, by it in favor of the nominees for director recommended
by VIMRx's Nominating Committee (or by a majority of the Board of Directors if
there is no Nominating Committee); provided, that nothing contained herein shall
require Baxter to refrain from voting its Stock in favor of the Baxter nominated
director; and provided further, that nothing contained herein shall prevent
Baxter from transferring, selling or otherwise disposing of Stock held by Baxter
provided any such transferee agrees in a written instrument satisfactory to
VIMRx to be bound by the terms hereof; and further provided, that the
obligations of such transferee shall be void as to any transferee purchasing
Stock pursuant to Rule 144 or a registered offering under the Securities Act of
1933.
2. Irrevocable Proxy. (a) In order to secure each Stockholder's obligation to
vote his or its Stock and other voting securities of the Company in accordance
with the provisions of Section 1(a), each Stockholder (other than Baxter) hereby
appoints Baxter (the "Proxy") as its true and lawful proxy and attorney-in-fact,
with full power of substitution, to vote all of his or its Stock and other
voting securities of the Company as expressly provided for in Section 1(a). The
Proxy may exercise the irrevocable proxy granted to it hereunder at any time
1
<PAGE>
any party fails to comply with the provisions of this Agreement. The proxies and
powers granted by each Stockholder pursuant to this Section 2 are coupled with
an interest and are given to secure the performance of the Stockholder's
obligations under this Agreement. Such proxies and powers will be irrevocable
with respect to the matters set forth in Section 1 for the term set forth in
Section 5, and, with respect to any individual, will survive the death,
incompetency and disability of such Stockholder.
(b) In order to secure Baxter's obligations to vote its Stock and other
voting securities of the Company in accordance with the provisions of Section
1(b), Baxter hereby appoints the Chief Executive Officer of VIMRx (the "Baxter
Proxy") as its true and lawful proxy and attorney-in-fact, with full power of
substitution, to vote all of Baxter's Stock and other voting securities of the
Company as expressly provided for in Section 1(b). The Baxter Proxy may exercise
the irrevocable proxy granted to him hereunder at any time Baxter fails to
comply with the provisions of this Agreement. The proxy and powers granted by
Baxter pursuant to this Section 2 are coupled with an interest and is given to
secure the performance of Baxter's obligations under this Agreement. Such proxy
and powers will be irrevocable with respect to the matters set forth in Section
1 for the term set forth in Section 5.
3. Representations of the Parties. Each party to this Agreement hereby
represents and warrants to each of the other parties that (a) he or it owns and
has the right to vote the number of shares of the Stock set forth opposite his
name on Exhibit A attached hereto, (b) he or it has full power to enter into
this Agreement, and (c) he or it is not a party to any proxy, voting trust or
other agreement which is inconsistent with or conflicts with the provisions of
this Agreement, and no party will grant any proxy or become party to any voting
trust or other agreement which is inconsistent with or conflicts with the
provisions of this Agreement. All representations and warranties contained
herein or made in writing by any party in connection herewith will survive the
execution and delivery of this Agreement, regardless of any investigation made
by any party.
4. Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or in equity.
5. Term. This Agreement shall remain in effect so long as Baxter shall
continue to own at least 3% of the shares of Stock of the Company, as adjusted
for any additional shares of Stock issued by the Company following the date of
this Agreement, and Baxter's obligations hereunder shall continue so long as
Baxter's representative (if Baxter shall have chosen to designate one) shall
retain a seat on the VIMRx Board of Directors.
6. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
7. General Provisions.
(a) All of the covenants and agreements contained in this Agreement shall be
binding upon, and inure to the benefit of, the respective parties and their
successors, assigns, heirs, executors, administrators and other legal
representatives, as the case may be. Nothing contained herein shall prevent
any of the parties hereto from assigning their rights hereunder.
2
<PAGE>
(b) This Agreement may be executed in two or more counterparts, each of
which will be deemed an original but all of which together shall constitute
one and the same instrument. The parties hereto agree that facsimile
transmissions of original signatures shall constitute and be accepted as
original signatures.
(c) If any provision of this Agreement shall be declared void or
unenforceable by any court or administrative board of competent
jurisdiction, such provision shall be deemed to have been severed from the
remainder of this Agreement and this Agreement shall continue in all
respects to be valid and enforceable.
(d) No waiver of any breach of this Agreement extended by any party hereto
to any other party shall be construed as a waiver of any rights or remedies
of any other party hereto or with respect to any subsequent breach.
(e) Whenever the context of this Agreement shall so require, the use of the
singular number shall include the plural and the use of any gender shall
include all genders.
(f) This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to principles of conflicts of
law; however, any action or proceeding relating to this Agreement shall be
brought only in and decided by the federal or state courts in Delaware, such
courts being a proper forum in which to adjudicate such action or
proceeding, and each party hereby waives any claim of inconvenient forum.
(g) The language used in this Agreement shall be deemed to be the language
chosen by the parties to express their mutual intent and no rule of strict
construction will be applied against any party.
3
<PAGE>
IN WITNESS WHEREOF, Baxter and each of the Stockholders has executed this
Agreement as of the date first written above.
BAXTER HEALTHCARE CORPORATION
BY: /s/ Victor W. Schmitt
-------------------------
Name: Victor W. Schmitt
-----------------------
Its: President, Venture Management
----------------------------------
VIMRx PHARMACEUTICALS INC.
By: /s/ Richard L. Dunning
--------------------------
Name: Richard L. Dunning
------------------------
Its: President & CEO
--------------------
LINDSAY A. ROSENWALD, M.D.
/s/ Lindsay A. Rosenwald, M.D.
------------------------------
PARAMOUNT CAPITAL ASSET MANAGEMENT INC.
By: /s/ Lindsay A. Rosenwald
----------------------------
Name: Lindsay A. Rosenwald
--------------------------
Its: President
--------------
4
<PAGE>
DONALD DRAPKIN
/s/ Donald Drapkin
--- --------------
RICHARD DUNNING
/s/ Richard Dunning
--- ---------------
LAURENCE D. FINK
/s/ Laurence D. Fink
--- ----------------
ERIC A. ROSE, M.D.
/s/ Eric A. Rose, M.D.
--- ------------------
5
<PAGE>
EXHIBIT A
NUMBER OF SHARES OF VIMRx
STOCK THAT STOCKHOLDER HAS
STOCKHOLDER RIGHT TO VOTE
-------------
BAXTER HEALTHCARE CORPORATION 11,000,000
LINDSAY A. ROSENWALD, M.D. 50,000
PARAMOUNT CAPITAL ASSET
MANAGEMENT INC. 3,666,666
DONALD DRAPKIN 150,000
RICHARD L. DUNNING 3,595
LAURENCE D. FINK 433,333
ERIC A. ROSE 328,400
6
<PAGE>
EXHIBIT 10.53
VIMRx PHARMACEUTICALS INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of December 17,
1997, and is entered into by and between VIMRx Pharmaceuticals Inc., a Delaware
corporation (the "Company") and Baxter Healthcare Corporation, a Delaware
corporation (the "Purchaser").
R E C I T A L S
---------------
A. The Company and the Purchaser have, on the date hereof, entered into an
Asset Purchase Agreement pursuant to which the Company has issued or will issue
to Purchaser 11,000,000 shares of the Company's common stock, $.001 par value
("Common Stock") and all shares of the Company's Series A Convertible Preferred
Stock ("Preferred Stock").
B. The parties desire to establish a procedure for the registration and resale
of the Common Stock and the Common Stock issuable upon conversion of the
Preferred Stock held by the Purchaser.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
releases contained herein, the parties hereto hereby agree as follows:
A G R E E M E N T
-----------------
1. Certain Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:
(a) "Commission" means the Securities and Exchange Commission or any other
United States federal agency at the time administering the Securities Act.
(b) "Holder" means the Purchaser holding Registrable Securities and any
holder of outstanding Registrable Securities which have not been sold to
the public, but only if such holder is an assignee or transferee of
Registration rights as permitted by Section 7.
(c) "Initiating Holders" means any Holder or Holders who in the aggregate
hold at least fifty percent (50%) of the Registrable Securities.
(d) "Register," "Registered," and "Registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (a "Registration Statement") and the
declaration or ordering of the effectiveness of such Registration
Statement, and qualification and compliance with applicable state
securities laws.
(e) "Registrable Securities" means (i) the Common Stock purchased by
Purchasers pursuant to the Asset Purchase Agreement, and (ii) all Common
Stock issuable upon conversion of the Preferred Stock in accordance with
its terms. In the event of any recapitalization by the Company, whether by
stock split, reverse stock split, stock dividend or the like, such
additional securities shall be Registrable Securities covered by this
Agreement.
<PAGE>
(f) "Registration Expenses" means all expenses incurred by the Company in
complying with Section 2, including, without limitation, all federal and
state registration, qualification and filing fees, printing expenses, fees
and disbursements of counsel for the Company and one special counsel for
Holders (if different from the Company), whose fees shall be capped at
$15,000, escrow fees, blue sky fees and expenses, and the expense of any
audits or financial statement reviews incident to or required by any such
registration. The Company shall not be required to undertake any audit of
its financial statements except in connection with its fiscal year end in
connection with any Registration undertaken pursuant to this Agreement.
(g) "Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(h) "Selling Expenses" means all underwriting discounts, selling
commissions, fees and expenses of underwriters' counsel, expenses of
underwriters and stock transfer taxes applicable to the sale of Registrable
Securities pursuant to this Agreement, which such Selling Expenses shall be
prorated among selling stockholders if such Registration includes
securities other than Registrable Securities.
(i) "Underwriter" means any underwriter which acts as an underwriter in
connection with a Registration Statement.
2. Demand Registration.
- ------------------------
2.1 Request for Registration. Subject to the remainder of this Agreement, if
the Company shall receive, from Holders who in the aggregate hold more than
thirty percent (30%) of the then outstanding Registrable Securities or any
lesser percent if the reasonably anticipated aggregate offering price to the
public would exceed $5,000,000, at any time after the date of this Agreement, a
written request that the Company effect any Registration with respect to all or
a part of the Registrable Securities for a firm-commitment underwritten offering
thereof, the Company shall (i) promptly, but in any event within 10 days, give
written notice of the proposed Registration to all other Holders and shall (ii)
use its commercially reasonable efforts to effect Registration of the
Registrable Securities specified in such request as soon as practicable,
together with any Registrable Securities of any Holder, joining in such request
as are specified in a written request delivered to the Company within 30 days
after delivery of such written notice from the Company of the proposed
Registration. The Company shall not be obligated to take any action to effect
any such Registration pursuant to this Section 2.1 after the Company has
effected three such Registrations pursuant to this Section 2.1 and each such
Registration has been declared effective.
2.2. Right of Deferral of Registration. If the Company shall furnish to all such
Holders who joined in the request a certificate signed by the President of the
Company stating that, in the good faith business judgment of the Board of
Directors of the Company, it would be commercially unreasonable for the Company
for any Registration to be effected as requested under this Section 2, the
Company shall have the right, exercisable once with respect to each demand for
Registration, to defer the filing of the Registration Statement with respect to
such offering for a period of not more than 150 days from delivery of the
request of the Initiating Holders.
2.3. Underwriting in Demand Registration.
- ----------------------------------------
(a) Notice of Underwriting. The right of any Holder to Registration
pursuant to Section 2 shall be conditioned upon the agreement of such
Holder to participate in such underwriting and the inclusion of Registrable
Securities in the underwriting.
2
<PAGE>
(b) Inclusion of Other Holders in Demand Registration. The Company shall be
entitled to include any other of its securities held by any other person in
any Registration Statement filed pursuant to this Section 2.
(c) Selection of Underwriter in Demand Registration. The Company shall
(together with all holders proposing to distribute their securities through
such underwriting) enter into an underwriting agreement with the
representative ("Underwriter's Representative") of the underwriter or
underwriters selected for such underwriting by the holders of a majority of
the Registrable Securities being registered by the Initiating Holders and
reasonably satisfactory to the Company.
(d) Marketing Limitation in Demand Registration. If the Underwriter's
Representative advises the Initiating Holders in writing that market
factors require a limitation of the number of shares to be underwritten,
the securities held by persons who are not Holders shall be excluded from
such Registration to the extent required by such limitation. If a
limitation in the number of shares is still required, the Initiating
Holders shall so advise all Holders and the number of shares of Registrable
Securities that may be included in the Registration and underwriting shall
be excluded pro rata based (as between the holders of Registrable
Securities) on percentage ownership of the Company. No Registrable
Securities or other securities excluded from the underwriting by reason of
this Section 2.3(d) shall be included in such Registration Statement. If
the number of shares of Registrable Securities so excluded exceeds 20% of
the number of shares of Registrable Securities which are requested to be
included in such Registration, then the Initiating Holders shall be
entitled, on behalf of the Holders, to require, by delivery of a written
notice to the Underwriter's Representative and the Company, that the
Registration be deferred for such period of time as the Initiating Holders,
the Company, and the Underwriter's Representative may mutually agree, but
in no event to exceed 90 days from delivery of the notice requiring such
deferral from the Initiating Holders, or alternatively, to request that the
Registration be terminated in its entirety. In such event, the demand for
Registration shall be considered to have not been made for purposes of
counting the number of demands for Registration permitted under Section
2.1.
(e) Right of Withdrawal in Demand Registration. If any Holder of
Registrable Securities or a holder of other securities entitled (upon
request) to be included in such Registration, disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written
notice to the Company, the Underwriter's Representative, and the Initiating
Holders delivered at least seven days prior to the effective date of the
Registration Statement. The securities so withdrawn shall also be withdrawn
from the Registration Statement. If by the withdrawal of such securities a
greater number of Registrable Securities held by other Holders may be
included in such Registration (up to the maximum of any limitation imposed
by the underwriters), then the Company shall offer to all Holders who have
included Registrable Securities in the Registration the right to include
additional Registrable Securities in the same proportion as that used in
determining the proportional inclusion under the underwriter limitation in
Section 2.3(d).
(f) Inclusion of Company's Securities in Demand Registration. If the
Underwriter's Representative has not limited the number of Registrable
Securities or other securities to be underwritten, the Company may include
its securities for its own account in such Registration and underwriting if
the Underwriter's Representative so agrees and if the number of Registrable
Securities and other securities which would otherwise have been included in
such Registration and underwriting will not thereby be
3
<PAGE>
limited, and if the Underwriter's Representative advises the Holders in
writing that, in such Representative's opinion, the price of the
Registrable Securities will not be adversely affected thereby.
(g) Blue Sky in Demand Registration. In the event of any Registration
pursuant to Section 2, the Company will exercise its best efforts to
Register and qualify the securities covered by the Registration Statement
under such other securities or blue sky laws of such jurisdictions (not
exceeding 20 unless otherwise agreed to by the Company) as shall be
reasonably appropriate for the distribution of such securities; provided,
however, that (i) the Company shall not be required to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions, and (ii) notwithstanding anything in this
Agreement to the contrary, if any jurisdiction in which the securities
shall be qualified imposes a non-waivable requirement that expenses
incurred in connection with the qualification of the securities be borne by
selling shareholders, such expenses shall be payable pro rata by selling
shareholders.
2.4. Piggyback Registration.
- ----------------------------
(a) Notice of Piggyback Registration and Inclusion of Registrable
Securities. In the event the Company decides to Register any of its Common
Stock (other than pursuant to a registration on Form S-4 or S-8 or any
successor forms), for its own account for cash in a firm commitment
underwritten offering on a form that would be suitable for a registration
involving Registrable Securities, the Company shall: (i) promptly, but in
any event within 10 days of such decision, give each Holder written notice
thereof (which shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the applicable
blue sky or other state securities laws) and (ii) include in such
Registration (and any related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all the Registrable
Securities specified in a written request delivered to the Company by any
Holder within 20 days after delivery of such written notice from the
Company of the proposed Registration.
(b) Underwriting in Piggyback Registration. The right of any Holder to
Registration shall be conditioned upon the agreement of such Holder to
participate in such underwriting and the inclusion of such Holder's
Registrable Securities in such underwriting. All Holders proposing to
distribute their securities through such underwriting shall (together with
the Company and the other holders distributing their securities through
such underwriting) enter into an underwriting agreement with the
Underwriter's Representative for such offering. The Holders shall have no
right to participate in the selection of the underwriters for an offering
pursuant to this Section 2.4.
(c) Marketing Limitation in Piggyback Registration. If the Underwriter's
Representative advises the Holders seeking registration of Registrable
Securities pursuant to Section 2.4 in writing that market factors require a
limitation of the number of shares to be underwritten, the Underwriter's
Representative may (subject to the allocation priority set forth in Section
2.4(d)) limit the number of Registrable Securities to be included therein,
down to complete exclusion.
(d) Allocation of Shares in Piggyback Registration. If the Underwriter's
Representative limits the number of shares to be included in a Registration
pursuant to Section 2.4(c), the number of shares to be included in such
Registration shall be allocated in the following manner: The shares (other
than Registrable Securities) held by holders of securities other than
Registrable Securities requesting and legally entitled to include shares in
such Registration shall be excluded from such registration and underwriting
to the extent required by such limitation, but only if permitted by the
terms of such other registration rights agreement. If a limitation in the
number of shares is still required, the number of
4
<PAGE>
shares of Registrable Securities to be included in the Registration and
underwriting shall be excluded pro rata (as between the holders of
Registrable Securities and such other holders of other registration rights)
based on percentage ownership. No Registrable Securities or other
securities excluded from the underwriting by reason of this Section 2.4(d)
shall be included in the Registration Statement.
(e) Withdrawal in Piggyback Registration. If any holder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the underwriter delivered at least seven
days prior to the effective date of the Registration Statement. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such Registration. If by the
withdrawal of such securities a greater number of Registrable Securities
may be included in such Registration (up to the maximum of any limitation
imposed by the underwriters), then the Company shall offer to all Holders
who have included Registrable Securities the right to include additional
Registrable Securities in the same proportion used in determining the
proportional inclusion under the underwriter limitation in Section 2.4(d).
(f) Blue Sky in Piggyback Registration. In the event of any Registration of
Registrable Securities pursuant to Section 2.4, the Company will exercise
its best efforts to Register and qualify the securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions (not exceeding 20 unless otherwise agreed to by the Company)
as shall be reasonably appropriate for the distribution of such securities;
provided, however, that (i) the Company shall not be required to qualify to
do business or to file a general consent to service of process in any such
states or jurisdictions, and (ii) notwithstanding anything in this
Agreement to the contrary, in the event any jurisdiction in which the
securities shall be qualified imposes a non-waivable requirement that
expenses incurred in connection with the qualification of the securities be
borne by selling stockholders, such expenses shall be payable pro rata by
selling stockholders.
3. Expenses of Registration. All Registration Expenses incurred in connection
with all Registrations shall be borne by the Company. Notwithstanding the above,
the Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (which Holders shall bear such
expenses); provided further, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, properties, prospects or financial condition of the Company from that
known to the Holders at the time of their request, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to
Section 2. All Selling Expenses shall be borne by the holders of the securities
registered pro rata on the basis of the number of shares registered.
4. Registration Procedures. The Company will keep each Holder whose
Registrable Securities are included in any Registration pursuant to this
Agreement advised as to the initiation and completion of such Registration. At
its expense the Company will: (a) use its best efforts to keep such Registration
effective for a period of 90 days or until the Holders have completed the
distribution described in the Registration Statement relating thereto, whichever
first occurs; and (b) furnish such number of prospectuses (including
preliminary, amended or supplemented prospectuses) and other documents as a
Holder from time to time may reasonably request. The Company shall file post-
effective amendments or supplements to such Registration Statement as may be
necessary to comply with applicable federal and state securities laws and
regulations, and shall deliver copies of the prospectus contained therein as
provided above.
5. Information Furnished by Holder. It shall be a condition precedent of the
Company's obligations under this Agreement to a particular Holder that such
Holder of Registrable Securities to be included in any Registration,
5
<PAGE>
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request.
6. Indemnification.
- --------------------
6.1. Company's Indemnification of Holders. To the extent permitted by law, the
Company will indemnify each Holder, each of their respective officers, directors
and constituent partners and each person controlling such Holder, with respect
to which Registration, qualification or compliance of Registrable Securities has
been effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter, against all claims, losses, damages,
liabilities (or actions in respect thereof) to the extent such claims, losses,
damages, liabilities or actions arise out of or are based upon any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other document issued by the Company (including
any related Registration Statement) incident to any such Registration,
qualification or compliance, or are based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by the Company of
any rule or regulation promulgated under the Securities Act applicable to the
Company and relating to action or inaction required of the Company in connection
with any such Registration, qualification or compliance. The Company will also
reimburse each such Holder, officer, director, constituent partner, legal
counsel and underwriter and each person who controls any such Holder or
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that the indemnity contained in this
Section 6 shall not apply to amounts paid in settlement of any such claim, loss,
damage, liability or action if settlement is effected without the consent of the
Company (which consent shall not unreasonably be withheld); and provided,
further, that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or action arises out of or is based upon
any untrue statement (or alleged untrue statement) or omission (or alleged
omission) of a material fact furnished in a writing to the Company by such
Holder, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such Registration Statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use in
connection with the offering of securities of the Company.
6.2. Holder's Indemnification of Company. To the extent permitted by law, each
Holder will, if Registrable Securities held by such Holder are included in the
securities as to which such Registration, qualification or compliance is being
effected pursuant to this Agreement, indemnify the Company, each of its
directors and officers, each legal counsel and independent accountant of the
Company, each underwriter, if any, of the Company's securities covered by such a
Registration Statement, each person who controls the Company or such underwriter
within the meaning of the Securities Act, and each other such Holder, its
officers, directors, constituent partners and legal counsel and each person
controlling such other Holder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based upon any
untrue statement (or alleged untrue statement) of a material fact contained in
any such Registration Statement, prospectus, offering circular or other document
issued by the Company, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by such Holder of any rule or
regulation promulgated under the Securities Act applicable to such Holder and
relating to action or inaction required of such Holder in connection with any
such Registration, qualification or compliance; and each Holder will also
reimburse the Company, such Holders, such directors, officers, partners,
persons, law and accounting firms, underwriters and control persons for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue
6
<PAGE>
statement) or omission (or alleged omission) is made in such Registration
Statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use in connection with the offering of
securities of the Company. The liability of the Holder under this paragraph
shall be limited to the aggregate proceeds received by such Holder from the sale
of Registrable Securities sold under the Registration Statement.
6.3. Indemnification Procedure. Promptly after receipt by an indemnified party
under this Section 6 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 6, notify the indemnifying party in
writing of the commencement thereof and generally summarize such action. The
indemnifying party shall have the right to participate in and to assume the
defense of such claim, and shall be entitled to select counsel for the defense
of such claim with the approval of the indemnified parties, which approval shall
not be unreasonably withheld; provided, however, that the indemnified party may
participate in such defense, and the indemnified parties collectively shall be
entitled to retain a separate counsel for purposes of such action, at the
indemnifying party's expense if a majority in interest of the indemnified
parties conclude in good faith that representation of such indemnified parties
by counsel selected by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnifying party and any
or the indemnified parties. The failure to notify an indemnifying party promptly
of the commencement of any such action, if prejudicial to the ability of the
indemnifying party to defend such action, shall relieve such indemnifying party
of any liability to the indemnified party under this Section 6, but the omission
so to notify the indemnifying party will not relieve such party of any liability
that such party may have to any indemnified party other than under this Section
6. No indemnifying party, in the defense of any such claim or litigation shall
consent to entry of any judgment or enter into any settlement (i) which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to the indemnified party of a release from all liability in respect to such
claim or litigation and (ii) except with the consent of each indemnified party,
which consent shall not be unreasonably withheld.
6.4. Other Securities. It shall be a condition to the Company's obligations
under this Agreement to include Registrable Securities of a Holder in any
Registration pursuant to this Agreement that such Holder agree to substantially
the indemnification provisions set forth in this Section.
7. Transfer of Registration Rights. The rights to cause the Company to register
securities granted by the Company under this Agreement to the Holders may be
assigned by any Holder (a) to any Affiliate of such Holder (as defined in Rule
405 under the Securities Act) or (b) to a transferee or assignee of any
Registrable Securities, not sold to the public, acquiring at least 20% of such
Holder's Registrable Securities; provided, however, that (i) the Company must be
given written notice of said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
Registration rights are being assigned, and (ii) the transferee or assignee of
such rights must not be a direct competitor of the Company.
8. Market Stand-off. Purchaser hereby agrees that, if so requested by the
Company and the Underwriter's Representative (if any), Purchaser shall not sell,
make any short sale of, grant any option for the purchase of, or otherwise
transfer, without the prior written consent of the Company or the Underwriter's
Representative, any securities of the Company (other than those included in the
Registration) during the 120-day period following the effective date of a
Registration Statement of the Company filed under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restriction.
9. [NOT USED]
7
<PAGE>
10. Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission which may at any time permit the sale of
the Registrable Securities to the public without Registration, the Company
agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
(b) Use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities
Act and the Securities Exchange Act of 1934, as amended;
(c) Furnish to the Holders of Registrable Securities forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of said Rule 144, and of the Securities Act and the Securities
Exchange Act of 1934, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents of the Company as a
Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such Holder to sell any such securities without
Registration.
11. Severability. If any provision of this Agreement is held to be
unenforceable, it shall be adjusted rather than voided to achieve its intent to
the maximum extent possible, and the remaining provisions of this Agreement
shall be enforced to the maximum extent possible.
12. Notices. All notices, communications and deliveries under this Agreement
shall be made in writing signed by the party making the same, shall be made
either by personal delivery (including couriers such as Federal Express) or by
registered mail, postage prepaid, or facsimile transmission and shall be deemed
to give delivery on the date delivered if delivered in person or by facsimile or
on the seventh day after mailing if mailed, addressed as follows:
If to:
the Company: VIMRx Pharmaceuticals Inc.
2751 Centerville Road Wilmington, DE 19808
Attn: President Facsimile: (302) 998-3794
with a copy to:
Lowell S. Lifschultz, Esq.
Epstein Becker & Green
250 Park Avenue New York, NY 10177
Facsimile: (212) 661-0989
the Holder: Baxter Healthcare Corporation
1627 Lake Cook Road
Deerfield, IL 60015
Attn: Victor W. Schmitt
Facsimile: (847) 940-6271
with a copy to:
Christopher A. Lause
Seyfarth, Shaw, Fairweather & Geraldson
55 East Monroe Street
Chicago, IL 60603
Facsimile: (312) 269-8869
8
<PAGE>
13. Assignment. Except as otherwise permitted by this Agreement, no assignment
or transfer, in whole or in part, by a Holder of his rights under this Agreement
shall be made except with the prior written consent of the Company, which
consent shall not be unreasonably withheld. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective legal
representatives, heirs, descendants and permitted successors and assigns.
14. Controlling Law; Integrations; Amendments; Waiver. This Agreement shall be
construed and enforced in accordance with the laws of the State of Delaware
applicable to agreements among Delaware residents made and to be performed
entirely within the State of Delaware. This Agreement supersedes all prior
negotiations, agreements, and understandings among the parties with respect to
the subject matter hereof, and constitutes the entire agreement among the
parties with respect such subject matter. This Agreement may not be altered or
amended except in writing signed by the Company and by the holders of not less
than 66-2/3% of the then outstanding Registrable Securities. The failure of any
party hereto at any time to require performance of any provision of this
Agreement shall in no manner be deemed a waiver of the right to require
performance of the same in the future.
15. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which taken together
shall constitute one and the same document. Facsimile transmission of a
signature shall be deemed an original for all purposes.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
The Company: VIMRx Pharmaceuticals Inc.,
a Delaware corporation
By /s/ Richard L. Dunning
-- ----------------------
Its President & CEO
--- ---------------
The Holder: Baxter Healthcare Corporation
By /s/ Victor W. Schmitt
-- ---------------------
Its President, Venture Management
--- -----------------------------
9
<PAGE>
EXHIBIT 10.54
NEXELL THERAPEUTICS INC.
NON-INCENTIVE STOCK OPTION AGREEMENT
---------------------------------------
To: Joseph A. Mollica
We are pleased to notify you that by the determination of the Stock
Option Plan Committee (herein called the "Committee") a non-incentive stock
option to purchase 50,000 shares of the Common Stock of Nexell Therapeutics Inc.
(herein called the "Company") at a price of $1.375 per share has this 9th day of
November, 1999 been granted to you under the Company's 1997 Incentive and Non-
Incentive Stock Option Plan (herein called the "Plan"). This option may be
exercised only upon the terms and conditions set forth below.
1. Purpose of Option.
-----------------
The purpose of the Plan under which this non-incentive stock option
has been granted is to further the growth and development of the Company and its
subsidiaries by encouraging key employees, directors, consultants, agents,
independent contractors and other persons who contribute and are expected to
contribute materially to the Company's success to obtain a proprietary interest
in the Company through the ownership of stock, thereby providing such persons
with an added incentive to promote the best interests of the Company, and
affording the Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
------------------------------
Your execution of this non-incentive stock option agreement will
indicate your acceptance of and your willingness to be bound by its terms; it
imposes no obligation upon you to purchase any of the shares subject to this
option. Your obligation to purchase shares can arise only upon your exercise of
the option in the manner set forth in paragraph 4 hereof.
3. When Option May Be Exercised.
----------------------------
The option granted you hereunder shall be exercisable as follows:
(i) From and after November 9, 2000, options to purchase 12,500
shares shall become exercisable;
(ii) From and after November 9, 2001, options to purchase 25,000
shares (i.e., an additional 12,500 shares) shall become
exercisable;
(iii) From and after November 9, 2002 options to purchase 37,500
shares (i.e., an additional 12,500 shares) shall become
exercisable; and
(iv) From and after November 9, 2003, options to purchase all
shares subject to this non-incentive stock option agreement
shall become exercisable.
1
<PAGE>
This option may not be exercised for less than ten shares at any one
time (or the remaining shares then purchasable if less than ten) and expires at
the end of ten years from the date of grant whether or not it has been duly
exercised (hereinafter, the "Option Expiration Date"), unless sooner terminated
as provided in paragraphs 5, 6 or 7 hereof.
4. How Option May Be Exercised.
---------------------------
This option is exercisable by a written notice signed by you and
delivered to the Company at its executive offices, signifying your election to
exercise the option. The notice must state the number of shares of Common Stock
as to which your option is being exercised, must contain a statement by you (in
a form acceptable to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale (unless a
Registration Statement covering the shares purchased has been declared effective
by the Securities and Exchange Commission) and must be accompanied by cash or a
check to the order of the Company for the full purchase price of the shares
being purchased, plus such amount, if any, as is required for withholding taxes.
Notwithstanding the foregoing, this option may also be exercised pursuant to the
following "cashless exercise" provision.
In lieu of paying for the shares purchasable under this option by cash
or check, you may (i) deliver previously owned shares of Common Stock with a
fair market value equal to the full purchase price of the shares being purchased
under this option, or (ii) request that the Company withhold shares of Common
Stock issuable upon exercise of this option with a fair market value equal to
the full purchase price of the shares being purchased under this option (thereby
reducing the number of shares issuable upon exercise of this option). For
purposes of this option, unless the Committee determines otherwise, the "fair
market value" of a share of Common Stock as of a certain date shall be the
closing sale price of the Common Stock on The Nasdaq Stock Market or, if the
Common Stock is not then traded on The Nasdaq Stock Market, such national
securities exchange on which the Common Stock is then traded, on the trading
date immediately preceding the date fair market value is being determined. The
Committee may make such other determination of fair market value, based on other
factors, as it shall deem appropriate.
If notice of the exercise of this option is given by a person or
persons other than you, the Company may require, as a condition to the exercise
of this option, the submission to the Company of appropriate proof of the right
of such person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will be
issued as soon as practicable. The Company, however, shall not be required to
issue or deliver a certificate for any shares until it has complied with all
requirements of the Securities Act of 1933, the Securities Exchange Act of 1934,
any stock exchange on which the Company's Common Stock may then be listed and
all applicable state laws in connection with the issuance or sale of such shares
or the listing of such shares on said exchange. Until the issuance of the
certificate for such shares, you or such other person as may be entitled to
exercise this option shall have none of the rights of a stockholder with respect
to shares subject to this option.
The Company shall have the right to require you, or such other person
as may be permitted to exercise this option, to remit to the Company an amount
sufficient to satisfy federal,
2
<PAGE>
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for shares of Common Stock issuable upon exercise of
this option.
5. Termination of Employment or Engagement.
---------------------------------------
If your employment with the Company (or a subsidiary thereof) is
terminated for any reason other than by death or disability, or if you are not
an employee of the Company and your engagement by the Company (or a subsidiary)
is terminated for any reason, you may exercise that portion of this option which
was exercisable by you at the date of such termination, provided, however, that
such exercise occurs prior to the Option Expiration Date.
6. Disability.
----------
If your employment with the Company (or a subsidiary thereof) is
terminated by reason of your disability, you may exercise, within twelve months
from the date of such termination, that portion of this option which was
exercisable by you at the date of such termination, provided, however, that such
exercise occurs prior to the Option Expiration Date.
7. Death.
-----
If you die while employed by the Company (or a subsidiary thereof) or
within six months after termination of your employment due to disability, that
portion of this option which was exercisable by you at the date of your death
may be exercised by your legatee or legatees under your Will, or by your
personal representatives or distributees, within twelve months from the date of
your death, but in no event after the Option Expiration Date.
8. Non-Transferability of Option.
-----------------------------
This option shall not be transferable except by Will or the laws of
descent and distribution, and may be exercised during your lifetime only by you.
9. Adjustments upon Changes in Capitalization.
------------------------------------------
If at any time after the date of grant of this option, the Company
shall, by stock dividend, split-up, combination, reclassification or exchange,
or through merger or consolidation, or otherwise, change its shares of Common
Stock into a different number or kind or class of shares or other securities or
property, then the number of shares covered by this option and the price of each
such share shall be proportionately adjusted for any such change by the
Committee, whose determination shall be conclusive.
10. Acceleration of Exercisability Upon Change in Control.
-----------------------------------------------------
Upon the occurrence of a "change in control" of the Company (as
defined below), this option shall become immediately fully exercisable. For
purposes of this option, a "change in control" of the Company shall mean (i) the
acquisition at any time by a "person" or "group" (as such terms are used in
Sections 13(d) and 14(d)(2) of the Exchange Act of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities
3
<PAGE>
representing 50% or more of the combined voting power in the election of
directors of the then outstanding securities of the Company or any successor of
the Company; (ii) the termination of service of directors, for any reason other
than death, disability or retirement from the Board of Directors, during any
period of two consecutive years or less, of individuals who at the beginning of
such period constituted a majority of the Board of Directors, unless the
election of or nomination for election of each new director during such period
was approved by a vote of at least two-thirds of the directors still in office
who were directors at the beginning of the period; (iii) approval by the
stockholders of the Company of any merger, consolidation, or statutory share
exchange as a result of which the Common Stock shall be changed, converted or
exchanged (other than a merger, consolidation or share exchange with a wholly-
owned Subsidiary) or liquidation of the Company or any sale or disposition of
80% or more of the assets or earning power of the Company; or (iv) approval by
the stockholders of the Company of any merger, consolidation, or statutory share
exchange to which the Company is a party as a result of which the persons who
were stockholders immediately prior to the effective date of the merger,
consolidation or share exchange shall have beneficial ownership of less than 50%
of the combined voting power in the election of directors of the surviving
corporation; provided, however, that no change in control shall be deemed to
-------- -------
have occurred if, prior to such time as a change in control would otherwise be
deemed to have occurred, the Company's Board of Directors deems otherwise.
11. Subject to Terms of the Plan.
----------------------------
This non-incentive stock option agreement shall be subject in all
respects to the terms and conditions of the Plan and in the event of any
question or controversy relating to the terms of the Plan, the decision of the
Committee shall be conclusive.
12. Tax Status.
----------
This option does not qualify as an "incentive stock option" under the
provisions of Section 422A of the Internal Revenue Code of 1986, as amended, and
the income tax implications of your receipt of a non-incentive stock option and
your exercise of such an option should be discussed with your tax counsel.
Sincerely yours,
NEXELL THERAPEUTICS INC.
By: /s/ William A. Albright
-----------------------
Name: William A. Albright
-------------------
Title: Chief Financial Officer
-----------------------
Agreed to and accepted this
9th day of November, 1999
/s/ Joseph A. Mollica
- ---------------------------
Joseph A. Mollica, Optionee
4
<PAGE>
EXHIBIT 10.55
NEXELL THERAPEUTICS INC.
NON-INCENTIVE STOCK OPTION AGREEMENT
---------------------------------------
To: Richard L. Casey
We are pleased to notify you that by the determination of the Stock
Option Plan Committee (herein called the "Committee") a non-incentive stock
option to purchase 50,000 shares of the Common Stock of Nexell Therapeutics Inc.
(herein called the "Company") at a price of $1.375 per share has this 9th day of
November, 1999 been granted to you under the Company's 1997 Incentive and Non-
Incentive Stock Option Plan (herein called the "Plan"). This option may be
exercised only upon the terms and conditions set forth below.
1. Purpose of Option.
-----------------
The purpose of the Plan under which this non-incentive stock option
has been granted is to further the growth and development of the Company and its
subsidiaries by encouraging key employees, directors, consultants, agents,
independent contractors and other persons who contribute and are expected to
contribute materially to the Company's success to obtain a proprietary interest
in the Company through the ownership of stock, thereby providing such persons
with an added incentive to promote the best interests of the Company, and
affording the Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
------------------------------
Your execution of this non-incentive stock option agreement will
indicate your acceptance of and your willingness to be bound by its terms; it
imposes no obligation upon you to purchase any of the shares subject to this
option. Your obligation to purchase shares can arise only upon your exercise of
the option in the manner set forth in paragraph 4 hereof.
3. When Option May Be Exercised.
----------------------------
The option granted you hereunder shall be exercisable as follows:
(i) From and after November 9, 2000, options to purchase 12,500
shares shall become exercisable;
(ii) From and after November 9, 2001, options to purchase 25,000
shares (i.e., an additional 12,500 shares) shall become
exercisable;
(iii) From and after November 9, 2002 options to purchase 37,500
shares (i.e., an additional 12,500 shares) shall become
exercisable; and
(iv) From and after November 9, 2003, options to purchase all
shares subject to this non-incentive stock option agreement
shall become exercisable.
1
<PAGE>
This option may not be exercised for less than ten shares at any one
time (or the remaining shares then purchasable if less than ten) and expires at
the end of ten years from the date of grant whether or not it has been duly
exercised (hereinafter, the "Option Expiration Date"), unless sooner terminated
as provided in paragraphs 5, 6 or 7 hereof.
4. How Option May Be Exercised.
---------------------------
This option is exercisable by a written notice signed by you and
delivered to the Company at its executive offices, signifying your election to
exercise the option. The notice must state the number of shares of Common Stock
as to which your option is being exercised, must contain a statement by you (in
a form acceptable to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale (unless a
Registration Statement covering the shares purchased has been declared effective
by the Securities and Exchange Commission) and must be accompanied by cash or a
check to the order of the Company for the full purchase price of the shares
being purchased, plus such amount, if any, as is required for withholding taxes.
Notwithstanding the foregoing, this option may also be exercised pursuant to the
following "cashless exercise" provision.
In lieu of paying for the shares purchasable under this option by cash
or check, you may (i) deliver previously owned shares of Common Stock with a
fair market value equal to the full purchase price of the shares being purchased
under this option, or (ii) request that the Company withhold shares of Common
Stock issuable upon exercise of this option with a fair market value equal to
the full purchase price of the shares being purchased under this option (thereby
reducing the number of shares issuable upon exercise of this option). For
purposes of this option, unless the Committee determines otherwise, the "fair
market value" of a share of Common Stock as of a certain date shall be the
closing sale price of the Common Stock on The Nasdaq Stock Market or, if the
Common Stock is not then traded on The Nasdaq Stock Market, such national
securities exchange on which the Common Stock is then traded, on the trading
date immediately preceding the date fair market value is being determined. The
Committee may make such other determination of fair market value, based on other
factors, as it shall deem appropriate.
If notice of the exercise of this option is given by a person or
persons other than you, the Company may require, as a condition to the exercise
of this option, the submission to the Company of appropriate proof of the right
of such person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will be
issued as soon as practicable. The Company, however, shall not be required to
issue or deliver a certificate for any shares until it has complied with all
requirements of the Securities Act of 1933, the Securities Exchange Act of 1934,
any stock exchange on which the Company's Common Stock may then be listed and
all applicable state laws in connection with the issuance or sale of such shares
or the listing of such shares on said exchange. Until the issuance of the
certificate for such shares, you or such other person as may be entitled to
exercise this option shall have none of the rights of a stockholder with respect
to shares subject to this option.
The Company shall have the right to require you, or such other person
as may be permitted to exercise this option, to remit to the Company an amount
sufficient to satisfy federal,
2
<PAGE>
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for shares of Common Stock issuable upon exercise of
this option.
5. Termination of Employment or Engagement.
---------------------------------------
If your employment with the Company (or a subsidiary thereof) is
terminated for any reason other than by death or disability, or if you are not
an employee of the Company and your engagement by the Company (or a subsidiary)
is terminated for any reason, you may exercise that portion of this option which
was exercisable by you at the date of such termination, provided, however, that
such exercise occurs prior to the Option Expiration Date.
6. Disability.
----------
If your employment with the Company (or a subsidiary thereof) is
terminated by reason of your disability, you may exercise, within twelve months
from the date of such termination, that portion of this option which was
exercisable by you at the date of such termination, provided, however, that such
exercise occurs prior to the Option Expiration Date.
7. Death.
-----
If you die while employed by the Company (or a subsidiary thereof) or
within six months after termination of your employment due to disability, that
portion of this option which was exercisable by you at the date of your death
may be exercised by your legatee or legatees under your Will, or by your
personal representatives or distributees, within twelve months from the date of
your death, but in no event after the Option Expiration Date.
8. Non-Transferability of Option.
-----------------------------
This option shall not be transferable except by Will or the laws of
descent and distribution, and may be exercised during your lifetime only by you.
9. Adjustments upon Changes in Capitalization.
------------------------------------------
If at any time after the date of grant of this option, the Company
shall, by stock dividend, split-up, combination, reclassification or exchange,
or through merger or consolidation, or otherwise, change its shares of Common
Stock into a different number or kind or class of shares or other securities or
property, then the number of shares covered by this option and the price of each
such share shall be proportionately adjusted for any such change by the
Committee, whose determination shall be conclusive.
10. Acceleration of Exercisability Upon Change in Control.
-----------------------------------------------------
Upon the occurrence of a "change in control" of the Company (as
defined below), this option shall become immediately fully exercisable. For
purposes of this option, a "change in control" of the Company shall mean (i) the
acquisition at any time by a "person" or "group" (as such terms are used in
Sections 13(d) and 14(d)(2) of the Exchange Act of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities
3
<PAGE>
representing 50% or more of the combined voting power in the election of
directors of the then outstanding securities of the Company or any successor of
the Company; (ii) the termination of service of directors, for any reason other
than death, disability or retirement from the Board of Directors, during any
period of two consecutive years or less, of individuals who at the beginning of
such period constituted a majority of the Board of Directors, unless the
election of or nomination for election of each new director during such period
was approved by a vote of at least two-thirds of the directors still in office
who were directors at the beginning of the period; (iii) approval by the
stockholders of the Company of any merger, consolidation, or statutory share
exchange as a result of which the Common Stock shall be changed, converted or
exchanged (other than a merger, consolidation or share exchange with a wholly-
owned Subsidiary) or liquidation of the Company or any sale or disposition of
80% or more of the assets or earning power of the Company; or (iv) approval by
the stockholders of the Company of any merger, consolidation, or statutory share
exchange to which the Company is a party as a result of which the persons who
were stockholders immediately prior to the effective date of the merger,
consolidation or share exchange shall have beneficial ownership of less than 50%
of the combined voting power in the election of directors of the surviving
corporation; provided, however, that no change in control shall be deemed to
-------- -------
have occurred if, prior to such time as a change in control would otherwise be
deemed to have occurred, the Company's Board of Directors deems otherwise.
11. Subject to Terms of the Plan.
----------------------------
This non-incentive stock option agreement shall be subject in all
respects to the terms and conditions of the Plan and in the event of any
question or controversy relating to the terms of the Plan, the decision of the
Committee shall be conclusive.
12. Tax Status.
----------
This option does not qualify as an "incentive stock option" under the
provisions of Section 422A of the Internal Revenue Code of 1986, as amended, and
the income tax implications of your receipt of a non-incentive stock option and
your exercise of such an option should be discussed with your tax counsel.
Sincerely yours,
NEXELL THERAPEUTICS INC.
By: /s/ William A. Albright
--------------------------------
Name: William A. Albright
------------------------
Title: Chief Financial Officer
------------------------
Agreed to and accepted this
9/th/ day of November, 1999
/s/ Richard L. Casey
- --------------------------
Richard L. Casey, Optionee
4
<PAGE>
EXHIBIT 10.56
NEXELL THERAPEUTICS INC.
NON-INCENTIVE STOCK OPTION AGREEMENT
---------------------------------------
To: C. Richard Piazza
We are pleased to notify you that by the determination of the Stock Option
Plan Committee (herein called the "Committee") a non-incentive stock option to
purchase 50,000 shares of the Common Stock of Nexell Therapeutics Inc. (herein
called the "Company") at a price of $1.375 per share has this 9th day of
November, 1999 been granted to you under the Company's 1997 Incentive and Non-
Incentive Stock Option Plan (herein called the "Plan"). This option may be
exercised only upon the terms and conditions set forth below.
1. Purpose of Option.
-----------------
The purpose of the Plan under which this non-incentive stock option has
been granted is to further the growth and development of the Company and its
subsidiaries by encouraging key employees, directors, consultants, agents,
independent contractors and other persons who contribute and are expected to
contribute materially to the Company's success to obtain a proprietary interest
in the Company through the ownership of stock, thereby providing such persons
with an added incentive to promote the best interests of the Company, and
affording the Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
------------------------------
Your execution of this non-incentive stock option agreement will indicate
your acceptance of and your willingness to be bound by its terms; it imposes no
obligation upon you to purchase any of the shares subject to this option. Your
obligation to purchase shares can arise only upon your exercise of the option in
the manner set forth in paragraph 4 hereof.
3. When Option May Be Exercised.
----------------------------
The option granted you hereunder shall be exercisable as follows:
(i) From and after November 9, 2000, options to purchase 12,500
shares shall become exercisable;
(ii) From and after November 9, 2001, options to purchase 25,000
shares (i.e., an additional 12,500 shares) shall become
exercisable;
(iii) From and after November 9, 2002 options to purchase 37,500
shares (i.e., an additional 12,500 shares) shall become
exercisable; and
(iv) From and after November 9, 2003, options to purchase all shares
subject to this non-incentive stock option agreement shall
become exercisable.
1
<PAGE>
This option may not be exercised for less than ten shares at any one time
(or the remaining shares then purchasable if less than ten) and expires at the
end of ten years from the date of grant whether or not it has been duly
exercised (hereinafter, the "Option Expiration Date"), unless sooner terminated
as provided in paragraphs 5, 6 or 7 hereof.
4. How Option May Be Exercised.
---------------------------
This option is exercisable by a written notice signed by you and delivered
to the Company at its executive offices, signifying your election to exercise
the option. The notice must state the number of shares of Common Stock as to
which your option is being exercised, must contain a statement by you (in a form
acceptable to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale (unless a
Registration Statement covering the shares purchased has been declared effective
by the Securities and Exchange Commission) and must be accompanied by cash or a
check to the order of the Company for the full purchase price of the shares
being purchased, plus such amount, if any, as is required for withholding taxes.
Notwithstanding the foregoing, this option may also be exercised pursuant to the
following "cashless exercise" provision.
In lieu of paying for the shares purchasable under this option by cash or
check, you may (i) deliver previously owned shares of Common Stock with a fair
market value equal to the full purchase price of the shares being purchased
under this option, or (ii) request that the Company withhold shares of Common
Stock issuable upon exercise of this option with a fair market value equal to
the full purchase price of the shares being purchased under this option (thereby
reducing the number of shares issuable upon exercise of this option). For
purposes of this option, unless the Committee determines otherwise, the "fair
market value" of a share of Common Stock as of a certain date shall be the
closing sale price of the Common Stock on The Nasdaq Stock Market or, if the
Common Stock is not then traded on The Nasdaq Stock Market, such national
securities exchange on which the Common Stock is then traded, on the trading
date immediately preceding the date fair market value is being determined. The
Committee may make such other determination of fair market value, based on other
factors, as it shall deem appropriate.
If notice of the exercise of this option is given by a person or persons
other than you, the Company may require, as a condition to the exercise of this
option, the submission to the Company of appropriate proof of the right of such
person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will be issued as
soon as practicable. The Company, however, shall not be required to issue or
deliver a certificate for any shares until it has complied with all requirements
of the Securities Act of 1933, the Securities Exchange Act of 1934, any stock
exchange on which the Company's Common Stock may then be listed and all
applicable state laws in connection with the issuance or sale of such shares or
the listing of such shares on said exchange. Until the issuance of the
certificate for such shares, you or such other person as may be entitled to
exercise this option shall have none of the rights of a stockholder with respect
to shares subject to this option.
The Company shall have the right to require you, or such other person as
may be permitted to exercise this option, to remit to the Company an amount
sufficient to satisfy federal,
2
<PAGE>
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for shares of Common Stock issuable upon exercise of
this option.
5. Termination of Employment or Engagement.
---------------------------------------
If your employment with the Company (or a subsidiary thereof) is terminated
for any reason other than by death or disability, or if you are not an employee
of the Company and your engagement by the Company (or a subsidiary) is
terminated for any reason, you may exercise that portion of this option which
was exercisable by you at the date of such termination, provided, however, that
such exercise occurs prior to the Option Expiration Date.
6. Disability.
----------
If your employment with the Company (or a subsidiary thereof) is terminated
by reason of your disability, you may exercise, within twelve months from the
date of such termination, that portion of this option which was exercisable by
you at the date of such termination, provided, however, that such exercise
occurs prior to the Option Expiration Date.
7. Death.
-----
If you die while employed by the Company (or a subsidiary thereof) or
within six months after termination of your employment due to disability, that
portion of this option which was exercisable by you at the date of your death
may be exercised by your legatee or legatees under your Will, or by your
personal representatives or distributees, within twelve months from the date of
your death, but in no event after the Option Expiration Date.
8. Non-Transferability of Option.
-----------------------------
This option shall not be transferable except by Will or the laws of descent
and distribution, and may be exercised during your lifetime only by you.
9. Adjustments upon Changes in Capitalization.
------------------------------------------
If at any time after the date of grant of this option, the Company shall,
by stock dividend, split-up, combination, reclassification or exchange, or
through merger or consolidation, or otherwise, change its shares of Common Stock
into a different number or kind or class of shares or other securities or
property, then the number of shares covered by this option and the price of each
such share shall be proportionately adjusted for any such change by the
Committee, whose determination shall be conclusive.
10. Acceleration of Exercisability Upon Change in Control.
-----------------------------------------------------
Upon the occurrence of a "change in control" of the Company (as defined
below), this option shall become immediately fully exercisable. For purposes of
this option, a "change in control" of the Company shall mean (i) the acquisition
at any time by a "person" or "group" (as such terms are used in Sections 13(d)
and 14(d)(2) of the Exchange Act of beneficial ownership (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities
3
<PAGE>
representing 50% or more of the combined voting power in the election of
directors of the then outstanding securities of the Company or any successor of
the Company; (ii) the termination of service of directors, for any reason other
than death, disability or retirement from the Board of Directors, during any
period of two consecutive years or less, of individuals who at the beginning of
such period constituted a majority of the Board of Directors, unless the
election of or nomination for election of each new director during such period
was approved by a vote of at least two-thirds of the directors still in office
who were directors at the beginning of the period; (iii) approval by the
stockholders of the Company of any merger, consolidation, or statutory share
exchange as a result of which the Common Stock shall be changed, converted or
exchanged (other than a merger, consolidation or share exchange with a wholly-
owned Subsidiary) or liquidation of the Company or any sale or disposition of
80% or more of the assets or earning power of the Company; or (iv) approval by
the stockholders of the Company of any merger, consolidation, or statutory share
exchange to which the Company is a party as a result of which the persons who
were stockholders immediately prior to the effective date of the merger,
consolidation or share exchange shall have beneficial ownership of less than 50%
of the combined voting power in the election of directors of the surviving
corporation; provided, however, that no change in control shall be deemed to
-------- -------
have occurred if, prior to such time as a change in control would otherwise be
deemed to have occurred, the Company's Board of Directors deems otherwise.
11. Subject to Terms of the Plan.
----------------------------
This non-incentive stock option agreement shall be subject in all respects
to the terms and conditions of the Plan and in the event of any question or
controversy relating to the terms of the Plan, the decision of the Committee
shall be conclusive.
12. Tax Status.
----------
This option does not qualify as an "incentive stock option" under the
provisions of Section 422A of the Internal Revenue Code of 1986, as amended, and
the income tax implications of your receipt of a non-incentive stock option and
your exercise of such an option should be discussed with your tax counsel.
Sincerely yours,
NEXELL THERAPEUTICS INC.
By: /s/ William A. Albright
-----------------------
Name: William A. Albright
-----------------------
Title: Chief Financial Officer
-----------------------
Agreed to and accepted this
9th day of November, 1999
/s/ C. Richard Piazza
- ---------------------------
C. Richard Piazza, Optionee
4
<PAGE>
EXHIBIT 10.57
NEXELL THERAPEUTICS INC.
NON-INCENTIVE STOCK OPTION AGREEMENT
---------------------------------------
To: Victor W. Schmitt
We are pleased to notify you that by the determination of the Stock Option
Plan Committee (herein called the "Committee") a non-incentive stock option to
purchase 25,000 shares of the Common Stock of Nexell Therapeutics Inc. (herein
called the "Company") at a price of $1.375 share has this 9th day of November,
1999 been granted to you under the Company's 1997 Incentive and Non-Incentive
Stock Option Plan (herein called the "Plan"). This option may be exercised only
upon the terms and conditions set forth below.
1. Purpose of Option.
-----------------
The purpose of the Plan under which this non-incentive stock option has
been granted is to further the growth and development of the Company and its
subsidiaries by encouraging key employees, directors, consultants, agents,
independent contractors and other persons who contribute and are expected to
contribute materially to the Company's success to obtain a proprietary interest
in the Company through the ownership of stock, thereby providing such persons
with an added incentive to promote the best interests of the Company, and
affording the Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
------------------------------
Your execution of this non-incentive stock option agreement will indicate
your acceptance of and your willingness to be bound by its terms; it imposes no
obligation upon you to purchase any of the shares subject to this option. Your
obligation to purchase shares can arise only upon your exercise of the option in
the manner set forth in paragraph 4 hereof.
3. When Option May Be Exercised.
----------------------------
The option granted you hereunder shall be exercisable as follows:
From and after May 9, 2000, options to purchase all shares subject to
this non-incentive stock option agreement shall become exercisable.
This option may not be exercised for less than ten shares at any one time
(or the remaining shares then purchasable if less than ten) and expires at the
end of ten years from the date of grant whether or not it has been duly
exercised (hereinafter, the "Option Expiration Date"), unless sooner terminated
as provided in paragraphs 5, 6 or 7 hereof.
1
<PAGE>
4. How Option May Be Exercised.
---------------------------
This option is exercisable by a written notice signed by you and delivered
to the Company at its executive offices, signifying your election to exercise
the option. The notice must state the number of shares of Common Stock as to
which your option is being exercised, must contain a statement by you (in a form
acceptable to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale (unless a
Registration Statement covering the shares purchased has been declared effective
by the Securities and Exchange Commission) and must be accompanied by cash or a
check to the order of the Company for the full purchase price of the shares
being purchased, plus such amount, if any, as is required for withholding taxes.
Notwithstanding the foregoing, this option may also be exercised pursuant to the
following "cashless exercise" provision.
In lieu of paying for the shares purchasable under this option by cash or
check, you may (i) deliver previously owned shares of Common Stock with a fair
market value equal to the full purchase price of the shares being purchased
under this option, or (ii) request that the Company withhold shares of Common
Stock issuable upon exercise of this option with a fair market value equal to
the full purchase price of the shares being purchased under this option (thereby
reducing the number of shares issuable upon exercise of this option). For
purposes of this option, unless the Committee determines otherwise, the "fair
market value" of a share of Common Stock as of a certain date shall be the
closing sale price of the Common Stock on The Nasdaq Stock Market or, if the
Common Stock is not then traded on The Nasdaq Stock Market, such national
securities exchange on which the Common Stock is then traded, on the trading
date immediately preceding the date fair market value is being determined. The
Committee may make such other determination of fair market value, based on other
factors, as it shall deem appropriate.
If notice of the exercise of this option is given by a person or persons
other than you, the Company may require, as a condition to the exercise of this
option, the submission to the Company of appropriate proof of the right of such
person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will be issued as
soon as practicable. The Company, however, shall not be required to issue or
deliver a certificate for any shares until it has complied with all requirements
of the Securities Act of 1933, the Securities Exchange Act of 1934, any stock
exchange on which the Company's Common Stock may then be listed and all
applicable state laws in connection with the issuance or sale of such shares or
the listing of such shares on said exchange. Until the issuance of the
certificate for such shares, you or such other person as may be entitled to
exercise this option shall have none of the rights of a stockholder with respect
to shares subject to this option.
The Company shall have the right to require you, or such other person as
may be permitted to exercise this option, to remit to the Company an amount
sufficient to satisfy federal, state and local withholding tax requirements
prior to the delivery of any certificate or certificates for shares of Common
Stock issuable upon exercise of this option.
2
<PAGE>
5. Termination of Employment or Engagement.
---------------------------------------
If your employment with the Company (or a subsidiary thereof) is terminated
for any reason other than by death or disability, or if a you are not an
employee of the Company and your engagement by the Company (or a subsidiary) is
terminated for any reason, you may exercise that portion of this option which
was exercisable by you at the date of such termination, provided, however, that
such exercise occurs prior to the Option Expiration Date.
6. Disability.
----------
If your employment with the Company (or a subsidiary thereof) is terminated
by reason of your disability, you may exercise, within twelve months from the
date of such termination, that portion of this option which was exercisable by
you at the date of such termination, provided, however, that such exercise
occurs prior to the Option Expiration Date.
7. Death.
-----
If you die while employed by the Company (or a subsidiary thereof) or
within six months after termination of your employment due to disability, that
portion of this option which was exercisable by you at the date of your death
may be exercised by your legatee or legatees under your Will, or by your
personal representatives or distributees, within twelve months from the date of
your death, but in no event after the Option Expiration Date.
8. Non-Transferability of Option.
-----------------------------
This option shall not be transferable except by Will or the laws of descent
and distribution, and may be exercised during your lifetime only by you.
9. Adjustments upon Changes in Capitalization.
------------------------------------------
If at any time after the date of grant of this option, the Company shall,
by stock dividend, split-up, combination, reclassification or exchange, or
through merger or consolidation, or otherwise, change its shares of Common Stock
into a different number or kind or class of shares or other securities or
property, then the number of shares covered by this option and the price of each
such share shall be proportionately adjusted for any such change by the
Committee, whose determination shall be conclusive.
10. Acceleration of Exercisability Upon Change in Control.
-----------------------------------------------------
Upon the occurrence of a "change in control" of the Company (as defined
below), this option shall become immediately fully exercisable. For purposes of
this option, a "change in control" of the Company shall mean (i) the acquisition
at any time by a "person" or "group" (as such terms are used in Sections 13(d)
and 14(d)(2) of the Exchange Act of beneficial ownership (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities
representing 50% or more of the combined voting power in the election of
directors of the then outstanding securities of the Company or any successor of
the Company; (ii) the termination of
3
<PAGE>
service of directors, for any reason other than death, disability or retirement
from the Board of Directors, during any period of two consecutive years or less,
of individuals who at the beginning of such period constituted a majority of the
Board of Directors, unless the election of or nomination for election of each
new director during such period was approved by a vote of at least two-thirds of
the directors still in office who were directors at the beginning of the period;
(iii) approval by the stockholders of the Company of any merger, consolidation,
or statutory share exchange as a result of which the Common Stock shall be
changed, converted or exchanged (other than a merger, consolidation or share
exchange with a wholly-owned Subsidiary) or liquidation of the Company or any
sale or disposition of 80% or more of the assets or earning power of the
Company; or (iv) approval by the stockholders of the Company of any merger,
consolidation, or statutory share exchange to which the Company is a party as a
result of which the persons who were stockholders immediately prior to the
effective date of the merger, consolidation or share exchange shall have
beneficial ownership of less than 50% of the combined voting power in the
election of directors of the surviving corporation; provided, however, that no
-------- -------
change in control shall be deemed to have occurred if, prior to such time as a
change in control would otherwise be deemed to have occurred, the Company's
Board of Directors deems otherwise.
11. Subject to Terms of the Plan.
----------------------------
This non-incentive stock option agreement shall be subject in all respects
to the terms and conditions of the Plan and in the event of any question or
controversy relating to the terms of the Plan, the decision of the Committee
shall be conclusive.
12. Tax Status.
----------
This option does not qualify as an "incentive stock option" under the
provisions of Section 422A of the Internal Revenue Code of 1986, as amended, and
the income tax implications of your receipt of a non-incentive stock option and
your exercise of such an option should be discussed with your tax counsel.
Sincerely yours,
NEXELL THERAPEUTICS INC.
By: /s/ William A. Albright
-----------------------
Name: William A. Albright
-------------------
Title: Chief Financial Officer
-----------------------
Agreed to and accepted this
9th day of November, 1999
/s/ Victor W. Schmitt
- -----------------------------
Victor W. Schmitt
4
<PAGE>
EXHIBIT 10.58
NEXELL THERAPEUTICS INC.
NON-INCENTIVE STOCK OPTION AGREEMENT
---------------------------------------
To: Victor W. Schmitt
We are pleased to notify you that by the determination of the Stock Option
Plan Committee (herein called the "Committee") a non-incentive stock option to
purchase 50,000 shares of the Common Stock of Nexell Therapeutics Inc. (herein
called the "Company") at a price of $1.375 per share has this 9th day of
November, 1999 been granted to you under the Company's 1997 Incentive and Non-
Incentive Stock Option Plan (herein called the "Plan"). This option may be
exercised only upon the terms and conditions set forth below.
1. Purpose of Option.
-----------------
The purpose of the Plan under which this non-incentive stock option has
been granted is to further the growth and development of the Company and its
subsidiaries by encouraging key employees, directors, consultants, agents,
independent contractors and other persons who contribute and are expected to
contribute materially to the Company's success to obtain a proprietary interest
in the Company through the ownership of stock, thereby providing such persons
with an added incentive to promote the best interests of the Company, and
affording the Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
------------------------------
Your execution of this non-incentive stock option agreement will indicate
your acceptance of and your willingness to be bound by its terms; it imposes no
obligation upon you to purchase any of the shares subject to this option. Your
obligation to purchase shares can arise only upon your exercise of the option in
the manner set forth in paragraph 4 hereof.
3. When Option May Be Exercised.
----------------------------
The option granted you hereunder shall be exercisable as follows:
(i) From and after November 9, 2000, options to purchase 12,500
shares shall become exercisable;
(ii) From and after November 9, 2001, options to purchase 25,000
shares (i.e., an additional 12,500 shares) shall become
exercisable;
(iii) From and after November 9, 2002 options to purchase 37,500
shares (i.e., an additional 12,500 shares) shall become
exercisable; and
(iv) From and after November 9, 2003, options to purchase all shares
subject to this non-incentive stock option agreement shall
become exercisable.
1
<PAGE>
This option may not be exercised for less than ten shares at any one time
(or the remaining shares then purchasable if less than ten) and expires at the
end of ten years from the date of grant whether or not it has been duly
exercised (hereinafter, the "Option Expiration Date"), unless sooner terminated
as provided in paragraphs 5, 6 or 7 hereof.
4. How Option May Be Exercised.
---------------------------
This option is exercisable by a written notice signed by you and delivered
to the Company at its executive offices, signifying your election to exercise
the option. The notice must state the number of shares of Common Stock as to
which your option is being exercised, must contain a statement by you (in a form
acceptable to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale (unless a
Registration Statement covering the shares purchased has been declared effective
by the Securities and Exchange Commission) and must be accompanied by cash or a
check to the order of the Company for the full purchase price of the shares
being purchased, plus such amount, if any, as is required for withholding taxes.
Notwithstanding the foregoing, this option may also be exercised pursuant to the
following "cashless exercise" provision.
In lieu of paying for the shares purchasable under this option by cash or
check, you may (i) deliver previously owned shares of Common Stock with a fair
market value equal to the full purchase price of the shares being purchased
under this option, or (ii) request that the Company withhold shares of Common
Stock issuable upon exercise of this option with a fair market value equal to
the full purchase price of the shares being purchased under this option (thereby
reducing the number of shares issuable upon exercise of this option). For
purposes of this option, unless the Committee determines otherwise, the "fair
market value" of a share of Common Stock as of a certain date shall be the
closing sale price of the Common Stock on The Nasdaq Stock Market or, if the
Common Stock is not then traded on The Nasdaq Stock Market, such national
securities exchange on which the Common Stock is then traded, on the trading
date immediately preceding the date fair market value is being determined. The
Committee may make such other determination of fair market value, based on other
factors, as it shall deem appropriate.
If notice of the exercise of this option is given by a person or persons
other than you, the Company may require, as a condition to the exercise of this
option, the submission to the Company of appropriate proof of the right of such
person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will be issued as
soon as practicable. The Company, however, shall not be required to issue or
deliver a certificate for any shares until it has complied with all requirements
of the Securities Act of 1933, the Securities Exchange Act of 1934, any stock
exchange on which the Company's Common Stock may then be listed and all
applicable state laws in connection with the issuance or sale of such shares or
the listing of such shares on said exchange. Until the issuance of the
certificate for such shares, you or such other person as may be entitled to
exercise this option shall have none of the rights of a stockholder with respect
to shares subject to this option.
The Company shall have the right to require you, or such other person as
may be permitted to exercise this option, to remit to the Company an amount
sufficient to satisfy federal,
2
<PAGE>
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for shares of Common Stock issuable upon exercise of
this option.
5. Termination of Employment or Engagement.
---------------------------------------
If your employment with the Company (or a subsidiary thereof) is terminated
for any reason other than by death or disability, or if you are not an employee
of the Company and your engagement by the Company (or a subsidiary) is
terminated for any reason, you may exercise that portion of this option which
was exercisable by you at the date of such termination, provided, however, that
such exercise occurs prior to the Option Expiration Date.
6. Disability.
----------
If your employment with the Company (or a subsidiary thereof) is terminated
by reason of your disability, you may exercise, within twelve months from the
date of such termination, that portion of this option which was exercisable by
you at the date of such termination, provided, however, that such exercise
occurs prior to the Option Expiration Date.
7. Death.
-----
If you die while employed by the Company (or a subsidiary thereof) or
within six months after termination of your employment due to disability, that
portion of this option which was exercisable by you at the date of your death
may be exercised by your legatee or legatees under your Will, or by your
personal representatives or distributees, within twelve months from the date of
your death, but in no event after the Option Expiration Date.
8. Non-Transferability of Option.
-----------------------------
This option shall not be transferable except by Will or the laws of descent
and distribution, and may be exercised during your lifetime only by you.
9. Adjustments upon Changes in Capitalization.
------------------------------------------
If at any time after the date of grant of this option, the Company shall,
by stock dividend, split-up, combination, reclassification or exchange, or
through merger or consolidation, or otherwise, change its shares of Common Stock
into a different number or kind or class of shares or other securities or
property, then the number of shares covered by this option and the price of each
such share shall be proportionately adjusted for any such change by the
Committee, whose determination shall be conclusive.
10. Acceleration of Exercisability Upon Change in Control.
-----------------------------------------------------
Upon the occurrence of a "change in control" of the Company (as defined
below), this option shall become immediately fully exercisable. For purposes of
this option, a "change in control" of the Company shall mean (i) the acquisition
at any time by a "person" or "group" (as such terms are used in Sections 13(d)
and 14(d)(2) of the Exchange Act of beneficial ownership (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities
3
<PAGE>
representing 50% or more of the combined voting power in the election of
directors of the then outstanding securities of the Company or any successor of
the Company; (ii) the termination of service of directors, for any reason other
than death, disability or retirement from the Board of Directors, during any
period of two consecutive years or less, of individuals who at the beginning of
such period constituted a majority of the Board of Directors, unless the
election of or nomination for election of each new director during such period
was approved by a vote of at least two-thirds of the directors still in office
who were directors at the beginning of the period; (iii) approval by the
stockholders of the Company of any merger, consolidation, or statutory share
exchange as a result of which the Common Stock shall be changed, converted or
exchanged (other than a merger, consolidation or share exchange with a wholly-
owned Subsidiary) or liquidation of the Company or any sale or disposition of
80% or more of the assets or earning power of the Company; or (iv) approval by
the stockholders of the Company of any merger, consolidation, or statutory share
exchange to which the Company is a party as a result of which the persons who
were stockholders immediately prior to the effective date of the merger,
consolidation or share exchange shall have beneficial ownership of less than 50%
of the combined voting power in the election of directors of the surviving
corporation; provided, however, that no change in control shall be deemed to
-------- -------
have occurred if, prior to such time as a change in control would otherwise be
deemed to have occurred, the Company's Board of Directors deems otherwise.
11. Subject to Terms of the Plan.
----------------------------
This non-incentive stock option agreement shall be subject in all respects
to the terms and conditions of the Plan and in the event of any question or
controversy relating to the terms of the Plan, the decision of the Committee
shall be conclusive.
12. Tax Status.
----------
This option does not qualify as an "incentive stock option" under the
provisions of Section 422A of the Internal Revenue Code of 1986, as amended, and
the income tax implications of your receipt of a non-incentive stock option and
your exercise of such an option should be discussed with your tax counsel.
Sincerely yours,
NEXELL THERAPEUTICS INC.
By: /s/ William A. Albright
-----------------------
Name: William A. Albright
-------------------
Title: Chief Financial Officer
-----------------------
Agreed to and accepted this
9th day of November, 1999
/s/ Victor W. Schmitt
- ------------------------------
Victor W. Schmitt, Optionee
4
<PAGE>
EXHIBIT 10.59
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT dated as of March 12, 1996, between VIMRx
Pharmaceuticals Inc., a Delaware corporation (the "Company"), and Donald G.
Drapkin ("Drapkin").
WHEREAS, the Company, Drapkin and Lindsay A. Rosenwald, M.D. have
entered into a guaranty agreement dated March 12, 1996 (the "Consulting
Agreement") pursuant to which Drapkin and Rosenwald agreed to guaranty certain
on-going obligations of the Company, and the Company has agreed to grant Drapkin
the option described herein;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Granting of Option. On the terms and conditions
------------------
hereinafter set forth, the Company hereby grants to Drapkin the irrevocable
option (the "Option") to purchase up to One Hundred Thousand (100,000) fully
paid and nonassessable shares of Common Stock, $.001 par value, of the Company,
at a price of $1.47 per share (the "Exercise Price"). The number of shares of
Common Stock which may be purchased upon the exercise of the Option and the
amount of the Exercise Price are subject to adjustment as set forth in Section
3.
Section 2. Term of Option; Exercise; Nontransferability; Death.
---------------------------------------------------
(a) The Option may be exercised, in whole or in part, commencing the
date hereof, and shall be exercisable for a ten-year period, or through 5:00
p.m. New York City time on March 11, 2006 (the "Expiration Date").
(b) The Option shall be exercised by giving a written notice of
exercise in the form of Appendix 1 hereto, which notice shall be accompanied by
payment to the Company in immediately available funds of the Exercise price for
the number of shares of Common Stock specified in such notice and shall contain
a statement by Drapkin (in a form satisfactory to the Company) that such shares
are being acquired by Drapkin for investment and not with a view to their
distribution or resale. The Company shall have the right to require that
Drapkin also remit to the Company an amount sufficient to satisfy any federal,
state or local withholding tax requirements prior to the delivery of any shares
of stock pursuant to the exercise of the Option. The Exercise Price may also be
paid by delivering previously owned shares of Common Stock or instructing the
Company to withhold that number of shares issuable upon exercise of this Option
having a value, based upon the closing price of the Common Stock on the trading
date immediately preceding the date of exercise, equal to the Exercise Price.
(c) Upon giving such notice and making such payment, the Company shall
promptly issue to Drapkin the shares of Common Stock to which Drapkin is
entitled hereunder.
(d) If the Option should be exercised in part only, the Company shall,
upon surrender of this Option Agreement, simultaneously execute and deliver a
new Option Agreement evidencing the rights of Drapkin to purchase the balance of
the shares of Common Stock purchasable hereunder. No shares shall be issued or
delivered until full payment therefor
<PAGE>
has been made. Drapkin shall have none of the rights of a stockholder in respect
of the shares of Common Stock subject to the Option until such shares are issued
or transferred to him. The Company shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of stock
certificates in the name of Drapkin.
(e) Anything herein to the contrary notwithstanding, the Option may
not be exercised for fewer than the lesser of (i) 10,000 shares of Common Stock
or (ii) all remaining shares of Common Stock subject to the Option.
(f) The Option may not be transferred other than by will or by the
laws of descent and distribution, and during Drapkin's lifetime the option may
be exercised only by him.
(g) If Drapkin dies prior to the Expiration Date, the Option may be
exercised (the extent Drapkin could have exercised it on the date of death) by
his executor or administrator, or by the person or persons to whom the Option is
transferred by will or the applicable laws of descent and distribution, within
twelve months following the date of death, but in no event subsequent to the
Expiration Date. If the Option is exercised by the executor or administrator of
Drapkin, or by the person or persons to whom the Option has been transferred by
Drapkin's will or the applicable laws of descent and distribution, the Company
shall be under no obligation to deliver stock pursuant to such exercise until
the Company is satisfied as to the authority of the person or persons exercising
the Option.
Section 3. Anti-Dilution Provisions. In the event of a
------------------------
recapitalization, stock split, stock dividend, combination, exchange of shares,
merger, consolidation, rights offering, separation, reorganization liquidation
or other change in the corporate structure of the Company, the number of shares
of Common Stock purchasable upon exercise of the Option and the Exercise Price
shall be equitably adjusted in order to protect Drapkin against dilution.
Section 4. Governing Law. This Option Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of New York, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
Section 5. Counterparts. This Option Agreement may be executed in
------------
two or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same Option.
<PAGE>
IN WITNESS WHEREOF, the Company and Drapkin have executed this Option
Agreement as of the day and year first above written.
VIMRx PHARMACEUTICALS INC.
By: /s/ Francis M. O'Connell
-------------------------
Francis M. O'Connell
Chief Financial Officer
/s/ Donald G Drapkin
--------------------
Donald G. Drapkin
<PAGE>
Appendix I
NOTICE OF EXERCISE OF OPTION
To: Dated:
The undersigned, pursuant to the provisions set forth in the attached
Option Agreement, hereby exercises his right to purchase _________________
shares of the Common Stock of VIMRx Pharmaceuticals Inc. (the "Company") (not
less than 10,000 shares unless constituting the balance of the shares
purchasable) pursuant to the terms and provisions of such Option Agreement, and
is hereby making payment of the exercise price therefor as follows (cross out
inapplicable provisions):
(i) $__________ in immediately available funds is being delivered
herewith;
(ii) ___________ shares of Common Stock, having a value of $________
(based upon the closing price of the Common Stock on the trading
date immediately preceding the date hereof) are being delivered
herewith; or
(iii) Please withhold _________ shares of Common Stock, having a
value of $__________ (based upon the closing price of the Common
Stock on the trading date immediately preceding the date
hereof), from the shares issuable upon exercise of this Option,
and deliver the _________ share balance to me.
The undersigned hereby acknowledges that he has had the opportunity to
converse with members of the management of the Company and to familiarize
himself with the Company's current operations and has reviewed the most recent
Annual Report on Form 10-K of the Company and any Quarterly Reports on Form 10-Q
of the Company since the date of the most recent Form 10-K, and hereby
represents and warrants to the Company that he is acquiring the shares of the
Company's Common Stock pursuant to his exercise of the within Option for
investment and not with a view to their distribution or resale. The undersigned
hereby further acknowledges that he understands that such shares (i) have not
been registered under the Securities Act of 1933, as amended (the "Act"), and
are being issued to him by the Company in reliance upon the foregoing
representation and warranty and (ii) may not be resold except in accordance with
the requirements of the Act, including Rule 144 thereunder, if applicable. The
undersigned further consents to the placing of a legend on the certificates for
the shares being purchased to the foregoing effect.
Signature_________________________
Address __________________________
__________________________
<PAGE>
EXHIBIT 10.60
Nexell Therapeutics Inc.
9 Parker
Irvine, California 92618
As of May 25, 1999
Eric A. Rose, MD
- ----------------
- ----------------
Re: Amendment to November 17, 1995 Consulting and Stock Option Agreement
--------------------------------------------------------------------
Dear Dr. Rose:
This letter constitutes an amendment to the Consulting and Stock Option
Agreement dated as of November 17, 1995 (the "Option Agreement") between you and
Nexell Therapeutics Inc. (formerly named VIMRx Pharmaceuticals Inc.) as follows:
In consideration of your willingness to extend your consulting services for
a period of three years, the parties hereto acknowledge and agree that the
expiration date of the "Option" (as each of those terms is defined in the Option
Agreement) is extended from November 16, 2000 to November 16, 2003, subject to
approval by the Company's shareholders as required by rules of The NASDAQ Stock
Market, Inc. In addition, you shall be entitled to a "cashless exercise"
provision consistent with the cashless exercise provision authorized under the
Company's 1997 Incentive and Non-Incentive Stock Option Plan.
Except as expressly set forth herein, the Option Agreement shall remain in
full force and effect.
Please sign below in the space provided to signify your consent to the
foregoing amendment.
Very truly yours,
NEXELL THERAPEUTICS INC.
By: /s/ Richard L. Dunning
-------------------------------
Richard L. Dunning
Chairman of the Board and Chief
Executive Officer
I hereby acknowledge and agree to the foregoing amendment.
/s/ Eric A. Rose, MD
- ------------------------
Eric A. Rose, MD
<PAGE>
EXHIBIT 10.61
Nexell Therapeutics Inc.
9 Parker
Irvine, California 92618
As of May 25, 1999
Mr. Donald G. Drapkin
c/o MacAndrews & Forbes
35 East 62nd Street
New York, NY
Re: Amendment to November 17, 1995 Stock Option Agreement
-----------------------------------------------------
Dear Mr. Drapkin:
This letter constitutes an amendment to the Stock Option Agreement dated as
of November 17, 1995 (the "Option Agreement") between you and Nexell
Therapeutics Inc. (formerly named VIMRx Pharmaceuticals Inc.) as follows:
In consideration of your willingness to extend your consulting services for
a period of three years, the parties hereto acknowledge and agree that the
expiration date of the "Option" (as each of those terms is defined in the Option
Agreement) is extended from November 16, 2000 to November 16, 2003, subject to
approval by the Company's shareholders as required by rules of The NASDAQ Stock
Market, Inc. In addition, you shall be entitled to a "cashless exercise"
provision consistent with the cashless exercise provision authorized under the
Company's 1997 Incentive and Non-Incentive Stock Option Plan.
Except as expressly set forth herein, the Option Agreement shall remain in
full force and effect.
Please sign below in the space provided to signify your consent to the
foregoing amendment.
Very truly yours,
NEXELL THERAPEUTICS INC.
By: /s/ Richard L. Dunning
----------------------
Richard L. Dunning
Chairman of the Board and Chief
Executive Officer
I hereby acknowledge and agree to the foregoing amendment.
/s/ Donald G. Drapkin
- -------------------------
Donald G. Drapkin
<PAGE>
EXHIBIT 10.62
INDEMNIFICATION AGREEMENT
This Indemnification Agreement, dated as of November 9, 1999, is made by
and between Nexell Therapeutics Inc., a Delaware corporation (the
"Corporation"), and the person whose name, address and position at the
Corporation and/or any of the direct or indirect subsidiaries of the Corporation
appear on the signature page hereto ("Indemnitee").
RECITALS
A. Indemnitee is currently serving as, or is assuming the position of, a
director and/or officer of the Corporation and/or, at the Corporation's request,
a director, officer, employee and/or agent of another corporation, partnership,
joint venture, trust or other enterprise, and the Corporation wishes Indemnitee
to continue in such capacity(ies);
B. The Corporation and Indemnitee recognize that the present state of the
law is too uncertain to provide the Corporation's directors and officers with
adequate and reliable advance knowledge or guidance with respect to the legal
risks and potential liabilities to which they may become personally exposed as a
result of performing their duties for the Corporation;
C. The Restated Certificate of Incorporation (the "Certificate") and the
Amended and Restated Bylaws (the "Bylaws") of the Corporation each provide that
the Corporation may indemnify, to the fullest extent permitted by law, certain
persons, including directors, officers, employees or agents of the Corporation,
against specified expenses and losses arising out of certain threatened, pending
or completed actions, suits or proceedings;
D. Section 145(f) of the Delaware General Corporation Law (the "DGCL")
expressly recognizes that the indemnification provided by the other subsections
of Section 145 of the DGCL shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office;
E. Indemnitee has indicated that he may not be willing to serve, or
continue to serve, as a director and/or officer of the Corporation and/or, at
the Corporation's request, as a director, officer, employee and/or agent of
another corporation, partnership, joint venture, trust or other enterprise in
the absence of an indemnification agreement of the Corporation;
F. The Board of Directors of the Corporation has concluded that, to retain
and attract talented and experienced individuals to serve as directors and
officers of the Corporation and to encourage such individuals to take the
business risks necessary for the success of the Corporation, it is necessary for
the Corporation to contractually indemnify them, and to assume for itself
liability for expenses and damages in connection with claims against them in
connection with their service to the Corporation, and has further concluded that
the failure to provide such contractual indemnification could result in great
harm to the Corporation and its stockholders.
1
<PAGE>
AGREEMENT
NOW, THEREFORE, the Corporation and Indemnitee agree as follows:
1. Definitions.
-----------
(a) "Expenses" means, for the purposes of this Agreement, all direct
and indirect costs of any type or nature whatsoever (including, without
limitation, any fees and disbursements of Indemnitee's counsel, accountants and
other experts and other out-of-pocket costs) actually and reasonably incurred by
Indemnitee in connection with the investigation, preparation, defense or appeal
of a Proceeding; provided, however, that Expenses shall not include judgments,
fines, penalties or amounts paid in settlement of a Proceeding unless such
matters may be indemnified under applicable provisions of the DGCL.
(b) "Proceeding" means, for the purposes of this Agreement, any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative (including actions, suits or
proceedings brought by or in the right of the Corporation) in which Indemnitee
may be or may have been involved as a party or otherwise, by reason of the fact
that Indemnitee is or was a director or officer of the Corporation, by reason of
any action taken by him or of any inaction on his part while acting as such
director or officer or by reason of the fact that he is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise, or was a director and/or officer of the foreign or domestic
corporation which was a predecessor corporation to the Corporation or of another
enterprise at the request of such predecessor corporation, whether or not he is
serving in such capacity at the time any liability or expense is incurred for
which indemnification or reimbursement can be provided under this Agreement.
2. Indemnification.
---------------
(a) Third Party Proceedings. To the fullest extent permitted by law,
-----------------------
the Corporation shall indemnify Indemnitee against Expenses and liabilities of
any type whatsoever (including, but not limited to, judgments, fines, penalties,
and amounts paid in settlement (if the settlement is approved in advance by the
Corporation)) actually and reasonably incurred by Indemnitee in connection with
a Proceeding (other than a Proceeding by or in the right of the Corporation) if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
Indemnitee's conduct was unlawful. The termination of any Proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner that Indemnitee reasonably believed to be
in, or not opposed to, the best interests of the Corporation, or, with respect
to any criminal Proceeding, had reasonable cause to believe that Indemnitee's
conduct was unlawful. Notwithstanding the foregoing, no indemnification shall be
made in any criminal proceeding where Indemnitee has been adjudged guilty unless
a disinterested majority of the directors determines that Indemnitee did not
receive, participate in or share in any pecuniary benefit to the detriment of
the Corporation and, in view
2
<PAGE>
of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for Expenses or liabilities.
(b) Proceedings by or in the Right of the Corporation. To the fullest
-------------------------------------------------
extent permitted by law, the Corporation shall indemnify Indemnitee against
Expenses actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of a Proceeding by or in the right of the Corporation to
procure a judgment in its favor if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in, or not opposed to, the best
interests of the Corporation. Notwithstanding the foregoing, no indemnification
shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Corporation in the performance of
Indemnitee's duty to the Corporation unless and only to the extent that the
court in which such Proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for Expenses and then only to the
extent that the court shall determine.
(c) Scope. Notwithstanding any other provision of this Agreement
-----
other than Sections 3 and 13, the Corporation shall indemnify Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by other provisions of this Agreement, the
Certificate, the Bylaws or statute.
3. Limitations on Indemnification. Any other provision herein to the
------------------------------
contrary notwithstanding, the Corporation shall not be obligated pursuant to the
terms of this Agreement:
(a) Excluded Acts. To indemnify Indemnitee for any acts or omissions
-------------
or transactions from which a director may not be relieved of liability under
Section 102(b)(7) of the DGCL; or
(b) Claims Initiated by Indemnitee. To indemnify or advance Expenses
------------------------------
to Indemnitee with respect to Proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the DGCL, but such indemnification or advancement of Expenses may
be provided by the Corporation in specific cases if a majority of the
disinterested directors has approved the initiation or bringing of such suit; or
(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses
------------------
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous; or
(d) Insured Claims. To indemnify Indemnitee for Expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines or penalties, and amounts paid in settlement) which have been paid
directly to or on behalf of Indemnitee by an insurance carrier under a policy of
directors' and officers' liability insurance maintained by the Corporation or
any other policy of insurance maintained by the Corporation or Indemnitee; or
3
<PAGE>
(e) Claims Under Section 16(b). To indemnify Indemnitee for Expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
4. Determination of Right to Indemnification. Upon receipt of a written
-----------------------------------------
claim addressed to the Board of Directors for indemnification pursuant to
Section 2 of this Agreement, the Corporation shall determine by any of the
methods set forth in Section 145(d) of the DGCL whether Indemnitee has met the
applicable standards of conduct that make it permissible under applicable law to
indemnify Indemnitee. If a claim under Section 2 of this Agreement is not paid
in full by the Corporation within ninety days after such written claim has been
received by the Corporation, Indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, unless
such action is dismissed by the court as frivolous or brought in bad faith,
Indemnitee shall be entitled to be paid also the expense of prosecuting such
claim. Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to make a determination prior to
the commencement of such action that indemnification of Indemnitee is proper in
the circumstances because Indemnitee has met the applicable standard of conduct
under applicable law, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel or its stockholders) that
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that Indemnitee has not met the applicable standard of conduct. The
court in which such action is brought shall determine whether Indemnitee or the
Corporation shall have the burden of proof concerning whether Indemnitee has or
has not met the applicable standard of conduct.
5. Advancement and Repayment of Expenses. The Expenses incurred by
-------------------------------------
Indemnitee in defending and investigating any Proceeding shall be paid by the
Corporation prior to the final disposition of such Proceeding within thirty days
after receiving from Indemnitee copies of invoices presented to Indemnitee for
such Expenses and an undertaking by or on behalf of Indemnitee to the
Corporation to repay such amount to the extent it is ultimately determined that
Indemnitee is not entitled to indemnification. In determining whether or not to
make an advance hereunder, the ability of Indemnitee to repay shall not be a
factor. Notwithstanding the foregoing, in a proceeding brought by the
Corporation directly, in its own right (as distinguished from an action brought
derivatively or by any receiver or trustee), the Corporation shall not be
required to make the advances called for hereby if a majority of the
disinterested directors determine that it does not appear that Indemnitee has
met the standards of conduct that made it permissible under applicable law to
indemnify Indemnitee and that the advancement of Expenses would not be in the
best interests of the Corporation and its stockholders.
6. Partial Indemnification. If Indemnitee is entitled under any provision
-----------------------
of this Agreement to indemnification or advancement by the Corporation of some
or a portion of any Expenses or liabilities of any type whatsoever (including,
but not limited to, judgments, fines, penalties, and amounts paid in settlement)
incurred by him in the investigation, defense, settlement or appeal of a
Proceeding, but is not entitled to indemnification or advancement of the total
amount thereof, the Corporation shall nevertheless indemnify or pay advancements
to Indemnitee for the portion of such Expenses or liabilities to which
Indemnitee is entitled.
4
<PAGE>
7. Notice to Corporation by Indemnitee. Indemnitee shall notify the
-----------------------------------
Corporation in writing of any matter with respect to which Indemnitee intends to
seek indemnification hereunder as soon as reasonably practicable following the
receipt by Indemnitee of written notice thereof; provided that any delay in so
notifying the Corporation shall not constitute a waiver by Indemnitee of his
rights hereunder. The written notification to the Corporation shall be addressed
to the Board of Directors and shall include a description of the nature of the
Proceeding and the facts underlying the Proceeding and be accompanied by copies
of any documents filed with the court, if any, in which the Proceeding is
pending. In addition, Indemnitee shall give the Corporation such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
8. Defense of Claim. In the event that the Corporation shall be obligated
----------------
under Section 5 hereof to pay the Expenses of any Proceeding against Indemnitee,
the Corporation, if appropriate, shall be entitled to assume the defense of such
Proceeding, with counsel approved by Indemnitee, which approval shall not be
unreasonably withheld, upon the delivery to Indemnitee of written notice of its
election to do so. After delivery of such notice, approval of such counsel by
Indemnitee and the retention of such counsel by the Corporation, the Corporation
will not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same Proceeding;
provided that (i) Indemnitee shall have the right to employ his own counsel in
any such Proceeding at Indemnitee's expense, and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Corporation, or (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Corporation and Indemnitee in the conduct of such defense
or (C) the Corporation shall not, in fact, have employed counsel to assume the
defense of such Proceeding, then the fees and expenses of Indemnitee's counsel
shall be paid by the Corporation.
9. Attorneys' Fees. If any legal action is necessary to enforce the terms
---------------
of this Agreement, the prevailing party shall be entitled to recover, in
addition to other amounts to which the prevailing party may be entitled, actual
attorneys' fees and court costs as may be awarded by the court.
10. Continuation of Obligations. All agreements and obligations of the
---------------------------
Corporation contained herein shall continue during the period Indemnitee is a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, fiduciary, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, and shall
continue thereafter so long as Indemnitee shall be subject to any possible
Proceeding by reason of the fact that Indemnitee served in any capacity referred
to herein.
11. Successors and Assigns. This Agreement establishes contract rights
----------------------
that shall be binding upon, and shall inure to the benefit of, the successors,
assigns, heirs and legal representatives of the parties hereto.
5
<PAGE>
12. Non-exclusivity.
---------------
(a) The provisions for indemnification and advancement of expenses set
forth in this Agreement shall not be deemed to be exclusive of any other rights
that Indemnitee may have under any provision of law, the Certificate or Bylaws,
the vote of the Corporation's stockholders or disinterested directors, other
agreements or otherwise, both as to action in his official capacity and action
in another capacity while occupying his position as a director or officer of the
Corporation.
(b) In the event of any changes, after the date of this Agreement, in
any applicable law, statute, or rule that expand the right of a Delaware
corporation to indemnify its directors and officers, Indemnitee's rights and the
Corporation's obligations under this Agreement shall be expanded to the fullest
extent permitted by such changes. In the event of any changes in any applicable
law, statute or rule, that narrow the right of a Delaware corporation to
indemnify a director and officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder.
13. Effectiveness of Agreement. This Agreement shall be effective as of
--------------------------
the date set forth on the first page and may apply to acts or omissions of
Indemnitee that occurred prior to such date if Indemnitee was a director or
officer of the Corporation or its predecessor, or was serving at the request of
the Corporation or its predecessor as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, at
the time such act or omission occurred.
14. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Corporation to do or fail to do any act in
violation of applicable law. The Corporation's inability, pursuant to court
order, to perform its obligations under this Agreement shall not constitute a
breach of this Agreement. The provisions of this Agreement shall be severable as
provided in this Section 14. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify Indemnitee to the fullest extent
permitted by any applicable portion of this Agreement that shall not have been
invalidated, and the balance of this Agreement not so invalidated shall be
enforceable in accordance with its terms.
15. Governing Law. This Agreement shall be interpreted and enforced in
-------------
accordance with the laws of the State of Delaware without regard to its rules
pertaining to conflicts of laws. To the extent permitted by applicable law, the
parties hereby waive any provisions of law that render any provision of this
Agreement unenforceable in any respect.
16. Notice. All notices, requests, demands and other communications under
------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressed, on the date of such
receipt, or (ii) if delivered by facsimile transmission to the recipient
followed by a copy sent by mail on the same date as the facsimile transmission,
on the date of receipt of such facsimile transmission, or (iii) if mailed by
certified or registered mail with postage prepaid, on the third business day
after the mailing date.
6
<PAGE>
Addresses for notice to either party are as shown on the signature page of this
Agreement, or as subsequently modified by written notice.
17. Mutual Acknowledgment. Both the Corporation and Indemnitee acknowledge
---------------------
that in certain instances, federal law or applicable public policy may prohibit
the Corporation from indemnifying its directors and officers under this
Agreement or otherwise. Indemnitee understands and acknowledges that the
Corporation has undertaken or may be required in the future to undertake with
the Securities and Exchange Commission to submit the question of indemnification
to a court in certain circumstances for a determination of the Corporation's
right under public policy to indemnify Indemnitee.
18. Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall constitute an original.
19. Amendment and Termination. No amendment, modification, termination or
-------------------------
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year set forth above.
NEXELL THERAPEUTICS INC.,
a Delaware corporation
By:____________________________________
Name:__________________________________
Title:_________________________________
Address: 9 Parker
Irvine, CA 92618
Tel: (949) 470-6485
Attn: William A. Albright, Jr.
INDEMNITEE:
__________________________
Name
__________________________
Position
Address:__________________
__________________________
Tel:______________________
Attn:_____________________
7
<PAGE>
EXHIBIT 10.63
AMENDMENT TO
ASSET TRANSFER AGREEMENT
This Amendment to the Asset Transfer Agreement dated as of June 30, 1999
(the "Asset Transfer Agreement") is made and entered into as of November 30,
1999 by and among BAXTER HEALTHCARE CORPORATION, a Delaware corporation with
offices at 1627 Lake Cook Road, Deerfield, Illinois 60015 ("Baxter"), NEXELL
THERAPEUTICS INC., a Delaware corporation f/k/a/ VIMRx Pharmaceuticals Inc.
("Nexell"), and NEXELL OF CALIFORNIA, INC., a Delaware corporation f/k/a Nexell
Therapeutics, Inc. ("Nexell California"). Nexell and Nexell California, which
are collectively referred to herein as the "Nexell Group", have offices located
at 9 Parker, Irvine, California 92618. All capitalized terms used herein and
not defined shall have the respective meanings assigned to them in the Asset
Transfer Agreement.
RECITALS
--------
A. Pursuant to the Asset Transfer Agreement, Baxter, Nexell and Nexell
California provided for the transfer of a going concern, i.e. Baxter's cell
----
therapies business in the United States and the rest of the world, from Baxter
(and its Affiliates) to Nexell California (and the Nexell European Affiliate).
B. The US Asset Transfer Closing occurred on June 30, 1999, and the ROW
Asset Transfer Closing will occur on the date hereof.
C. Baxter, Nexell and Nexell California desire to set forth herein certain
acknowledgments relating specifically to the ROW Asset Transfer Closing and to
amend the Asset Transfer Agreement to reflect such terms.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. Schedules. The parties hereby acknowledge that attached hereto as
---------
Schedule 1 are the following schedules delivered in connection with the ROW
- ----------
Asset Transfer Closing pursuant to Section 2.4 of the Asset Transfer Agreement:
Schedule of ROW Service Contracts (identifying any outstanding balances due on
any prepaid amounts under the ROW Service Contracts as of the ROW Asset Transfer
Closing); Schedule of finished goods inventory forming part of the ROW
Transferred Assets; Schedule of hardware and related assets forming part of the
ROW Transferred Assets; Schedule of ROW Assigned Agreements forming part of the
ROW Transferred Assets; Schedule of ROW Service Contracts forming part of the
ROW Transferred Assets (including all payments due under the ROW Service
Contracts and the aggregate pro rata share of any outstanding balance due on any
prepaid amounts under any ROW Service Contract); Schedule of ROW Assumed
Liabilities; and a Schedule of ROW Leased Transferred Assets.
1
<PAGE>
2. Purchase Consideration. The parties acknowledge that certain of the
----------------------
ROW Transferred Assets which are in the possession of customers of Baxter or its
Affiliates are not the subject of written agreements between Baxter (or its
Affiliates) and such customers, but that the parties nonetheless desire to
transfer such ROW Transferred Assets on the ROW Asset Transfer Closing Date in
accordance with the Asset Transfer Agreement.
(a) Section 2.2(B) of the Asset Transfer Agreement is hereby amended
by adding a new paragraph at the end of the existing Section to read as follows:
Notwithstanding the foregoing, within six months of the ROW Asset
Transfer Settlement Date or not later than December 31, 1999, as
applicable under the preceding paragraph of this Section 2.2(B) (the
"Payment Date"), Nexell California shall be required to pay or cause a
Nexell European Affiliate to pay to Baxter (or its Affiliates) the ROW
Transferred Asset Purchase Price only with respect to those ROW
Transferred Assets as to which Baxter has delivered to Nexell
California prior to the Payment Date sufficient evidence of good and
valid title, free and clear of all Encumbrances, except for Permitted
Encumbrances and the rights of any third party lessee arising under
applicable leases relating to the Leased Transferred Assets.
"Sufficient evidence" shall mean (i) an original writing signed by the
party in possession of the ROW Transferred Assets, stating
unambiguously that Baxter (or its Affiliates) has such title and that
such party acknowledges and accepts the transfer of such title to
Nexell, or (ii) any evidence that Nexell California reasonably deems
sufficient for the purposes of evidencing title. If, at any time
following the Payment Date, Baxter delivers to Nexell California
sufficient evidence of good and valid title to any ROW Transferred
Assets for which Nexell California or the Nexell European Affiliate
has not yet paid, then, within 30 days of receipt of such evidence,
Nexell California shall pay or cause a Nexell European Affiliate to
pay to Baxter (or its Affiliates) the ROW Transferred Asset Purchase
Price with respect to such ROW Transferred Assets.
(b) Section 2.2(C) of the Asset Transfer Agreement is hereby amended
by adding a new paragraph at the end of the existing Section to read as follows:
Notwithstanding the foregoing, over the three year period or not
later than December 31, 1999, as applicable under the preceding
paragraph of this Section 2.2(C) (the "Leased Transferred Assets
Payment Date"), Nexell California shall be required to pay or cause a
Nexell European Affiliate to pay to Baxter (or its Affiliates) the
Leased Transferred Asset Purchase Price only with respect to those
Leased Transferred Assets as to
2
<PAGE>
which Baxter has delivered to Nexell California prior to the Payment
Date sufficient evidence of good and valid title, free and clear of
all Encumbrances, except for Permitted Encumbrances and the rights of
any third party lessee arising under applicable leases relating to the
Leased Transferred Assets. "Sufficient evidence" shall mean (i) an
original writing signed by the party in possession of the Leased
Transferred Assets, stating unambiguously that Baxter (or its
Affiliates) has such title and that such party acknowledges and
accepts the transfer of such title to Nexell, or (ii) any evidence
that Nexell California reasonably deems sufficient for the purposes of
evidencing title. If, at any time following the Leased Transferred
Assets Payment Date, Baxter delivers to Nexell California sufficient
evidence of good and valid title to any Leased Transferred Assets for
which Nexell California or the Nexell European Affiliate has not yet
paid, then, within 30 days of receipt of such evidence, Nexell
California shall pay or cause a Nexell European Affiliate to pay to
Baxter (or its Affiliates) the Leased Transferred Asset Purchase Price
with respect to such Leased Transferred Assets.
3. Agreement Relating to European Commercial Contracts. The parties
---------------------------------------------------
hereby acknowledge that Baxter and the Nexell European Affiliate have entered
into an agreement relating to Baxter European commercial contracts (the
"Commercial Contract Agreement"), because all such contracts have not been
delivered to Nexell California in accordance with Section 2.4 of the Asset
Transfer Agreement, and the parties nonetheless desire to transfer Baxter's
assets on the ROW Asset Transfer Closing Date in accordance with the Asset
Transfer Agreement. Under this agreement, Baxter Affiliates will act to a
limited degree as non-exclusive distributors for Nexell's cell therapies
products for a period of time following the ROW Asset Transfer Closing Date, in
accordance with their terms and conditions. The terms of Section 3.3 of the
Asset Transfer Agreement shall not be modified by this Paragraph 3.
4. Tender Agreements.
-----------------
(a) The parties hereby acknowledge that Baxter Affiliates and the
Nexell European Affiliate have entered into certain agreements relating to
Baxter tenders (the "Tender Agreements") pursuant to which Baxter will remain a
party to certain tenders with the Governments of France, Italy, Portgual and
Spain relating to the provision and servicing of cell therapies products,
equipment, apparatus and instruments ("Tenders") because such Tenders have not
been delivered to Nexell California in accordance with Section 2.4 of the Asset
Transfer Agreement, and the parties nonetheless desire to transfer Baxter's
assets on the ROW Asset Transfer Closing Date in accordance with the Asset
Transfer Agreement. The parties further acknowledge that Baxter Affiliates and
the Nexell European Affiliate have entered into certain business transfer
agreements (the "Business Transfer Agreements") reciting the transfer of the ROW
Transferred Assets in France, Italy, Portugal and Spain in accordance with the
Asset Transfer Agreement.
3
<PAGE>
(b) Section 2.1(A)(ii) of the Asset Transfer Agreement is hereby
amended and restated in its entirety to read as follows:
(ii) At the ROW Asset Transfer Closing, all of Baxter's (or its
Affiliates') right, title and interest in and to the ROW Transferred
Assets, except for Baxter's (and its Affiliates') right, title and
interest in and to certain tenders with the Governments of France,
Italy, Spain, Portugal and Finland identified in those certain
agreements entered into as of the ROW Asset Transfer Closing Date
between Affiliates of Baxter and the Nexell European Affiliate
pursuant to which Baxter will remain a party to such tenders (the
"Tender Agreements"). The sale, assignment, transfer and delivery by
Baxter (and its Affiliates) to Nexell California of such tenders shall
be governed by the terms and conditions of the Tender Agreements.
(c) Notwithstanding anything herein to the contrary, the Tenders shall
continue to be included in the definition of "ROW Transferred Assets" as "ROW
Service Contracts" for all purposes of the Asset Transfer Agreement.
5. Key European Employees.
----------------------
(a) The parties hereby acknowledge that, of the European Key Employees
identified on Schedule 13 to the Asset Transfer Agreement, only those employees
identified on Schedule 4(a) hereto have chosen to be hired by the Nexell
-------------
European Affiliate.
(b) Section 13 of the Asset Transfer Agreement is hereby amended by
adding a new subsection following existing subsection (B) to read as follows:
(C) Except to the extent otherwise provided herein, neither
Nexell California nor the Nexell European Affiliate shall assume any
obligations arising under any Plans which Baxter maintains relating to
any European Key Employees. The active participation of the European
Key Employees who choose to be hired by the Nexell European Affiliate
in the Plans shall terminate as of the ROW Asset Transfer Closing
Date, in each case except to the extent that any rights under the
Plans shall have vested, or may vest upon fulfillment of certain
conditions, in accordance with the terms contained therein; provided,
however, that the European Key Employees who choose to be hired by the
Nexell European Affiliate shall be 100% vested in their account
balances under Baxter's Savings Plan and in their accrued benefits
under the Baxter International Inc. and Subsidiaries Pension Plan.
4
<PAGE>
6. Representations and Warranties. Baxter hereby makes to Nexell
------------------------------
California those representations and warranties that are set forth in Section 6
of the Asset Transfer Agreement as of the ROW Asset Transfer Closing Date.
Nexell California hereby makes to Baxter those representations and warranties
that are set forth in Section 7 of the Asset Transfer Agreement as of the ROW
Asset Transfer Closing Date.
7. Further Assurances and Cooperation. Each party covenants and warrants
----------------------------------
that, on and following the ROW Asset Transfer Closing Date, it shall, whenever
and as often as it shall be reasonably requested to do so by another party to
this Amendment, 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 carry out and
effectuate the transactions contemplated by this Amendment and to complete any
and all of the conveyances, transfers, sale and assignments provided for in the
Asset Transfer Agreement and this Amendment. These documents and instruments
shall include, but not be limited to, the Tender Documentation as defined in the
Tender Agreements, the Commercial Contract Documentation as defined in the
agreement relating to European commercial contracts, and the other documents and
instruments conemplated to be provided pursuant to the Commercial Contract
Agreement, the Tender Agreements and the Business Transfer Agreements.
8. Effect of Amendment. The Asset Transfer Agreement and this Amendment
-------------------
shall be read together and shall have the same effect as if the provisions of
the Agreement and this Amendment were contained in one document. Except as
amended by this Amendment, the Agreement shall remain in full force and effect
and the terms and conditions thereof shall remain as originally written.
9. Dispute Resolution. The terms of Section 23.6 of the Asset Transfer
------------------
Agreement shall apply equally to disputes under this Amendment, and the word
"Agreement" where used in such Section 23.6 shall be interpreted to mean the
Asset Transfer Agreement and this Amendment.
10. Governing Law; Jurisdiction. This Amendment shall be governed by and
---------------------------
construed in accordance with the internal laws of the State of Delaware, without
application of conflicts of law principles, and, subject to Section 23.6 of the
Asset Transfer Agreement, each party hereby submits to the jurisdiction and
venue of any state or federal court in the State of Delaware. To the extent
permissible by law, each of the parties hereby waives, releases and agrees not
to assert, and agrees to cause its Affiliates to waive, release and not assert,
any rights such party or its Affiliates may have under any foreign law or
regulation that would be inconsistent with the terms of this Agreement as
governed by Delaware law.
11. Counterparts; Facsimile Signature. This Amendment may be signed in
---------------------------------
any number of counterparts which taken together shall constitute one and the
same instrument. This Amendment 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.
5
<PAGE>
12. Schedules. The schedules referred to in this Amendment are attached
---------
hereto and incorporated herein by reference as if fully set forth herein.
IN WITNESS WHEREOF, the undersigned have executed this Amendment to
Asset Transfer Agreement as of the date first above written.
BAXTER HEALTHCARE CORPORATION
By: /s/ Steven J. Meyer
---------------------------------
Name: Steven J. Meyer
---------------------------------
Title: Treasurer
---------------------------------
NEXELL THERAPEUTICS INC.
By: /s/ L. William McIntosh
---------------------------------
Name: L. William McIntosh
---------------------------------
Title: President and COO
---------------------------------
NEXELL OF CALIFORNIA, INC.
By: /s/ L. William McIntosh
---------------------------------
Name: L. William McIntosh
---------------------------------
Title: CEO
---------------------------------
6
<PAGE>
SCHEDULE 1
- ----------
ROW ASSET TRANSFER SCHEDULES
<PAGE>
SCHEDULE 4(a)
- -------------
KEY EUROPEAN EMPLOYEES
<PAGE>
EXHIBIT 21
List of Subsidiaries
Name of Jurisdiction in Which Percentage of
Subsidiary Organized Voting Stock Owned
Nexell of California, Inc. Delaware 100% Nexell Therapeutics Inc.
Nexell International Belgium 100% Nexell of California, Inc.
Innovir Laboratories Inc. Delaware 86% Nexell Therapeutics Inc.
Vimrx Genomics, Inc. Delaware 100% Nexell Therapeutics Inc.
Vimrx Holdings Ltd. Delaware 100% Innovir Laboratories Inc.
<PAGE>
EXHIBIT 23(a)
Independent Auditors' Consent
The Board of Directors,
Nexell Therapeutics Inc.:
We consent to incorporation by reference in the registration statements
(No. 333-3106 and No. 333-15693) on Form S-8 and registration statements
(No. 333-25469 and No. 333-78175) on Form S-3 of Nexell Therapeutics Inc. of our
report dated February 4, 2000, relating to the consolidated balance sheets of
Nexell Therapeutics Inc. and subsidiaries (formerly VIMRx Pharmaceuticals, Inc.)
as of December 31, 1999 and 1998, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1999, and the related schedule,
which report appears in the December 31, 1999 annual report on Form 10-K of
Nexell Therapeutics Inc.
/s/ KPMG LLP
Orange County, California
March 29, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 28,695,000 33,091,000
<SECURITIES> 0 0
<RECEIVABLES> 3,307,000 4,193,000
<ALLOWANCES> 26,000 0
<INVENTORY> 4,409,000 2,389,000
<CURRENT-ASSETS> 38,656,000 38,772,000
<PP&E> 17,349,000 14,953,000
<DEPRECIATION> 6,417,000 4,011,000
<TOTAL-ASSETS> 93,839,000 87,601,000
<CURRENT-LIABILITIES> 10,625,000 6,755,000
<BONDS> 0 0
0 0
200 100
<COMMON> 73,000 68,000
<OTHER-SE> 83,140,800 48,746,900
<TOTAL-LIABILITY-AND-EQUITY> 93,839,000 87,601,000
<SALES> 14,960,000 13,443,000
<TOTAL-REVENUES> 14,960,000 13,443,000
<CGS> 9,617,000 8,166,000
<TOTAL-COSTS> 40,310,000 41,875,000
<OTHER-EXPENSES> 502,000 2,625,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,903,000 2,036,000
<INCOME-PRETAX> (35,673,000) (34,963,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (35,673,000) (34,963,000)
<EPS-BASIC> (0.56) (0.58)
<EPS-DILUTED> (0.56) (0.58)
</TABLE>
