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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 June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-12830
BioTime, Inc.
(Exact name of registrant as specified in its charter)
California 94-3127919
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
935 Pardee Street, Berkeley, California 94710
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 845-9535
Securities registered pursuant to Section 12(b) of
the Act:
Common Shares, no par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The approximate aggregate market value of voting stock held by nonaffiliates of
the registrant was $41,310,579 as of September 13, 1996.
2,782,071
(Number of Common Shares outstanding as of September 13, 1996)
Documents Incorporated by Reference
Proxy Statement for the Company's 1996 Annual Meeting of Shareholders
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PART I
Item 1. Description of Business
Overview
BioTime Inc. is a development stage company engaged in the research and
development of aqueous based synthetic solutions that can be used as plasma
expanders, blood substitutes during hypothermic (low temperature) surgery, and
organ preservation solutions. These products are intended for several important
medical applications, including: the emergency treatment of blood loss due to
traumatic injury or during surgery; cardiopulmonary bypass surgery; the
replacement of very large volumes of a patient's blood during cardiac surgery
and neurosurgery that involve lowering the patient's body temperature to
hypothermic levels; the preservation of body organs and tissues awaiting
transplant; cancer treatment; and other biomedical applications. Because the
Company's solutions are synthetic, rather than human blood byproducts, use of
the solutions would not pose the risk of transmitting AIDS, hepatitis or other
blood borne infectious diseases, and would not have to be matched to a patient's
blood type.
The Company's first two blood replacement products are Hextend(R) and
PentaLyte,TM which are composed of different hydroxyethyl starches,
electrolytes, sugar and a buffer. The Company believes that a solution that
sustains the patient's fluid volume and physiological balance, thereby
maintaining tissue and organ function, can reduce or eliminate the need for
supplemental whole blood and blood plasma. Based upon the results of its
laboratory research, the Company has determined that in many emergency care and
surgical applications, it is not necessary for the solution to include special
oxygen carrying molecules to replace red blood cells. Therefore, the Company has
devoted its efforts to the development of formulations that do not rely upon the
use of recombinant DNA or other complex technologies to synthesize and
assimilate into solution costly and potentially toxic oxygen carrying molecules
such as hemoglobin and perfluorocarbons.
The Company has filed an Investigational New Drug Application ("IND")
with the Food and Drug Administration ("FDA") and has received permission to
commence Phase III clinical trials of Hextend(R) in approximately 125 patients.
These Phase III clinical trials are designed to test whether the use of
Hextend(R) can improve patient outcomes by maintaining organ perfusion and
preventing the adverse effects of hypovolemia (loss of blood volume) during
surgical procedures that often involve a large amount of blood loss. It is
expected that Hextend(R) will be tested in a variety of surgical procedures,
such as orthopedic, urologic and gastro-intestinal surgery. These clinical
trials are expected to begin in October 1996 at the Duke University Medical
Center in Durham, North Carolina. Although BioTime has conducted pharmacology
and toxicology testing of Hextend,(R) and has compiled a significant amount of
data demonstrating the safety and efficacy of Hextend(R) in laboratory testing
using animal subjects, the outcome of human trials cannot be predicted with
certainty.
The time frame in which the Company will be able to complete the
clinical testing necessary and file a New Drug Application ("NDA") for FDA
approval depends in part upon the ability of the Company to obtain sufficient
financing for that purpose, as well as a manufacturer willing to produce
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Hextend(R) in compliance with FDA "good manufacturing practices." The Company is
seeking to obtain the necessary financing from one or more pharmaceutical
companies that would be capable of manufacturing Hextend(R) for commercial
distribution when FDA approval is obtained. See "Manufacturing" and "Government
Regulation."
To reduce the capital costs and delays inherent in acquiring or
establishing a pharmaceutical manufacturing facility and establishing a
marketing organization, the Company will seek contract, licensing or joint
venture arrangements with one or more pharmaceutical companies for the
production and marketing of the Company's products. If such arrangements cannot
be made on acceptable terms, the Company would be required to obtain additional
capital to construct or acquire its own manufacturing facilities and establish
its own marketing organization. There is no assurance that the Company would be
able to raise sufficient capital for those purposes.
The Company was incorporated under the laws of the State of California
on November 30, 1990. The Company's principal office is located at 935 Pardee
Street, Berkeley, California 94710. Its telephone number at such office is (510)
845-9535.
The Market for Plasma Expanders, Blood Substitutes and Organ Preservation
Solutions
The transfusion of human blood or blood products is presently the
traditional and only commercially available means for treating patients
suffering from severe blood loss requiring the replacement of more than 30% of
their blood volume. The transfusion market in the United States consists of two
principal segments. The acute blood loss segment, which comprises approximately
60 percent of the transfusion market, includes transfusions required in
connection with trauma, surgery and unexpected blood loss. The chronic blood
loss segment represents approximately 40 percent of the transfusion market
includes transfusions in connection with general medical applications and
chronic anemias. Approximately 14 million units of blood were transfused in the
United States in 1992, of which approximately 8.5 million units were
administered to patients suffering the effects of acute blood loss. Patient
charges for the units of blood used in the United States in 1992 for the
treatment of acute blood loss were approximately $2.5 billion.
The use of whole blood or human blood products presents a number of
medical risks and logistical problems that could be reduced or eliminated if a
safe and effective synthetic plasma expander or blood substitute were available.
Transfused blood can only be used in recipients having a blood type compatible
with that of the donor. Delays in treatment resulting from the necessity of
blood typing prior to transfusion, together with the limited shelf life of blood
and the limited availability of certain blood types, impose constraints on the
rapid availability of compatible blood for transfusion. Accident victims,
wounded soldiers and persons with rare blood types may die while awaiting
compatible blood. In addition, clerical error continues to result in transfusion
related deaths. The problem of blood type compatibility and availability could
be eliminated by the use of a universally compatible synthetic blood plasma. A
synthetic product with a long shelf life that could be stored at room
temperature would also resolve problems of perishability of whole blood
products.
The past decade has seen an increase in the incidence of blood-borne
infectious diseases, such
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as AIDS and hepatitis B, C, D, E, and F which has heightened the awareness of
both health professionals and patients to the inherent risk from blood
transfusions. Although new tests have been developed, such tests have not
entirely eliminated the risk of infectious blood-borne disease transmission. In
addition, despite improved testing standards, human error still results in the
release of contaminated units of blood. Furthermore, some infectious diseases
are known to contaminate the blood supply but cannot be avoided because no
reliable or cost effective diagnostic tests exist. New infectious agents can
suddenly appear in the blood supply, and it can take years to develop a reliable
test for such agents. Several years elapsed between the appearance of AIDS and
the development of a reliable test, and numerous patients contracted AIDS from
transfusions during that time. A synthetic blood plasma or blood substitute not
derived from human blood products would be advantageous because it could be used
without exposing the patient to the risk of infection by a blood-borne disease.
The current blood supply is dependent upon volunteer donors.
Increasingly stringent donor- screening criteria have caused the donor pool, and
therefore the potential supply of blood, to contract. As a consequence, the cost
and intricacy of collecting, testing and storing blood has greatly increased in
recent years, and many blood banks have experienced inventory shortages. An
improved synthetic blood plasma volume expander that can be manufactured at an
economical price would help alleviate the blood shortage problems that arise
from dependence upon donated blood.
Organ transplant surgery is a growing field. Approximately 5,000 donors
donate organs, and approximately an additional 5,000 donors donate skin, bone
and other tissues in the United States each year. As more surgeons have gained
the necessary expertise and surgical methods have been refined, the number of
transplant procedures has increased, as has the percentage of successful
transplants. Organ transplant surgeons and their patients face two major
obstacles, namely the shortage of available organs from donors, and the limited
amount of time that a transplantable organ can be kept viable between the time
it is harvested from the donor and the time it is transplanted into the
recipient.
The scarcity of transplantable organs makes them too precious to lose
and increases the importance of effective preservation technology and products.
Current organ removal and preservation technology generally requires multiple
preservation solutions to remove and preserve effectively different groups of
organs, and limits preservation times of those organs for transplant use.
BioTime is seeking to address this problem by developing a more effective organ
preservation solution that will permit surgeons to harvest all transplantable
organs from a single donor. The Company believes that preserving the viability
of all transplantable organs and tissues simultaneously, at low temperatures,
would extend by several hours the time span in which the organs can be preserved
prior to transplant.
The Products
Products for Surgery, Plasma Replacement and Emergency Care
Background. Severe blood loss during surgery or from trauma injuries
caused by blunt or
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penetrating force can cause fatal shock. Whole blood or packed red cells
generally cannot be administered to a patient until the patient's blood serum
has been typed and sufficient units of compatible blood or red cells can be
located. The use of human blood products also poses the risk of exposing the
patient to blood borne diseases such as AIDS and hepatitis. While some fluid
needs can be temporarily met by various colloid and crystalloid plasma
extenders, those solutions are generally not used to replace more than 30% of a
patient's blood. The solutions being developed by the Company are intended to be
more complete synthetic plasma volume expanders that can replace more than 30%
of a patient's blood volume and can provide more of the components necessary to
prevent physiological shock during emergency care and surgical procedures.
Synthetic Blood Plasma Expander. The Company is developing Hextend(R) ,
PentaLyteTM and other synthetic plasma expander solutions to treat acute blood
loss that occurs during many kinds of surgery, particularly cardiac, orthopedic
and gastrointestinal operations. The solutions could also be used by emergency
room physicians or by paramedics while the patient is being transported to the
hospital to treat acute blood loss in trauma victims. Because BioTime's
solutions are synthetic, they could be used without matching the patient's blood
type and would not pose the risk of transmitting AIDS, hepatitis or other blood
borne infectious diseases.
Hextend(R) , PentaLyteTM and BioTime's other solutions contain
constituents that may prevent or reduce the physiological imbalances that can
impair or inhibit blood clotting and cardiac function in acute blood loss
patients. Hextend(R) and PentaLyteTM are similar formulations, except that
Hextend(R) uses a high molecular weight hydroxyethyl starch (hetastarch) whereas
PentaLyteTM uses a low molecular weight hydroxyethyl starch (pentastarch). The
higher molecular hetastarch is retained in the blood longer than the lower
molecular weight pentastarch, which may make Hextend(R) the product of choice
when a larger volume of plasma expander or blood substitute for low temperature
surgery is needed or where the patient's ability to regenerate his own blood
after surgery is compromised. PentaLyte,TM with its lower molecular weight
pentastarch, would be eliminated from the blood faster than Hextend(R) and might
be used when less plasma expander is needed or where the patient is more capable
of quickly regenerating lost blood.
BioTime has not attempted to synthesize potentially toxic and costly
oxygen carrying molecules such as hemoglobin because the loss of fluid volume
and physiological balance may contribute as much to shock as the loss of the
oxygen carrying component of the blood. Surgical and trauma patients are
routinely given supplemental oxygen and retain a substantial portion of their
own red blood cells, so the lack of oxygen carrying molecules in the Company's
solutions should not pose a significant contraindication to use.
Experiments by BioTime scientists have demonstrated that laboratory
animals are able to survive at normal temperatures and without supplemental
oxygen when more than two-thirds of their circulating blood volume is replaced
by BioTime's artificial plasma solution, Hextend(R) and PentaLyteTM. When
animals are placed in an oxygen rich environment, they are able to survive at
normal temperatures when even more of their circulating blood volume is replaced
by Hextend(R).
BioTime has a cooperative research program with the Department of
Surgery at the Metropolitan Hospital Center in New York City to test the
potential usefulness of Hextend(R) and
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PentaLyteTM as trauma care products. In a series of laboratory animal
experiments, researchers at Metropolitan Hospital have shown the ability of
Hextend(R) and PentaLyteTM to replace blood lost due to severe bleeding. Results
from certain of these tests indicate that Hextend(R) and PentaLyteTM may prove
more effective at maintaining blood calcium levels than a leading commercially
available plasma extender when used to replace large volumes of blood. Calcium
can be a significant factor in regulating blood clotting and cardiac function.
Results from other in vitro tests of Hextend(R) indicate that Hextend(R) does
not alter the activity of a number of specific blood clotting factors, other
than by simple hemodilution.
Products for Hypothermic Surgery
Background. Approximately 400,000 coronary bypass and other open heart
surgeries are performed in the United States annually, and approximately 18,000
aneurysm surgeries and 4,000 arterio-venous malformation surgeries were
performed in the United States during 1989. Those procedures often require the
use of cardio-pulmonary bypass equipment to do the work of the heart and lungs
during the surgery. During open heart surgery and surgical procedures for the
treatment of certain cardiovascular conditions such as large aneurysms,
cardiovascular abnormalities and damaged blood vessels in the brain, surgeons
must temporarily interrupt the flow of blood through the body. Interruption of
blood flow can be maintained only for short periods of time at normal body
temperatures because many critical organs, particularly the brain, are quickly
damaged by the resultant loss of oxygen. As a result, certain surgical
procedures are performed at low temperatures because lower body temperature
helps to minimize the chance of damage to the patient's organs by reducing the
patient's metabolic rate, thereby decreasing the patient's needs during surgery
for oxygen and nutrients which normally flow through the blood.
Current technology limits the degree to which surgeons can lower a
patient's temperature and the amount of time the patient can be maintained at a
low body temperature because blood, even when diluted, cannot be circulated
through the body at near-freezing temperatures. As a result, surgeons face
severe time constraints in performing surgical procedures requiring blood flow
interruption, and those time limitations prevent surgeons from correcting
certain cardiovascular abnormalities.
CardioPulmonary Bypass Solution. BioTime plans to test the use of
Hextend(R) as cardio-pulmonary bypass circuit priming solutions. In order to
perform heart surgery, the patient's heart must be stopped and mechanical
apparatus is used to oxygenate and circulate the blood. The cardio-pulmonary
bypass apparatus requires a blood compatible fluid such as Hextend(R) to
commence and maintain the process of diverting the patient's blood from the
heart and lungs to the mechanical oxygenator and pump.
BioTime believes that Hextend(R) will maintain blood pressure and
physiological balance better than the solutions presently used as bypass priming
solutions. Approximately 1.5 to 2 liters of Hextend(R) would be used for each
bypass operation. Based upon the number of coronary bypass operations performed,
the potential market for Hextend(R) as bypass circuit priming solutions in the
United States would be 600,000 to 800,000 liters annually.
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Low Temperature Blood Substitute Solution. The Company is also
developing Hextend(R) as a low temperature blood substitute that will be used to
replace all of a patient's circulating blood volume to permit the rapid and
profound cooling of patients in the performance of surgery in hypothermic
bloodless conditions. Although surgeons are already using other solutions to
supplement the blood during the performance of certain limited surgical
procedures, the Company is not aware of any complete blood-substitution
procedures in current surgical practice.
Hextend(R) would be introduced into the patient's body during the
cooling process. Once the patient's body temperature is near ice cold levels,
and the heart and brain are temporarily arrested, the surgeon would perform the
operation. During the surgery, the solutions may be circulated throughout the
body in place of blood, or the patient's circulation may be arrested for a
period of time if an interruption of fluid circulation is required in order to
perform the surgical procedure. Upon completion of the surgery, the patient
would be slowly warmed, the patient's blood would be reintroduced into the
patient's vascular system and then warmed further.
The Company believes that low temperature bloodless surgery would be
primarily suitable for open heart operations, operations to repair major
vascular disorders such as aneurysms, and removal of tumors from the brain,
head, neck or heart. Based upon laboratory studies using baboons and dogs,
BioTime has developed protocols for using Hextend(R) to replace all of the
subject's blood for one to four hours at temperatures ranging from 10oC to 1oC.
BioTime has begun a series of laboratory studies testing the use of the solution
in low temperature open chest cardiac surgery in dogs. The purpose of these
studies is to develop protocols for aortic surgery and other cardio-vascular
procedures in human patients.
Minimally Invasive Cardiac Surgery. Cardiac surgeons are working to
develop procedures to repair damaged coronary arteries and heart valves using
optically guided instruments that can be inserted into the heart through blood
vessels or small incisions, without the need to open the patient's chest cavity.
BioTime believes that Hextend(R) may be useful in these minimally invasive
closed chest cardiac procedures because the solution is transparent and if it
were used to completely replace blood at low temperatures it would permit
surgeons to use their optically guided instruments inside the heart or blood
vessels without having their view obstructed by red blood. BioTime intends to
conduct a series of laboratory studies using animal subjects to test the utility
of Hextend(R) as a low temperature blood substitute in such procedures.
Organ Transplant Products
Background. Organ transplant surgery is a growing field. Approximately
5,000 donors donate organs, and approximately an additional 5,000 donors donate
skin, bone and other tissues in the United States each year. As more surgeons
have gained the necessary expertise and surgical methods have been refined, the
number of transplant procedures has increased, as has the percentage of
successful transplants.
A significant problem that arises frequently in the field of organ
transplant surgery is the inability to recover more than a few viable organs
from a donor. Currently, surgeons use different
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preservation solutions for different organs or different groups of organs. As a
result, a separate procedure using a different preservation solution is required
to preserve and remove each organ, or system of related organs. The removal of
one organ can impair the viability of other organs. Available technology does
not permit surgeons to keep the remaining organs viable within the donor's body
for a significant time after the first organ is removed.
Another problem in the field of organ transplant surgery is the timely
matching and delivery of compatible organs from donors to recipients. Currently,
an organ available for transplant is flushed with an ice cold solution during
the removal process to deactivate the organ and preserve its tissues, and then
the organ is transported on ice to the donee. The ice cold solutions currently
used, together with transportation on ice, keep the organ healthy for only a
short period of time. For example, the storage time for hearts is limited to
approximately six hours. Because of the short time span available for removal
and transplant of an organ, potential organ donees often fail to receive the
needed organs.
Multi-Organ Preservation. The Company is seeking to develop Hextend(R)
for use as a single solution that can simultaneously preserve all of a single
donor's organs. When used as an organ preservation solution,Hextend(R) would be
perfused into the donor's body while the body is chilled, thereby eliminating an
undesirable condition called "warm ischemia," caused when an organ is warm while
its blood supply is interrupted. The use of Hextend(R) in conjunction with the
chilling of the body should help to slow down the process of organ deterioration
by a number of hours so that a surgeon can remove all organs for donation and
transplant. The Company's current estimates are that each such preservation
procedure could require as much as 50 to 100 liters of Hextend(R).
The Company believes that the ability to replace an animal's blood with
the Company's solution, to maintain the animal at near freezing temperatures for
several hours, and then revive the animal, would demonstrate that the solution
could be used for multi-organ preservation. Company scientists have revived
animals after more than six hours of cold blood-substitution, and have observed
heart function in animals maintained cold and blood-substituted for more than
eight hours. An objective of the Company's research and development program is
to extend the time span in which animal subjects can be maintained in a cold,
blood-substituted state before revival or removal of organs for transplant
purposes. Organ transplant procedures using animal subjects could then be
conducted to test the effectiveness of Hextend(R) as an organ preservative.
Other Potential Uses of BioTime Solutions
Long-term Tissue and Organ Banking. The development of marketable
products and technologies for the preservation of tissues and vital organs for
weeks and months is a long-range goal of the Company's research and development
plan. To permit such long-term organ banking the Company may attempt to develop
products and technologies that can protect tissues and organs from the damage
that occurs when human tissues are subjected to subfreezing temperatures.
Proprietary solutions and protocols have already been developed by the Company
which allow liquid nitrogen storage of full thickness rat and hamster skin
grafts with subsequent survival following transplantation to host animals.
Cold-Protected Chemotherapy. Isolated regional perfusion of anti-cancer
drugs has been
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used to treat melanoma of the limbs, and inoperable tumors of the liver. The
Company believes that employing such a procedure while the patient is kept in
ice-cold blood-substitution may allow high doses of toxic anti-cancer drugs to
be directed at disseminated, inoperable tumors within vital organs. Keeping the
rest of the patient in a cold, blood substituted state may reduce or eliminate
the circulation of the toxic drugs to healthy tissues.
BioTime considers such surgical techniques to be a longer range goal of
its research and development program for hypothermic surgery products. Use of
this complex technology in the practice of oncology can occur only after
ice-cold blood-substitution has advanced to an appropriate level of safety and
effectiveness.
Research and Development Strategy
From inception through June 30, 1996, the Company has spent $4,773,028
on research and development. The greatest portion of BioTime's research and
development efforts have been devoted to the development of Hextend(R) and other
solutions for multi-organ preservation, low temperature surgery, conventional
surgery and emergency care. A lesser portion of the Company's research and
development efforts have been devoted to developing solutions and protocols for
storing organs and tissues at subfreezing temperatures. In the future the
Company may explore other applications of its products and technologies,
including cancer chemotherapy. As the first products achieve market entry, more
effort will be expended to bring the next tier of products to maturity.
One major focus of the Company's research and development effort has
been on products and technology to extend the time animals can be kept cold and
blood-substituted, and then revived without physical impairment. An integral
part of that effort has been the development of techniques and procedures or
"protocols" for use of the Company's products. A substantial amount of data has
been accumulated through animal tests, including the proper drugs and
anesthetics, the temperatures at which blood should be removed and restored,
solution volume, the temperature range for maintaining circulatory arrest, and
the rate at which the subject should be rewarmed.
Experiments intended to test the efficacy of the Company's blood
substitute solutions and protocols for surgical applications involve replacing
the animal's blood with low temperature blood substitute solution, maintaining
the animal in a cold blood-substituted state for a period of time, and then
attempting to revive the animal. Experiments for multi-organ preservation
involve the maintenance of the animal subjects at cold temperatures for longer
periods of time than would be required for many surgical applications, followed
by transplant procedures to test the viability of one or more of the subject's
vital organs.
The Company is conducting experiments, using both small and large
animals, at hospital and medical school research facilities. These collaborative
research programs are testing solutions and protocols developed in the Company's
laboratories and, in some cases, comparing the efficacy of the Company's blood
substitute solutions with commercially available FDA approved products
manufactured by other companies. The Company intends to continue to foster
relations with research hospitals and medical schools for the purpose of
conducting collaborative research projects because
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it believes that such projects will introduce the Company's potential products
to members of the medical profession and provide the Company with objective
product evaluations from independent research physicians and surgeons.
It is the Company's policy to retain all patent and intellectual
property rights to its products, including any improvements that may be derived
or refined from Company financed research programs. However, to obtain funding
for additional research and development for pre-clinical and clinical studies,
the Company may seek to enter into joint venture, licensing, or other
collaborative arrangements with pharmaceutical companies. There is no assurance
that any such arrangements can be made.
Manufacturing
Facilities Required
The Company has sufficient equipment, space and personnel needed to
synthesize the quantities of Hextend(R) used in its research activity, but the
Company does not have facilities to manufacture the solution in commercial
quantities, or under "good manufacturing practice" required by the FDA. Any
products that are approved by the FDA will have to be manufactured according to
"good manufacturing practices" in commercial quantities, and with sufficient
stability to withstand the distribution process, and in compliance with such
federal and state regulatory requirements as may be applicable. The active
ingredients and component parts of the products must be either USP or themselves
manufactured according to "good manufacturing practices". In order to obtain FDA
approval for the sale of its synthetic blood plasma volume expander, blood
substitute and organ preservation solutions, the Company will be required to
conduct clinical trials using products manufactured according to good
manufacturing practices, at a facility that has passed FDA inspection.
Accordingly, the Company will need to enter into product manufacturing
arrangements with an established pharmaceutical company or the Company will have
to acquire its own manufacturing facility.
Through an agreement with McGaw, Inc., a subsidiary of IVAX
Corporation, BioTime has obtained approximately 6,000 liters of Hextend(R) for
use in human clinical trials and in stability, pharmacology and toxicology
testing. Discussions are continuing with McGaw and other pharmaceutical
companies regarding the commercial manufacture and marketing of Hextend,(R)
PentaLyteTM and other BioTime blood plasma volume expander and blood replacement
products.
Acquiring a manufacturing facility would involve significant
expenditure of time and money for design and construction of the facility,
purchasing equipment, hiring and training a production staff, purchasing raw
material and attaining an efficient level of production. To avoid the incurrence
of those expenses and delays, the Company is seeking contract, licensing or
joint venture arrangements with established pharmaceutical companies for the
production of the Company's products. In joint ventures or licensing
arrangements that include marketing rights, the participating pharmaceutical
company would be entitled to a large portion of the profits from sales to end
users or would pay the Company a royalty on net sales.
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If contractual arrangements for the manufacture of the Company's
products cannot be made on terms acceptable to the Company, the Company would be
required to establish its own production facilities. Although the Company has
not determined the cost of constructing production facilities that meet FDA
requirements, it expects that the cost would be substantial, and that the
Company would need to raise additional capital in the future for that purpose.
There can be no assurance that the Company will be able to obtain the capital
required for the acquisition of production facilities, or that satisfactory
arrangements will be made with third parties to manufacture and distribute any
products.
Raw Materials
Although most ingredients in the products being developed by the
Company are readily obtainable from multiple sources, the Company knows of only
a few manufacturers of the hydroxyethyl starches that serve as the active
ingredient in Hextend(R) and PentaLyte(TM). One of the hydroxyethyl starch
manufacturers is McGaw, Inc., which has produced limited quantities of
Hextend(R) for BioTime's use in clinical trials.
BioTime is pursuing discussions with McGaw and other hydroxyethyl
starch manufacturers to obtain commercial quantities of hydroxyethyl starch or
Hextend(R) and PentaLyte.(TM) However, McGaw and other manufacturers produce
hydroxyethyl starch for use in plasma expanders with which Hextend(R) and
PentaLyte(TM) might compete and there is no assurance that any of those
manufacturers will be willing to provide hydroxyethyl starch to BioTime or to
manufacture and market Hextend,(R) PentaLyte(TM) or other products under a
license from BioTime.
If the Company is unable to secure a supply or production agreement
with one of the known manufacturers, the Company would have to acquire a
manufacturing facility and the technology to produce hydroxyethyl starch
according to "good manufacturing practices." The possibility of producing
hydroxyethyl starch through a co-operative effort with a small, independent
starch manufacturer is also being considered. The Company would have to raise
additional capital to participate in the development and acquisition of the
necessary production technology and facilities.
If arrangements cannot be made for a source of supply of hydroxyethyl
starch, BioTime would have to reformulate its solutions to use one or more other
starches that are more readily available. In order to reformulate its products,
the Company would have to perform new laboratory testing to determine whether
the alternative starches could be used in a safe and effective synthetic plasma,
blood substitute or organ preservation solution. If needed, such testing would
be costly to conduct and would delay the Company's product development program,
and there is no certainty that any such testing would demonstrate that an
alternative ingredient, even if chemically similar to the one currently used by
BioTime, would be as safe or effective in BioTime's solutions.
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Marketing
The Company has not established a marketing and sales organization, but
it may need to do so if it obtains FDA approval for commercial production of its
products. The Company's proposed products and services are intended for sale to
hospitals, medical centers and scientists engaged in the practice of specific
areas of medicine or medical research, including transplantation, neurosurgery,
cardiovascular surgery, anesthesiology, oncology, emergency room and trauma
care, critical care, and biomedical research.
The Company intends to seek contract, licensing or joint venture
arrangements with established pharmaceutical companies for marketing the
Company's products. Although such arrangements could permit the Company to
receive revenues from the sale of its products expeditiously and with lower
costs, the Company would have to share those revenues with the participating
pharmaceutical companies. There can be no assurance that any pharmaceutical
companies will be willing to enter into marketing arrangements on terms
acceptable to the Company.
If the Company does not enter into licensing or other arrangements for
the sale of its products by one or more pharmaceutical companies, the Company
would have to establish its own marketing organization. Due to the complexity of
the technologies being developed by the Company, prospective end-users will have
to be trained in the proper use of products that the Company may develop.
In order to market any new products it may develop, the Company also
plans to publish studies in scientific journals, and to present studies and the
results of its work at meetings of medical and scientific professional
organizations. BioTime also will continue to seek opportunities to conduct
research in collaboration with well-known institutions and to demonstrate its
work at scientific conventions.
Government Regulation
The FDA will regulate the Company's proposed products as drugs,
biologicals, or medical devices, depending upon such factors as the use to which
the product will be put, the chemical composition and the interaction of the
product on the human body. Products that are intended to be introduced into the
body, such as blood substitute solutions for low temperature surgery and plasma
expanders, will be regulated as drugs but will also be reviewed by the FDA staff
responsible for evaluating biologicals.
The Company's human drug products will be subject to rigorous FDA
review and approval procedures. After testing in animals, an Investigational New
Drug (IND) application must be filed with the FDA to obtain authorization for
human testing. Extensive clinical testing, which is generally done in three
phases, must then be undertaken at a hopital or medical center to demonstrate
optimal use, safety and efficacy of each product in humans. Each clinical study
is conducted under the auspices of an independent Institutional Review Board
("IRB"). The IRB will consider, among other things, ethical factors, the safety
of human subjects and the possible liability of the institution. The
12
<PAGE>
time and expense required to perform this clinical testing can far exceed the
time and expense of the research and development initially required to create
the product. No action can be taken to market any therapeutic product in the
United States until an appropriate New Drug Application ("NDA") has been
approved by the FDA. Even after initial FDA approval has been obtained, further
studies may be required to provide additional data on safety or to gain approval
for the use of a product as a treatment for clinical indications other than
those initially targeted. In addition, use of these products during testing and
after marketing could reveal side effects that could delay, impede or prevent
FDA marketing approval, resulting in a FDA ordered product recall, or in FDA
imposed limitations on permissible uses.
The FDA also regulates the manufacturing process of pharmaceutical
products and requires that a portion of the clinical trials for new products be
conducted using products produced in compliance with "good manufacturing
practices." See "Manufacturing."
Sales of pharmaceutical products outside the United States are subject
to foreign regulatory requirements that vary widely from country to country.
Even if FDA approval has been obtained, approval of a product by comparable
regulatory authorities of foreign countries must be obtained prior to the
commencement of marketing the product in those countries. The time required to
obtain such approval may be longer or shorter than that required for FDA
approval.
Patents and Trade Secrets
On April 18, 1995, the Company was granted a United States Patent which
protects methods for using BioTime's proprietary solutions, including the use of
Hextend(R) and PentaLyteTM to replace blood. Claims include the use of the
solutions at normal and hypothermic (below normal) body temperatures as plasma
expanders, and for increasing circulation of a hypovolemic (acute blood loss)
patient. Additional patent applications have been filed in the United States and
certain other countries for Hextend(R) and other solutions. These patent
applications include claims for patent protection of the composition of the
Company's solutions and patent protection of methods of using the solutions. The
Company also holds a United States Patent on its microcannula.
The Company has been informed that 62 additional claims in two patent
applications have been allowed; and patents are expected to issue within the
next six months. There is no assurance that any additional patents will be
issued, or that any patents now held or later obtained by the Company will not
be successfully challenged by third parties and declared invalid or infringing
of third party claims. Further, the enforcement of patent rights often requires
the prosecution of litigation against third party infringers, and such
litigation can be costly to pursue.
While the Company believes that the protection of patents and licenses
is important to its business, the Company also will rely on trade secrets,
know-how and continuing technological advancement to maintain its competitive
position. The Company has entered into intellectual property, invention and
non-disclosure agreements with its employees and it is the Company's practice to
enter into confidentiality agreements with its consultants. There can be no
assurance, however, that these measures will prevent the unauthorized disclosure
or use of the Company's trade secrets
13
<PAGE>
and know-how or that others may not independently develop similar trade secrets
and know how or obtain access to the Company's trade secrets, know-how or
proprietary technology. If, in the future, the techniques for use of the
Company's products become widely known through academic instruction or
publication, patent protection would become more important as a means of
protecting the Company's market share for its products.
Licensed Products and Technology
The Company has obtained from Cryomedical Sciences, Inc. ("CMSI") a
royalty free, non-exclusive license to make, have made, use and sell certain
experimental hypothermic blood substitute solutions for cryonics, cancer and
AIDS research and treatment. The licensed solutions were developed by three of
BioTime's scientists while they were employed by CMSI before BioTime was
founded. The license granted by CMSI will terminate if Paul Segall, Harold
Waitz, Hal Sternberg, Judith Segall, Lawrence Cohen, Donna Cohen, Victoria
Bellport, Alan Gelband, Trans Time, Inc. (a corporation in which certain
officers and directors of BioTime own an interest) and Ronald Barkin in the
aggregate do not own at least 33-1/3% of the Company's Common Shares which are
not sold to the public or otherwise owned by public shareholders (the "Insiders'
Shares"). As of June 30, 1996, such persons owned an aggregate of 596,165
shares, representing 98% of the Insiders' Shares. The license is not assignable
or transferable.
The technology and solutions licensed from CMSI were used by the
Company's scientists in its initial experiments. However, the Company has
developed its own patented blood substitute and organ preservation solutions,
and is no longer using CMSI's solutions in its research and development program
and does not intend to pursue the commercial exploitation of those licensed
solutions.
Competition
If successfully developed, the Company's solutions will compete with
the plasma volume expanders and organ preservation solutions presently
manufactured by established pharmaceutical companies, and with human blood
products. For example, DuPont Pharmaceuticals presently markets Hespan,(R) an
artificial plasma volume expander, and Viaspan,(TM) a solution for use in the
preservation of kidneys, livers and pancreases for surgical transplant. Other
blood plasma replacement products are being developed, and clinical trials have
either begun or are expected to begin in the near future for some of these
products, including Pentaspan(TM) (a solution used for the collection of red
blood cells from patients) and a genetically engineered human albumin. To
compete with new and existing plasma expanders, the Company is developing
products that contain constituents that may prevent or reduce the physiological
imbalances that can affect the patient's tissue and organ function. To compete
with existing organ preservation solutions, the Company is seeking to develop a
solution that can be used to preserve all organs simultaneously and for long
periods of time.
CMSI, which was founded by four of the Company's executive officers and
directors, is attempting to develop blood substitution and cold protecting
solutions for low temperature surgery,
14
<PAGE>
for organ preservation and for the treatment of trauma victims. Somatogen, Inc.
is developing a synthetic hemoglobin blood substitute that may also have
application in bloodless surgery, in treatment of trauma victims, and in organ
preservation. A number of other companies are known to be developing artificial
hemoglobin and other synthetic red blood cell substitutes and technologies that
may compete directly with the products and technologies that the Company is
developing. In general, red cell substitutes are more expensive to produce and
potentially more toxic than Hextend(R) and PentaLyte.TM Some of these competing
companies have substantially larger research facilities and technical staffs and
greater financial and marketing resources than BioTime.
Generic plasma expanders intended to compete with HespanTM have
recently been introduced in the United States market. As a result, competition
in the plasma expander market has intensified and wholesale prices have
declined. Competition in the areas of business targeted by the Company is likely
to intensify as new products and technologies reach the market. Superior new
products are likely to sell for higher prices and generate higher profit margins
once acceptance by the medical community is achieved. Those companies that are
successful in introducing new products and technologies to the market first may
gain significant economic advantages over their competitors in the establishment
of a customer base and track record for the performance of their products and
technologies. Such companies will also benefit from revenues from sales which
could be used to strengthen their research and development, production, and
marketing resources. All companies engaged in the medical products industry face
the risk of obsolescence of their products and technologies as more advanced or
cost effective products and technologies are developed by their competitors. As
the industry matures, companies will compete based upon the performance and cost
effectiveness of their products.
Employees
As of June 30, 1996, the Company employed nine persons on a full-time
basis and two persons on a part-time basis. Three of the full-time employees
hold Ph.D. or Masters Degrees in one or more fields of science.
Item 2. Facilities
The Company presently occupies an approximately 5,200 square foot
office and laboratory facility in Berkeley, California under a lease that will
expire on May 31, 1997, subject to the Company's option to renew the lease for
an additional 24 month period. The current rent is $5,000 per month. If the
Company exercises its renewal option, rent during the option period will be
$5,300 per month, plus the cost of utilities. This facility serves as the
Company's principal executive office and laboratory for small animal
experiments.
The Company uses, on a fee per use basis, facilities for surgical
research on animals at an unaffiliated privately run research center located in
Winters, California. Contracting for the use of research facilities has enabled
the Company to initiate its research projects without the substantial capital
cost, overhead costs and delay associated with the acquisition and maintenance
of a modern animal surgical research facility.
15
<PAGE>
Item 3. Legal Proceedings.
The Company is not presently involved in any material litigation or
proceedings, and to the Company's knowledge no such litigation or proceedings
are contemplated.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
16
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's Common Shares are traded in the over-the-counter market
on the NASDAQ Small Cap Market System under the symbol BTIM, and on the Boston
Stock Exchange under the symbol BTM. The closing price of the Company's Common
Shares on the NASDAQ Small Cap Marker System on September 13, 1996 was $19.
The following table sets forth the range of high and low bid prices for
the Common Shares for the fiscal years ended June 30, 1995 and 1996, based on
transaction data as reported on the NASDAQ Small Cap Market System.
<TABLE>
<CAPTION>
Quarter Ended High Low
<S> <C> <C>
September 30, 1994 $ 3 1/8 $ 2
December 31, 1994 2 3/8 1 3/4
March 31, 1995 1 15/16 1 3/8
June 30, 1995 1 7/8 1 3/8
September 30, 1995 5 3/8 1 1/4
December 31, 1995 4 3/8 2 3/8
March 31, 1996 10 1/8 2 5/8
June 30, 1996 22 1/4 8 1/4
</TABLE>
As of August 12, 1996, there were 118 shareholders of record of the
Common Shares based upon information from the Registrar and Transfer Agent.
The Company has paid no dividends on its Common Shares since its
inception and does not plan to pay dividends on its Common Shares in the
foreseeable future.
17
<PAGE>
Item 6. Selected Financial Data
The selected financial data as of June 30, 1996 and 1995 and for three
years ended June 30, 1996 and the period from inception (November 30, 1990) to
June 30, 1996 presented below have been derived from the financial statements of
the Company which have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing elsewhere herein (which expresses
an unqualified opinion and includes an explanatory paragraph related to the
development stage of the Company's operations). The selected financial data
should be read in conjunction with the Company's financial statements and notes
thereto and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND
RESULTS OF OPERATIONS" included elsewhere.
<TABLE>
Statement of Operations
Data:
<CAPTION>
Period from Inception
(November 30, 1990)
June 30, to June 30, 1996
--------------------------------------------------- -----------------------
1996 1995 1994
-------------- ------------- --------------
<S> <C> <C> <C> <C>
EXPENSES:
Research and development $(1,142,168) $(1,791,698) $ (777,668) (4,773,028)
General and administrative (954,049) (808,432) (931,439) (4,020,775)
-------------- ------------- -------------- ------------------
Total expenses (2,096,217) (2,600,130) (1,709,107) (8,793,803)
-------------- ------------- -------------- ------------------
INCOME:
Interest 127,212 218,416 152,438 678,698
Other 3,760 3,967 9,716 50,634
-------------- ------------- -------------- ------------------
Total Income 130,882 222,383 162,154 729,332
-------------- ------------- -------------- ------------------
Net loss $ 1,965,335) $ (2,377,747) $ (1,546,953) $ (8,064,471)
============== ============= ============== ==================
Net loss per share $ (.75) $ (.90) $ (.76) $ (4.14)
============== ============= ============== ==================
Shares used in calculating
per share data 2,609,244 2,633,464 2,046,445 1,947,448
============== ============= ============== ==================
</TABLE>
<TABLE>
Balance Sheet Data:
<CAPTION>
June 30,
---------------------------------------------------
1996 1995 1994
-------------- ------------- --------------
<S> <C> <C> <C>
Cash, cash equivalents and
short term investments $ 2,443,121 $ 3,440,896 $ 5,719,046
Working Capital 2,727,986 3,180,200 5,780,949
Total assets 2,968,474 3,610,330 5,909,050
Shareholders' equity 2,839,245 3,231,603 5,799,379
</TABLE>
18
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Overview
Since its inception in November 1990, the Company has been engaged
primarily in research and development activities. The Company has not yet
generated significant operating revenues, and as of June 30, 1996 the Company
had incurred a cumulative net loss of $8,064,471.
Most of the Company's research and development efforts have been
devoted to the development of Hextend(R) and PentaLyte.TM The Company has filed
an IND with the FDA and has received permission to commence Phase III clinical
trials of Hextend(R) in human patients. These clinical trials are expected to
begin in October 1996 at the Duke University Medical Center in Durham, North
Carolina. Additional studies are being designed to assess the value of
Hextend(R) in other surgical applications. The costs of such clinical trials and
other studies may be substantial, and it might be necessary for the Company to
obtain additional financing in order to complete these studies.
In order to bring other new products, such as Pentalyte,TM to the
medical market place, it will be necessary for the Company to file an IND with
the FDA and to conduct clinical trials of each new product. The cost of
preparing those IND filings and conducting those clinical trials is not
presently determinable. It may be necessary for the Company to obtain additional
financing in order to complete any clinical trials that may begin for its new
products.
The Company plans to continue to provide funding for its laboratory
testing programs at selected medical schools and hospitals for the purpose of
developing additional uses of Hextend,(R) PentaLyteTM and other new products,
but the amount of research that will be conducted at those institutions will
depend upon the extent to which the Company can raise sufficient capital for
research in addition to the funding required for the clinical testing of new
products. If funding for collaborative research at medical schools and hospitals
is curtailed, the Company will have to rely on in-house research, using small
laboratory animals and less sophisticated surgical procedures.
To address its anticipated need for manufacturing and marketing
resources, the Company is continuing to identify domestic and international
pharmaceutical companies that, based upon their current product lines and
resources, might be able to manufacture and market the Company's products if and
when the necessary regulatory approvals are obtained. The acquisition of the
Company's own production facilities and the development of the Company's own
marketing organization is also being considered in the event that production and
marketing arrangements cannot be made with established pharmaceutical companies
on terms that the Company deems advantageous. Additional capital will be
required in order for the Company to acquire its own production facilities and
marketing organization.
Because the Company's research and development expenses, clinical trial
expenses, and production and marketing expenses will be charged against earnings
for financial reporting purposes, management expects that losses from operations
will continue to be incurred for the foreseeable future.
19
<PAGE>
Results of Operations
Years Ended June 30, 1996 and June 30, 1995
From inception (November 30, 1990) through June 30, 1996, the Company
generated $729,332 of revenues, comprised of $50,634 from the sale of products
and services, and $678,698 in interest. For the year ended June 30, 1996, the
Company generated $130,882 of revenues, including $3,670 from the sale of
products, and $127,212 in interest. For the year ended June 30, 1995, the
Company generated total revenues of $222,383, comprised of $3,967 from the sale
of microcannulas and solutions for research purposes, and $218,416 in interest.
The decrease in interest income is attributable to the decrease in cash and cash
equivalents from 1995 to 1996. Limited test marketing of the Company's
laboratory research equipment, through advertisements in trade publications, has
resulted in sales of a small number of microcannulas. Although the Company may
continue to test market its laboratory research equipment, and to promote its
ability to perform research services, the Company's ability to generate
substantial operating revenue depends upon its success in developing and
marketing its blood substitute and organ preservation solutions and technology
for medical use.
From inception (November 30, 1990) through June 30, 1996, the Company
incurred $4,773,028 of research and development expenses, including salaries,
supplies and other expense items. Research and development expenses decreased to
$1,142,168 for the year ended June 30, 1996, from $1,791,698 for the year ended
June 30, 1995. The decrease in research and development expenses is attributable
to a decrease in the number and scope of research collaborations the Company is
sponsoring, since there has been a shift in the focus of the Company from
research to clinical studies. It is expected that research and development
expenses will increase as the Company commences clinical testing of Hextend(R).
From inception (November 30, 1990) through June 30, 1996, the Company
incurred $4,020,775 of general and administrative expenses. General and
administrative expenses increased to $954,049 for the year ended June 30, 1996,
from $808,432 for the year ended June 30, 1995. This increase is primarily
attributable to an amortized expense of $143,000 associated with a two year
agreement the Company entered into with a financial advisor in exchange for
warrants to purchase the Company's common shares (See Note 5 to the accompanying
financial statements). Otherwise, general and administrative expenses decreased,
due to a general concentration of resources and personnel on development and
testing of the Company's products.
Years Ended June 30, 1995 and June 30, 1994
For the year ended June 30, 1995, the Company generated total revenues
of $222,383, comprised of $3,967 from the sale of microcannulas and solutions
for research purposes, and $218,416 in interest. For the year ended June 30,
1994, the Company had total revenues of
20
<PAGE>
$162,154, comprised of $9,716 from the sale of products and services, and
$152,438 in interest. During March 1994, the Company completed a second public
offering of its common shares. The increase in interest income in fiscal year
1995 over fiscal year 1994 is attributable to the increase in cash from the
public offering and investment of the offering proceeds.
Research and development expenses increased to $1,791,698 for the year
ended June 30, 1995, from $777,668 for the year ended June 30, 1994. The
increase in research and development expenses is attributable to an increase in
the scope of Company sponsored research collaborations, the manufacturing of two
lots of Hextend(R) solution under "good manufacturing practices," and the
initiation of stability, toxicology and pharmacology studies needed for filing
of the Company's first Investigational New Drug application (IND).
General and administrative expenses decreased to $808,432 for the year
ended June 30, 1995 from $931,439 for the year ended June 30, 1994. The decrease
in general and administrative expenses is due largely to a focus of resources
and personnel to development and testing of the Company's products.
Taxes
At June 30, 1996, the Company had a cumulative net operating loss
carryforward of approximately $7,866,000 for federal income tax purposes.
Liquidity and Capital Resources
Because of the developmental nature of the Company's business, it is
unlikely that in the near future the Company will be able to generate internally
the funds necessary to carry on its planned operations. The Company expects that
its cash on hand will be sufficient to finance the Company's operations for the
next 12 months. Since inception, the Company has financed its operations through
the sale of equity securities. Presently, the Company is seeking financing from
pharmaceutical and medical device companies that may be interested in licensing
or otherwise acquiring marketing rights to Hextend(R) and other BioTime
products. Financing may also be obtained through additional public or private
offerings of equity and debt securities.
The future availability and terms of equity and debt financings and
collaborative arrangements with industry partners cannot be predicted. The
unavailability or inadequacy of financing to meet future capital needs could
force the Company to modify, curtail, delay or suspend some or all aspects of
its planned operations.
21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Pages
Independent Auditors' Report 23
Balance Sheets 24
Statements of Operations 25
Statements of Shareholders' Equity 26-27
Statements of Cash Flows 28-29
Notes to Financial Statements 30-34
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
BioTime, Inc.
We have audited the accompanying balance sheets of BioTime, Inc. (a development
stage company) as of June 30, 1996 and 1995, and the related statements of
operations, shareholders' equity, and cash flows for the period from November
30, 1990 (inception) to June 30, 1996 and for each of the three years in the
period ended June 30, 1996, These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits 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, such financial statements present fairly, in all material
respects, the financial position of BioTime, Inc. as of June 30, 1996 and 1995,
and the results of its operations and its cash flows for the period from
November 30, 1990 (inception) to June 30, 1996 and for each of the three years
in the period ended June 30, 1996 in conformity with generally accepted
accounting principles.
The Company is in the development stage as of June 30, 1996. As discussed in
Note 1 to the financial statements, successful completion of the Company's
product development program and ultimately the attainment of profitable
operations is dependent upon future events, including maintaining adequate
financing to fulfill its development activities, obtaining regulatory approval
for products ultimately developed, and achieving a level of sales adequate to
support the Company's cost structure.
DELOITTE & TOUCHE LLP
Oakland, California
August 8, 1996
23
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
BALANCE SHEETS
<CAPTION>
ASSETS June 30
------------------------------
1996 1995
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 2) $ 2,443,121 $ 3,440,896
Research and development supplies on hand (Note 2) 200,000
Prepaid expenses and other current assets (Note 5) 214,094 50,731
------------- -------------
Total current assets 2,857,215 3,491,627
EQUIPMENT, Net of accumulated depreciation of $98,219 and $62,681 (Notes
2) 101,559 108,655
ORGANIZATION COSTS, Net of accumulated amortization of $4,196 and
$3,848 (Note 2) 348
DEPOSITS 9,700 9,700
------------- -------------
TOTAL ASSETS $ 2,968,474 $ 3,610,330
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES--Accounts payable and accrued liabilities $ 129,229 $ 311,427
------------- -------------
COMMON SHARES, subject to rescission, no par value, issued and
outstanding 37,392 shares (Note 5) 67,300
------------- -------------
SHAREHOLDERS' EQUITY:
Preferred Shares, no par value, undesignated as to Series, authorized 1,000,000
shares; none outstanding (Note 5)
Common Shares, no par value, authorized 5,000,000 shares; issued
and outstanding 2,756,521 and 2,559,822 shares (Notes 2 and 5) 10,834,575 9,261,598
Contributed Capital 93,972 93,972
Deficit accumulated during development stage (8,089,302) (6,123,967)
------------- -------------
Total shareholders' equity 2,839,245 3,231,603
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,968,474 $ 3,610,330
============= =============
<FN>
See notes to financial statements.
</FN>
</TABLE>
24
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<CAPTION>
Period from Inception
(November 30, 1990)
Year Ended June 30, to June 30, 1996
-------------------------------------------------- --------------------
1996 1995 1994
-------------- ------------- --------------
<S> <C> <C> <C> <C>
EXPENSES (Notes 2,3,4,5 and 6):
Research and development $ (1,142,168) $ (1,791,698) $ (777,668) $ 4,773,028)
General and administrative (954,049) (808,432) (931,439) (4,020,775)
-------------- ------------- -------------- --------------------
Total expenses (2,096,217) (2,600,130) (1,709,107) (8,793,803)
-------------- ------------- -------------- --------------------
INCOME:
Interest 127,212 218,416 152,438 678,698
Other 3,670 3,967 9,716 50,634
-------------- ------------- -------------- --------------------
Total income 130,882 222,383 162,154 729,332
-------------- ------------- -------------- --------------------
NET LOSS $ (1,965,335) $ (2,377,747) $ (1,546,953) $ (8,064,471)
-------------- ------------- -------------- --------------------
NET LOSS PER SHARE (Note 2) $ (.75) $ (.90) $ (.76) $ (4.14)
============== ============= ============== ====================
NUMBER OF SHARES USED FOR
CALCULATION OF NET LOSS
PER SHARE (Note 2) 2,609,244 2,633,464 2,046,445 1,947,448
============== ============= ============== ====================
<FN>
See notes to financial statements.
</FN>
</TABLE>
25
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Series A Convertible Deficit
Preferred Shares Accumulated
During
Development
Common Shares Stage
------------------------ ----------------------- ---------------
Number of Number of Contributed
Shares Amount Shares Amount Capital
--------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, November 30, 1990
(date of inception)
NOVEMBER 1990
Common shares issued for cash 437,587 $ 263
DECEMBER 1990:
Common shares issued for
stock of a separate entity at
fair value(Note 5) 350,070 137,400
Contributed equipment at appraised
value $16,425
Contributed cash 77,547
MAY 1991:
Common shares issued for cash
less offering costs (Note 5) 33,725 54,463
Common shares issued for stock
of a separate entity at fair value
(Note 5) 33,340 60,000
JULY 1991:
Common shares issued for
services performed 10,000 18,000
AUGUST-DECEMBER 1991
Preferred shares issued for
cash less less offering costs of
$125,700 120,000 474,300
MARCH 1992:
Common shares issued for
cash less offering costs of $1,015,873 724,500 4,780,127
Preferred shares converted
into common shares (120,000) (474,300) 120,000 474,300
Dividends declared and paid
on preferred shares (24,831)
NET LOSS FROM INCEPTION (2,174,436)
--------- ----------- --------- ---------- -------- -----------
BALANCE AT JUNE 30, 1993 -- $ -- 1,709,222 $5,524,553 $ 93,972 $(2,199,267)
<FN>
See notes to financial statements. (Continued)
</FN>
</TABLE>
26
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Series A Convertible Deficit
Preferred Shares Accumulated
During
Common Shares Development Stage
-------------------- ------------------------ --------------
Number of Number of Contributed
Shares Amount Shares Amount Capital
--------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
MARCH 1994:
Common shares issued for cash less
offering costs of $865,826 935,200 3,927,074
NET LOSS (1,546,953)
--------- --------- --------- ---------- -------- ------------
BALANCE AT JUNE 30, 1994 $ -- 2,644,422 $9,451,627 $ 93,972 $ (3,746,220)
AUGUST 1994 - JUNE 1995
Common shares repurchased
with cash (84,600) (190,029)
NET LOSS (2,377,747)
--------- --------- --------- ---------- -------- ------------
BALANCE AT JUNE 30, 1995 -- $ -- 2,559,822 $9,261,598 $ 93,972 $ (6,123,967)
JULY - SEPTEMBER 1995
Common shares repurchased
with cash (6,200) (12,693)
APRIL - JUNE 1996
Common shares issued for
cash (exercise of options and warrants) 165,507 1,162,370
Common shares issued for cash
(lapse of recission) (Note 5) 37,392 67,300
Common shares warrants and options
granted for services 356,000
NET LOSS (1,965,335)
--------- --------- --------- ---------- -------- ------------
BALANCE AT JUNE 30, 1996 -- $ -- 2,756,521 $10,834,575 $ 93,972 $ (8,089,302)
========= ========= ========= ========== ======== ============
<FN>
See notes to financial statements. (Concluded)
</FN>
</TABLE>
27
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<CAPTION>
Period from Inception
(November 30, 1990)
Year Ended June 30, to June 30, 1996
------------------------------------------------------- ------------------
1996 1995 1994
---------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,965,335) $ (2,377,747) $ (1,546,953) $ (8,064,471)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 35,886 32,051 29,500 114,618
Cost of Services - options and warrants 167,932 185,932
Changes in operating assets and
liabilities:
Research and development supplies on hand (200,000) (200,000)
Prepaid expenses and other current
assets 24,705 53,543 (51,540) (26,026)
Deposits (5,400) (9,700)
Organizational costs (4,196)
Accounts payable (182,198) 267,326 9,661 127,499
-------------- ------------ --------------- -------------
Net cash used in operating activities (2,119,010) (2,030,227) (1,559,332) (7,876,344)
-------------- ------------ --------------- -------------
INVESTING ACTIVITIES:
Sale of investments 197,400
Purchase of short-term investments (3,000,000) (5,000,000) (9,946,203)
Redemption of short-term investments 8,000,000 1,934,000 9,934,000
Purchase of equipment and furniture (28,442) (59,624) (41,420) (183,353)
-------------- ------------ --------------- ------------
Net cash provided by (used in) investing
activities (28,442) 4,940,376 (3,107,420) 1,844
-------------- ------------ --------------- -------------
FINANCING ACTIVITIES:
Issuance of preferred shares for cash 600,000
Preferred shares placement costs (125,700)
Issuance of common shares for cash 4,792,900 10,710,926
Net proceeds from exercise of common share
options and warrants 1,162,370 1,162,370
Common shares placement costs (865,826) (1,881,699)
Contributed capital - cash 77,547
Dividends paid on preferred shares (24,831)
Repurchase of common shares (12,693) (188,299) (200,992)
-------------- ------------ --------------- -------------
Net cash provided by (used in) financing activities 1,149,677 (188,299) 3,927,074 10,317,621
-------------- ------------ --------------- -------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (997,775) 2,721,850 (739,678) 2,443,121
CASH AND CASH EQUIVALENTS:
At beginning of period 3,440,896 719,046 1,458,724 --
-------------- ------------ --------------- -------------
At end of period $ 2,443,121 $ 3,440,896 $ 719,046 $ 2,443,121
============== ============ =============== =============
<FN>
See notes to financial statements. (Continued)
</FN>
</TABLE>
28
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<CAPTION>
Period from Inception
(November 30, 1990)
Year Ended June 30, to June 30, 1996
----------------------------------------------------- --------------------
1996 1995 1994
---------------- --------------- -------------
<S> <C> <C> <C> <C>
NONCASH FINANCING AND
INVESTING ACTIVITIES:
Receipt of contributed equipment $ 16,425
Issuance of common shares 400
in exchange for shares of
common stock of Cryomedical
Sciences, Inc. in a stock-for-stock
transaction $ 197,
Accrued public offering costs $ 54,458
Granting of options and warrants for $ 356,000 $ 356,000
services
<FN>
See notes to financial statements. (Concluded)
</FN>
</TABLE>
29
<PAGE>
BIOTIME, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. GENERAL AND DEVELOPMENT STAGE ENTERPRISE
General - BioTime, Inc. (the Company) was organized November 30, 1990
as a California corporation. The Company is a biomedical organization,
currently in the development stage, which is engaged in research and
development of synthetic plasma expanders, blood substitute solutions,
and organ preservation solutions, for use in surgery, trauma care,
organ transplant procedures, and other areas of medicine.
Development Stage Enterprise - Since inception, the Company has been
engaged in research and development activities in connection with the
development of synthetic blood substitute and organ preservation
products. The Company has not had any significant operating revenues
and has incurred operating losses of $8,064,471 from inception to June
30, 1996. The successful completion of the Company's product
development program and, ultimately, achieving profitable operations is
dependent upon future events including maintaining adequate capital to
finance its future development activities, obtaining regulatory
approvals for products that may be ultimately developed and achieving a
level of sales adequate to support the Company's cost structure.
While the Company successfully completed two public offerings of its
common shares and, at June 30, 1996, had remaining cash and cash
equivalents of over $2,400,000, management believes that additional
funds will be required for the successful completion of its product
development activities.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents include cash, money market funds, and U.S.
Government securities with original maturities of three months or less.
Equipment is stated at cost or, in the case of donated equipment, at
fair market value. Equipment is being depreciated using the
straight-line method over a period of sixty months.
Organizational costs are amortized over a period of sixty months.
Patent costs associated with obtaining patents on products being
developed are expensed as research and development expenses when
incurred. These costs totaled $95,598 for the year ended June 30, 1996,
$83,430 for the year ended June 30, 1995, $60,777 for the year ended
June 30, 1994, and cumulatively, $276,617 for the period from inception
(November 30, 1990) to June 30, 1996.
Research and development supplies on hand are comprised of a quantity
30
<PAGE>
of the Company's Hextend(R) solution for use in human clinical trials.
Research and development costs, consisting principally of salaries,
payroll taxes, research and laboratory fees, are expensed as incurred.
Income Taxes: At June 30, 1996, the Company has not realized any
taxable income since its inception and has federal and state loss
carryforwards of $7,866,000 and $3,933,000 for both financial statement
and tax purposes as follows:
Year of
Expiration Federal State
---------- ------- -----
2006 $ 255,000 $ 128,000
2007 710,000 355,000
2008 1,209,000 604,000
2009 1,547,000 774,000
2010 2,348,000 1,174,000
2011 1,797,000 898,000
Total $7,866,000 $3,933,000
In the event of a significant change in the ownership of the Company,
the utilization of such loss carryforwards could be substantially
limited.
Net Loss Per Share is based on the weighted average number of common
shares outstanding during the periods presented. For all periods
presented, all unexercised warrants and options are considered to be
antidilutive and were not included in the computation.
3. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with five officers/shareholders
for the five-year period commencing June 1, 1996 that provide for
compensation for each individual at $85,000 for the first year, $92,000
for the second year, $99,000 for the third year, $106,000 for the
fourth year, and $113,000 for the fifth year. These
officers/shareholders have signed intellectual property agreements with
the Company as a condition of their employment.
The Company had an employment agreement with the former Chairman of the
Board/shareholder for the three year period commencing April 25, 1994
that provides for compensation at $60,000 for the first year, $100,000
for the second year, and $105,000 for the third year. The Chairman has
signed an intellectual property agreement with the Company as a
condition of his employment.
In December 1990, the Company was granted a fully paid, royalty-free
worldwide irrevocable nonexclusive license to make, have made, use and
sell CMSI's hypothermic blood substitute solution that exists in CMSI's
patent application. The license granted by CMSI will terminate
31
<PAGE>
if certain officers/shareholders in the aggregate do not own at least
33 1/3% of the interest in the Company not sold to the public or
otherwise owned by public shareholders. At June 30, 1996 the license is
still in effect.
4. LEASES
In June 1993, the Company entered into a two-year lease agreement for
its principal office and research facilities. Rent expense totaled
$58,188, $53,388, and $25,200 for each of the three years ended June
30, 1996, 1995 and 1994, respectively; and cummulatively, $167,326 for
the period from inception to June 30, 1996. During July 1994, the lease
was amended to include additional space and to extend the expiration
period to May 31, 1997, subject to the Company's option to renew the
lease for an additional 24 month period. Rent for the initial term of
the new lease is $4,500 per month for the first year, $4,900 per month
for the second year, and $5,000 per month for the third year. If the
Company exercises its option to renew the lease, rent during the option
period will be $5,300 per month, plus the cost of utilities.
5. SHAREHOLDERS' EQUITY
In May 1991, the Company received $121,763, net of offering costs of
$6,237, in a private placement offering in exchange for 71,117 common
shares. The investors in certain states where the shares were sold may
have had the right to rescind their investment in 37,392 shares.
Accordingly, 37,392 shares and related amounts were excluded from
shareholders' equity in the financial statements. As of June 30, 1996,
any such right to rescind the investment had lapsed, and 37,392 shares
have been included in shareholders' equity in the financial statements.
In March 1992, the Company completed an underwritten initial public
offering of 724,500 common shares, at an initial price to the public of
$8.00 per share. The net proceeds to the Company, after deducting
expenses of the offering, was $4,780,127.
Under the terms of the underwriting agreement for the public offering,
the Company sold to the underwriter, for $60, warrants to purchase
61,889 common shares at an exercise price of $9.60 per share, subject
to adjustment to prevent dilution. The underwriter's warrants will
expire on March 4, 1997. As a result of dilution, adjustments were
made; and some warrants have been exercised. Warrants to purchase
36,563 common shares at an exercise price of $7.81, as adjusted,
remained outstanding at June 30, 1996.
In March 1994, the Company completed a second underwritten public
offering of 935,200 common shares, at an initial price to the public of
$5.125 per share. The net proceeds to the Company, after deducting
expenses of the offering, was $3,927,074. Under the terms of the
underwriting agreement for the public offering, the Company sold to the
underwriter, for $5, warrants to purchase 90,000 common shares at an
exercise price of $7.18 per share, subject to adjustment to prevent
dilution. These underwriter's warrants will expire on March 4, 2000.
Some warrants have been exercised and at June 30, 1996, warrants to
purchase 81,000 common shares remained outstanding.
32
<PAGE>
The Board of Directors of the Company adopted the 1992 Stock Option
Plan (the "Plan") in September 1992, which was approved by the
shareholders at the 1992 Annual Meeting of Shareholders, on December 1,
1992. Under the Plan, as amended, the Company has reserved 400,000
Common Shares for issuance under options granted to eligible persons.
No options may be granted under the Plan more than ten years after the
date the Plan was adopted by the Board of Directors, and no options
granted under the Plan may be exercised after the expiration of ten
years from the date of grant.
At June 30, 1996, options for the purchase of 230,000 shares under the
Plan were held by employees, officers, directors, members of the
scientific advisory board and certain consultants. Such options are
exercisable at prices ranging from $1.99 to $10.79 beginning from one
to two years after the grant date and expire after five to ten years
from the grant date. Certain options require the achievement of
performance criteria. At June 30, 1996, 167,498 options were
exercisable at prices ranging from $1.99 to $10.79. Options for 57,000
common shares have been exercised as of June 30, 1996. During fiscal
1996, 62,000 options were granted.
During 1996, certain consultants agreed to accept stock options as full
or partial payment for the services they render to the Company. Options
to purchase a total of 60,000 shares were issued to those consultants.
The fair value of the consulting services is the basis for recording
the transaction in the Company's financial records and will be
recognized as the related services are performed ($25,000 in fiscal
1996).
During September 1995, the Company entered into an agreement with a
firm to act as its financial advisor. In exchange for financial
consulting services associated in part with a plan to secure additional
capital, the Company issued to the financial advisor warrants to
purchase 100,000 common shares at a price of $6 per share, and the
Company agreed to issue additional warrants to purchase up to an
additional 200,000 common shares at a price equal to the greater of (a)
150% of the average market price of the common shares during the three
months prior to grant or (b) $6 per share. The additional warrants were
to be issued in equal quarterly installments over a two year period,
beginning October 15, 1995. The Company may terminate the financial
advisory agreement on 30 days notice, in which case the next warrant
issuance would be accelerated to the date on which notice of
termination is given, but no additional warrants would be issued. As of
June 30, 1996, the total number of warrants to purchase Common Shares
issued was 175,000; 150,000 of which will be exercisable at a price of
$6 per share, and 25,000 of which will be exercisable at a price of
$7.32 per share. As of July 15, 1996, warrants to purchase an
additional 25,000 shares were issued, which will be exercisable at a
price of $30.04 per share.
The total value of these warrants at the agreement date was estimated
to be approximately $300,000. The financial advisor was assisting the
Company in identifying and negotiating with potential investors and
investment bankers. It was the Company's expectation to complete a
financing by the first quarter of fiscal 1997 and to include this
amount in expenses of the offering. During the fourth quarter of 1996,
the Company determined that the financing would not occur within its
initial timing estimate and accordingly capitalized the warrant value
and is amortizing this amount over the term of the agreement.
33
<PAGE>
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation," which the Company
will adopt in fiscal year 1997. Pursuant to the new standard, companies
are encouraged, but are not required, to adopt the fair value method of
accounting for employee stock-based transactions. Companies are also
permitted to continue to account for such transactions under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," but would be required to disclose pro forma results of
operations in a note to the financial statements and, if presented, per
share amounts as if the company had applied the new method of
accounting. The Company has not yet determined if it will elect to
change to the fair value method, nor has it determined the effect the
new standard will have on operating results and related per share
amounts should it elect to make such change. Adoption of the new
standard will have no effect on the Company's cash flows.
In June 1994, the Board of Directors authorized management to
repurchase up to 200,000 shares of the Company's common shares at
market price at the time of purchase. As of June 30, 1996, 90,800
shares have been repurchased and retired.
6. RELATED PARTY TRANSACTIONS
During the years ended June 30, 1994, 1995 and 1996, $9,230, $81,043,
and $19,940 in fees for consulting services was paid to a
shareholder/member of the Board of Directors.
7. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
Summarized results of operations for each quarter of fiscal 1994, 1995
and 1996 are as follows:
<CAPTION>
First Second Third Fourth Total
1994 Quarter Quarter Quarter Quarter Year
<S> <C> <C> <C> <C> <C>
Net loss $318,717 $431,161 $301,441 $495,634 $1,546,953
Net loss per share $ .18 $ .25 $ .15 $ .18 $ .76
1995
Net loss $483,737 $631,714 $553,095 $709,201 $2,377,747
Net loss per share $ .18 $ .24 $ .21 $ .27 $ .90
1996
Net loss $377,407 $463,395 $413,230 $711,303 $1,965,335
Net loss per share $ .13 $ .18 $ .16 $ .27 $ .75
</TABLE>
34
<PAGE>
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.
Directors and Executive Officers
<TABLE>
The names and ages of the directors and executive officers of the
Company are as follows:
<CAPTION>
Name Age Position
<S> <C> <C>
Paul Segall, Ph.D. 54 President, Chief Executive Officer and Director
Judith Segall 43 Secretary, Vice President of Technology and
Director
Victoria Bellport 31 Chief Operating and Financial Officer, Vice
President of Operations, Treasurer and Director
Hal Sternberg, Ph.D. 43 Vice President of Research and Director
Harold Waitz, Ph.D. 54 Vice President of Engineering and Director
Ronald S. Barkin 50 Director
</TABLE>
Paul Segall, Ph.D., 54, is President and Chief Executive Officer of
BioTime and has served as a director of the Company since 1990. He was a
research scientist for Cryomedical Sciences, Inc. ("CMSI") and a member of its
Board of Directors from 1987 to December 1990, serving as Director of Research
and Vice President of Research for CMSI, from April 1988 until 1989. Dr. Segall
received a Ph.D. in Physiology from the University of California at Berkeley in
1977.
Victoria Bellport, 31, is Chief Financial Officer and Executive Vice
President of BioTime and has been a director of the Company since 1990. Ms.
Bellport received a B.A. in Biochemistry from the University of California at
Berkeley in 1988.
Hal Sternberg, Ph.D., 43, is Vice President of Research of BioTime and
has been a director of the Company since 1990. He was a research scientist for
CMSI from 1987 to December 1990, serving as Vice President of Biochemistry for
CMSI from November 1987 to 1989. Dr. Sternberg was a visiting scientist and
research Associate at the University of California at Berkeley from 1985-1988,
where he supervised
35
<PAGE>
a team of researchers studying Alzheimer's Disease. Dr. Sternberg
received his Ph.D. from the University of Maryland in Biochemistry in 1982.
Harold Waitz, Ph.D., 54, is Vice President of Engineering of BioTime
and has been a director of the Company since 1990. He was a research scientist
for CMSI from 1987 to December 1990, serving as Vice President of Technology for
CMSI from November 1987 to 1989. From 1986-1988, Dr. Waitz served as Vice
President of Research at the Winters Institute, a non-profit biomedical research
institution, at which Dr. Waitz studied arteriosclerosis in primates. He
received his Ph.D. in Biophysics and Medical Physics from the University of
California at Berkeley in 1983.
Ronald S. Barkin, 51, has been a director of the Company since 1990.
Mr. Barkin is an attorney with a background in civil and corporate law. He is an
active member of the California Bar, and has practiced in that state since 1971.
Judith Segall, 43, has been Vice President of Technology and Secretary
of BioTime since 1990 and has been a director since 1996. Ms. Segall previously
served as a director of the Company from 1990 through 1994. Ms. Segall received
a B.S. in Nutrition and Clinical Dietetics from the University of California at
Berkeley in 1989.
There are no family relationships among the directors or officers of
the Company, except that Paul Segall and Judith Segall are husband and wife.
Mr. Lawrence Cohen retired as Chairman of the Board of the Company
in the first quarter of fiscal 1997.
Directors' Meetings, Compensation and Committees of the Board
The Board of Directors does not have a standing Audit Committee,
Compensation Committee, or Nominating Committee. Nominees to the Board of
Directors are selected by the entire Board.
The Board of Directors has a Stock Option Committee that administers
the Company's 1992 Stock Option Plan and makes grants of options to key
employees, consultants, scientific advisory board members and independent
contractors of the Company. The members of the Stock Option Committee are
Victoria Bellport and Paul Segall. The Stock Option Committee was formed during
September 1992.
During the fiscal year ended June 30, 1996, the Board of Directors met
nine times. No director attended fewer than 75% of the meetings of the Board or
any committee on which they served.
Directors of the Company and members of committees of the Board of
Directors who are employees of the Company are not compensated for serving as
directors or attending meetings of the Board or committees of the Board.
Directors are entitled to reimbursements for their out-of-pocket expenses
incurred in attending meetings of the Board or committees of the Board.
Directors who are employees of the Company are also entitled to receive
compensation in such capacity. Ronald S. Barkin, the only director who is not an
employee of the Company, received a fee of $200 per hour for attending meetings
of the Board and for performing other duties as a director and consultant to the
Company.
36
<PAGE>
Compliance with Section 16(a) of the Securities Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
persons who own more than ten percent (10%) of a registered class of the
Company's equity securities to file with the Securities and Exchange Commission
(the "SEC") initial reports of ownership and reports of changes in ownership of
Common Shares and other equity securities of the Company. Officers, directors
and greater than ten percent beneficial owners are required by SEC regulation to
furnish the Company with copies of all reports they file under Section 16(a).
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with during the fiscal year ended June 30, 1996.
Item 11. Executive Compensation.
None of the Company's executive officers received compensation from the
Company in excess of $100,000 during the fiscal year ended June 30, 1996. The
Company has entered into a new five-year employment agreement (the "Employment
Agreement") with Paul Segall, the President and Chief Executive Officer of the
Company. The Employment Agreement will expire on December 31, 2000 but may
terminate prior to the end of the term if Dr. Segall (1) dies, (2) leaves the
Company, (3) becomes disabled for a period of 90 days in any 150 day period, or
(4) is discharged by the Board of Directors for failure to carry out the
reasonable policies of the Board, persistent absenteeism, or a material breach
of a covenant. Under his Employment Agreement, Dr. Segall is presently receiving
an annual salary of $85,000. Dr. Segall will receive a one-time cash bonus of
$25,000 if the Company receives at least $1,000,000 of equity financing from a
pharmaceutical company. Dr. Segall will be entitled to seek a modification of
his Employment Agreement before the expiration of the five year term if the
market value of the Company's outstanding capital stock exceeds $75,000,000.
In the event of Dr. Segall's death during the term of his Employment
Agreement, the Company will pay his estate his salary for a period of six month
or until December 31, 2000, whichever first occurs. In the event that Dr.
Segall's employment terminates, voluntarily or involuntarily, after a change in
control of the Company through an acquisition of voting stock, an acquisition of
the Company's assets, or a merger or consolidation of the Company with another
corporation or entity, Dr. Segall will be entitled to severance compensation
equal to the greater of (a) 2.99 times his average annual compensation for the
preceding five years and (b) the balance of his base salary for the unexpired
portion of the term of his Employment Agreement.
The Board of Directors has also approved employment agreements that
contain the same or similar change of control severance benefits for the other
executive officers of the Company.
Dr. Segall has also executed an Intellectual Property Agreement which
provides that the Company is the owner of all inventions developed by Dr. Segall
during the course of his employment.
37
<PAGE>
The following table summarizes certain information concerning the
compensation paid to Dr. Segallduring the last three fiscal years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation Compensation
Name ------------------- ------------
and
Principal
Position Year Salary($) Bonus Stock Options
- - ----------- ----- --------- ------ -------------
<S> <C> <C> <C> <C>
Paul Segall 1996 $76,041
Chief Executive 1995 $67,500
Officer 1994 $63,796 $25,000
</TABLE>
Stock Option Plan
During 1992, the Company adopted the 1992 Stock Option Plan and granted
to Paul Segall options to purchase 21,000 Common Shares at $9.22 per share. The
options granted to Dr. Segall will expire five years after the date of grant,
and became exercisable in three equal annual installments. No options were
granted to any of the Company's executive officers during the last fiscal year.
The following table provides information with respect to Dr. Segall
concerning the exercise of options during the last fiscal year and unexercised
options held as of June 30, 1996.
<TABLE>
Aggregated Options Exercised in Last Fiscal Year,
and Fiscal Year-End Option Values
<CAPTION>
Number of
Shares Number of Value of Unexercised
Acquired Value Unexercised Options at In-the-Money Options at
on Realized June 30, 1996 June 30, 1996(1)
Name Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
- - ----------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul Segall 0 -- 21,000 0 $239,610 0
<FN>
(1) Based on the average of the high and low bid prices of a Common Share
($20.63) as reported on the NASDAQ Small Cap Market System on such date.
</FN>
</TABLE>
38
<PAGE>
<TABLE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information as of August 31, 1996
concerning beneficial ownership of Common Shares by each shareholder known by
the Company to be the beneficial owner of 5% or more of the Company's Common
Shares, and the Company's executive officers and directors:
<CAPTION>
Number of Percent of
Shares Total
---------- ----------
<S> <C> <C>
Alfred D. Kingsley(1)
Gary K. Duberstein
Greenbelt Corp. 302,500 10.2%
Greenway Partners, L.P.
Greenhouse Partners, L.P.
277 Park Avenue, 27th floor
New York, NY 10017
Paul and Judith Segall (2) 217,035 7.8 %
Spinnaker Technology Fund, L.P. (3)
SoundView Asset Management, Inc.
22 Gatehouse Road
Stamford, Connecticut 06902 192,300 6.9
Harold D. Waitz (4) 153,790 5.5
Hal Sternberg (5) 145,890 5.2
Victoria Bellport 59,445 2.1
Ronald S. Barkin(6) 31,670 1.1
All officers and directors
as a group (6 persons)(7) 607,830 21.8%
- - ---------------------------
<FN>
(1) Includes 200,000 Common Shares issuable upon the exercise of
certain warrants owned beneficially by Greenbelt Corp. Mr. Kingsley and
Mr. Duberstein may be deemed to beneficially own the warrant shares
that Greenbelt Corp. beneficially owns. Includes 25,000 Common Shares
owned by Greenway Partners, L.P. Greenhouse Partners, L.P. is the
general partner of Greenway Partners, L.P., and Mr. Kingsley and Mr.
Duberstein are the general partners of Greenhouse Partners, L.P.
Greenhouse Partners, L.P., Mr. Kingsley, and Mr. Duberstein may be
deemed to beneficially own the common shares that Greenway Partners,
L.P. beneficially owns. Includes 74,500 Common Shares owned solely by
Mr. Kingsley, as to which Mr. Duberstein disclaims beneficial
ownership. Includes 3,000 Common Shares owned solely by Mr. Duberstein,
as to which Mr. Kingsley disclaims beneficial ownership.
(2) Includes 128,690 shares held of record by Paul Segall and 58,345
shares held of record by Judith Segall. Includes 21,000 Common Shares
issuable upon the exercise of certain options.
(3) SoundView Asset Management, Inc. is the general partner of
Spinnaker Technology Fund, L.P. and has disclaimed beneficial ownership
of such shares.
39
<PAGE>
(4) Includes 21,000 Common Shares issuable upon the exercise of certain
options.
(5) Includes 21,000 Common Shares issuable upon the exercise of certain
options.
(6) Includes 15,000 Common Shares issuable upon the exercise of certain
options.
(7) Includes 78,000 Common Shares issuable upon the exercise of certain
options.
</FN>
</TABLE>
Item 13. Certain Relationships and Related Transactions.
During the twelve months ended June 30, 1996, $19,940 in fees for
consulting services was paid to Ronald S. Barkin, a member of the Board of
Directors.
During September 1995, the Company entered into an agreement for
financial advisory services with Greenbelt Corp., a corporation controlled by
Alfred D. Kingsley and Gary K. Duberstein. Under this agreement the Company
issued to the financial advisor warrants to purchase 100,000 common shares at a
price of $6 per share, and the Company agreed to issue additional warrants to
purchase up to an additional 200,000 common shares at a price equal to the
greater of (a) 150% of the average market price of the common shares during the
three months prior to issuance and (b) $6 per share. The additional warrants
were to be issued in equal quarterly installments over a two year period,
beginning October 15, 1995. The Company may terminate the financial advisory
agreement on 30 days notice, in which case the next warrant issuance would be
accelerated to the date on which notice of termination is given, but no
additional warrants would be issued. The exercise price and number of common
shares for which the warrants may be exercised are subject to adjustment to
prevent dilution in the event of a stock split, combination, stock dividend,
reclassification of shares, sale of assets, merger or similar transaction. As of
June 30, 1996, the total number of warrants to purchase common shares issued was
175,000; 150,000 of which will be exercisable at a price of $6 per share, and
25,000 of which will be exercisable at a price of $7.32 per share. As of July
15, 1996, warrants to purchase an additional 25,000 shares were issued, which
will be exercisable at a price of $30.04 per share.
Under the agreement, upon the request of Greenbelt Corp., the Company
will file a registration statement to register the warrants and underlying
Common Shares for sale under the Securities Act of 1933, as amended (the "Act")
and applicable state securities or "Blue Sky" laws. The Company will bear the
expenses of registration, other than any underwriting discounts that may be
incurred by Greenbelt Corp. in connection with a sale of the warrants or common
shares. The Company shall not be obligated to file more than two such
registration statements, other than registration statements on Form S-3.
Greenbelt Corp. also is entitled to include warrants and common shares in any
registration statement filed by the Company to register other securities for
sale under the Act.
The Company has agreed to reimburse Greenbelt Corp. for all reasonable
out-of-pocket expenses incurred in connection with its engagement as financial
advisor, and to indemnify Greenbelt Corp. and the officers, affiliates,
employees, agents, assignees, and controlling person of Greenbelt Corp. from any
liabilities arising out of or in connection with actions taken on behalf of the
Company under the agreement.
40
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
<TABLE>
(a-1) Financial Statements.
The following financial statements of BioTime, Inc. are filed in the Form 10-K:
<CAPTION>
Page
-----
<S> <C>
Report of Independent Auditors 23
Balance Sheet at June 30, 1996 and 1995 24
Statements of Operations for each of the three years in the period ending June
30, 1996, and for the period from
November 30, 1990 (inception) to June 30, 1996 25
Statements of Shareholders' Equity for the period from
November 30, 1990 (inception) to June 30, 1996 26-27
Statements of Cash Flows for each of the three years in the period ending June
30, 1996, and for the period from November 30, 1990 (inception) to June 30, 1996
28-29
Notes to Financial Statements 30-34
</TABLE>
41
<PAGE>
(a-3) Exhibits.
Exhibit
Numbers Description
3 (a) Articles of Incorporation as Amended.+
(c) By-Laws, As Amended.#
4 (a) Specimen of Common Share Certificate.+
(b) Form of Warrant.#
(c) Form of Underwriter's Warrant.#
(d) Form of Underwriter's Warrant.**
10 (a) Lease Agreement dated July 1, 1994 between the Registrant and
Robert and Norah Brower, relating to principal executive offices of
the Registrant.*
10 (b) Employment Agreement dated June 1, 1996 between the Company and
Paul Segall.++
10 (c) Employment Agreement dated June 1, 1996 between the Company and
Hal Sternberg.++
10 (d) Employment Agreement dated June 1, 1996 between the Company and Harold
Waitz.++
10 (e) Employment Agreement dated June 1, 1996 between the Company and Judith
Segall.++
10 (f) Employment Agreement dated June 1, 1996 between the Company and
Victoria Bellport.++
10 (g) Intellectual Property Agreement between the Company and Paul
Segall.+
10 (h) Intellectual Property Agreement between the Company and Hal
Sternberg.+
10 (i) Intellectual Property Agreement between the Company and Harold
Waitz.+
10 (j) Intellectual Property Agreement between the Company and Judith
Segall.+
10 (k) Intellectual Property Agreement between the Company and Victoria
Bellport.+
10 (l) Agreement between CMSI and BioTime Officers Releasing Employment
Agreements, Selling Shares, and Transferring Non-Exclusive License.+
42
<PAGE>
10(m) Agreement for Trans Time, Inc. to Exchange CMSI Common Stock for
BioTime, Inc. Common Shares.+
10 (n) 1992 Stock Option Plan, as amended.^
10 (o) Employment Agreement dated April 1, 1994 between the Company and
Lawrence Cohen.*
10 (p) Intellectual Property Agreement between the Company and Lawrence
Cohen.^
10 (q) Severance Agreement, dated August 19, 1996 between the Company
and Lawrence Cohen.++
23 (a) Consent of Deloitte & Touche LLP++
+ Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992, respectively.
# Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992, respectively.
^ Incorporated by reference to the Company's Form 10-K for the fiscal year ended
June 30, 1993.
** Incorporated by reference to Registration Statement on Form S-1, File Number
33-73256 filed with the Securities and Exchange Commission on December 22, 1993,
and Amendment No.1 thereto filed with the Securities and Exchange Commission on
February 24, 1994.
* Incorporated by reference to the Company's Form 10-K for the fiscal year ended
June 30, 1994.
++ Filed herewith.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized on the
24th day of September 1996.
BIOTIME, INC.
/s/ Paul E. Segall
By: -----------------------------
Paul E. Segall, Ph.D.
President and Chief Executive
Officer (Principal executive
officer)
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C> <C>
/s/ Paul E. Segall
- - -------------------------------
President, Chief Executive Officer and September 24, 1996
Paul E. Segall, Ph.D. Director (Principal Executive Officer)
/s/ Harold D. Waitz
- - -------------------------------
Vice President and Director September 24, 1996
Harold D. Waitz, Ph.D.
/s/ Hal Sternberg
- - -------------------------------
Vice President and Director September 24, 1996
Hal Sternberg, Ph.D.
/s/ Victoria Bellport
- - -------------------------------
Chief Financial Officer and September 24, 1996
Victoria Bellport Director (Principal Financial and
Accounting Officer)
/s/ Judith Segall
- - -------------------------------
Vice President, Corporate Secretary September 24, 1996
Judith Segall and Director
/s/ Ronald S. Barkin
- - -------------------------------
Director September 24, 1996
Ronald S. Barkin
</TABLE>
44
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made June 1, 1996, by and between BioTime, Inc. (the
"Company"), and Paul E. Segall, Ph.D. (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee, and Employee is
willing to accept such employment, all on the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee, and Employee hereby
accepts employment with the Company on the terms and conditions herein set
forth.
2. Term of Agreement. This Agreement shall commence on June 1, 1996 and
shall continue in effect until December 31, 2000 (the "Expiration Date"), unless
terminated pursuant to the express provisions of this Agreement.
3. Renewal. This Agreement shall be renewed automatically for an
additional one (1) year period on January 1, 2001 and on each anniversary
thereof, unless one party gives the other advance written notice of non-renewal
at least sixty (60) days prior to such date. Either party may elect not to renew
this Agreement with or without cause.
4. Position; Duties. Employee shall be employed in the position and
shall perform the duties and functions set forth on EXHIBIT A, and such
additional duties and functions as are normally carried out by an executive in a
comparable position with a developer of pharmaceutical or medical products, and
as the Board of Directors or a duly authorized officer of the Company shall from
time to time reasonably determine. Employee shall devote his or her best
efforts, skills and abilities, on a full-time basis, exclusively to the
Company's business pursuant to, and in accordance with, reasonable business
policies and procedures, as fixed from time to time by the Board of Directors of
the Company (the "Board of Directors"). Employee covenants and agrees that he or
she will faithfully adhere to and fulfill such policies as are established from
time to time by the Board of Directors.
5. Compensation
5.1 Salary and Bonuses. During the term of this Agreement, the
Company shall pay to the Employee:
5.1.1 Base Salary. A base annual salary (the "Base
Salary") in the following amounts: Eighty-Five Thousand Dollars ($85,000) during
the calendar year beginning
1
<PAGE>
January 1, 1996; Ninety-Two Thousand Dollars ($92,000) during the calendar year
beginning January 1, 1997; Ninety-Nine Thousand Dollars ($99,000) during the
calendar year beginning January 1, 1998; One Hundred Six Thousand Dollars
($106,000) during the calendar year beginning January 1, 1999; and One Hundred
Thirteen Thousand Dollars ($113,000) during the calendar year beginning January
1, 2000. The Base Salary shall be payable in equal semi-monthly installments or
in such other installments as may be agreed upon between the parties. The Base
Salary may be increased from time to time in the discretion of the Board of
Directors.
5.1.2 Financing Bonus. Employee shall receive a
one-time cash bonus in the amount of Twenty-Five Thousand Dollars ($25,000) if
the Company receives at least One Million Dollars ($1,000,000) of equity
financing from a pharmaceutical company. Such bonus shall be paid within thirty
(30) days after the Company has received such $1,000,000. For the purpose of
this paragraph the following provisions shall apply: (a) all payments made by a
pharmaceutical company on an installment basis, or upon the exercise of options,
warrants or other rights will be aggregated; and (b) in the event of an exchange
or conversion of any debt security or evidence of indebtedness for or into any
equity security of the Company, the indebtedness so converted or exchanged
(including all principal and accrued interest) shall be deemed paid to the
Company as equity financing on the date of such exchange or conversion. The term
"equity financing" means the payment of cash to the Company for the purchase of
(a) shares of capital stock of any class of the Company (whether or not
convertible into another class of capital stock of the Company), and (b) any
option, warrant or other security (other than a debt security or instrument
evidencing indebtedness of the Company) entitling the holder thereof to purchase
or otherwise acquire capital stock.
5.1.3 Other Bonuses. The Company may pay Employee such
bonuses, if any, as the Board of Directors may, from time to time determine.
5.2 Benefit Plans. Employee shall be eligible (to the extent
he or she qualifies) to participate in any retirement, pension, life, health,
accident and disability insurance, stock option plan or other similar employee
benefit plans which may be adopted by the Company (or any other member of a
consolidated group of which the Company is a part) for its executive officers or
other employees; provided, that Employee shall not be eligible to participate in
the Company's 1992 Stock Option Plan (or any similar stock option or stock
purchase plan) so long as Employee is a member of the Stock Option Committee (or
other committee governing such stock option or stock purchase plan) appointed by
the Board of Directors.
5.3 Expense Reimbursement. The Company shall reimburse
Employee for all reasonable expenses incurred by Employee in connection with the
performance of his or her employment duties, subject to the Company's policies
and procedures in effect from time to time, and provided that Employee submits
supporting vouchers.
5.4 Vacation; Sick Leave. Employee shall be entitled to four
weeks of vacation, without reduction in compensation, during each calendar year.
Such vacation shall be taken at
2
<PAGE>
such time as is consistent with the needs and policies of the Company. All
vacation days shall accrue based upon days of service. The Company may, from
time to time, adopt policies governing the disposition of unused vacation days
remaining at the end of the Company's fiscal year; which policies may govern
whether unused vacation days will be paid, lost, or carried over into subsequent
fiscal years. Employee shall also be entitled to leave from work, without
reduction in compensation, due to illness to the extent allowed by the Company
consistent with its policies and procedures and subject to the provisions of
this Agreement governing termination due to disability, sickness or illness.
6. Termination. This Agreement shall terminate prior to the Expiration
Date upon the happening of any of the following events:
6.1 Death. Automatically and without notice upon the death of
Employee;
6.2 Voluntary Termination by Employee. By Employee voluntarily
leaving the employ of the Company with or without the consent of the Company
(which Employee shall be entitled to do upon thirty (30) days written notice);
6.3 Disability. Upon written notice of termination from the
Company to Employee, after Employee becomes disabled, either totally or
partially, for a period of ninety (90) days during any one hundred fifty (150)
day period, so that he or she is prevented from performing his or her principal
duties pursuant to this Agreement; provided, that the Company's obligation to
pay the compensation due under Section 5 shall continue until this Agreement is
so terminated.
6.4 For Cause. Upon discharge of Employee, on written notice,
by the Board of Directors on grounds of: (i) conviction of a crime of moral
turpitude; (ii) deliberate failure to carry out the reasonable policies of the
Board of Directors, as they may relate to Employee's duties under this
Agreement; (iii) chronic alcohol or drug abuse; (iv) fraud, embezzlement or
misappropriation of Company assets; (v) disloyal, dishonest or illegal conduct
in the course of his or her employment; or (vi) a material default or breach of
any of the covenants made by Employee in this Agreement. The written notice
delivered by the Board of Directors shall specify the ground for termination and
shall be supported by a statement of all relevant facts constituting cause for
termination. Any termination under this Section 6.4 shall be deemed a
termination for "cause".
6.5 Notice and Opportunity to Cure. If the Company intends to
terminate this Agreement under clause (ii) or (vi) of Section 6.4, and if all of
Employee's acts or omissions giving rise to such determination to terminate this
Agreement are, in the reasonable determination of the Board of Directors,
susceptible to substantially complete cure by Employee within a period of thirty
(30) days, the written notice given to Employee pursuant to Section 6.4 shall
state that the effective date of termination shall be thirty (30) days from the
date of such notice, and such notice shall be rescinded if Employee effects a
substantially complete cure within such thirty (30) day period.
3
<PAGE>
6.6 Payment of Compensation After Termination . Upon the
occurrence of any events set forth in Sections 6.1 through 6.4 hereof or Section
6.8, the Company shall be obligated to pay to Employee (or Employee's estate in
the event of Employee's death) (i) the compensation due him or her under Section
5.1.1 up to the date of termination; (ii) any unpaid bonus previously awarded by
the Board of Directors; and (iii) compensation for any earned but unused
vacation, which compensation shall be paid at the Base Salary rate in effect at
the time such unused vacation accrued.
6.7 Payment Upon Termination by the Company Without Cause. In
the event this Agreement is terminated by the Company for a reason other than
one of those set forth in Section 6.3 or Section 6.4 or Section 6.8, the Company
shall be required to continue to pay Employee, as severance compensation, the
compensation due him or her under Section 5.1.1, for the unexpired term of this
Agreement (without regard to Section 3). Such severance compensation shall be
paid for a period equal to the number of weeks remaining in the unexpired term
of this Agreement (without regard to Section 3). Employee may elect to receive
the severance compensation (or such part of the severance compensation as shall
then remain unpaid) in a lump sum. Such election may be made by written notice
to the Company, and if such election is made the lump sum shall be paid by the
Company within ten (10) days after such notice.
6.8 Change of Control. Notwithstanding the foregoing, the
Company or its successor, or Employee may terminate this Agreement, with or
without cause, in connection with a Change of Control of the Company. In the
event of such a termination, the Company shall pay Employee on the date of
termination a lump sum payment equal to the greater of (a) 2.99 times Employee's
"Base Amount" and (b) the compensation due him or her under Section 5.1.1 for
the unexpired term of this Agreement (without regard to Section 3). Such payment
shall be in addition to any unpaid amounts otherwise then due Employee under
Section 5 of this Agreement. Any termination of this Agreement, except
termination under Sections 6.1 through 6.4, within twelve months after either
(i) the earliest date on which the Company enters into a letter of intent,
memorandum of agreement, or similar document leading to a Change of Control, or
(ii) the effective date of a Change of Control, shall be deemed conclusively to
be a termination in connection with a Change of Control. If the Company or its
successor causes a material reduction in Employee's responsibilities or
compensation after a Change of Control, then Employee may at Employee's option
terminate this Agreement under Section 6.2 any time within one hundred eighty
(180) days after such reduction, and such resignation shall be deemed a
termination by the Company in connection with a Change of Control and shall
entitle Employee to the benefits of this Section 6.8. For purposes of this
Agreement, the following definitions shall apply.
6.8.1 "Change of Control" means (i) the acquisition of
Voting Securities of the Company by a Person or an Affiliated Group entitling
the holder thereof to elect a majority of the directors of the Company;
provided, that an increase in the amount of Voting Securities held by a Person
or Affiliated Group who previously held sufficient Voting Securities to elect a
majority of the directors shall not constitute a Change of Control; and
provided, further, that an
4
<PAGE>
acquisition of Voting Securities by one or more Persons acting as an underwriter
in connection with a sale or distribution of such Voting Securities shall not
constitute a Change of Control under this clause (i); (ii) the sale of all or
substantially all of the assets of the Company; or (iii) a merger or
consolidation of the Company with or into another corporation or entity in which
the stockholders of the Company immediately before such merger or consolidation
do not own, in the aggregate, Voting Securities of the surviving corporation or
entity (or the ultimate parent of the surviving corporation or entity) entitling
them, in the aggregate (and without regard to whether they constitute an
Affiliated Group) to elect a majority of the directors or persons holding
similar powers of the surviving corporation or entity (or the ultimate parent of
the surviving corporation or entity); provided, however, that in no event shall
any transaction described in clauses (i), (ii) or (iii) be a Change of Control
if all of the Persons acquiring Voting Securities or assets of the Company or
merging or consolidating with the Company are one or more direct or indirect
subsidiary or parent corporations of the Company.
6.8.2 "Voting Securities" means shares of capital stock
or other equity securities entitling the holder thereof to regularly vote for
the election of directors (or for person performing a similar function if the
issuer is not a corporation), but does not include the power to vote upon the
happening of some condition or event which has not yet occurred.
6.8.3 "Person" means any natural person or any
corporation, partnership, limited liability company, trust, unincorporated
business association or other entity.
6.8.4 "Affiliated Group" means (i) a Person and one or
more other Persons in control of, controlled by, or under common control with
such Person; and (ii) two or more Persons who, by written agreement among them,
act in concert to acquire Voting Securities entitling them to elect a majority
of the directors of the Company.
7. Renegotiation. Employee shall be entitled to seek a modification of
this Agreement prior to the Expiration Date if the market value of the Company's
outstanding capital stock exceeds $75,000,000. The Company will negotiate in
good faith with Employee in connection with any such request by the Employee for
such a modification of this Agreement.
8. Intellectual Property Agreement. Employee acknowledges that the
Intellectual Property Agreement previously executed and delivered by Employee
shall remain in effect and shall not be affected by the terms of this Agreement
or the termination of this Agreement.
9. Entire Agreement. The provisions of this Agreement, including the
exhibits attached to this Agreement, constitute the entire agreement between
Employee and the Company with respect to the subject matter of this Agreement,
and supersede any prior oral understanding. No modification, supplement or
discharge of this Agreement shall be effective unless in writing and executed on
behalf of the party to be charged.
5
<PAGE>
10. Waiver. No waiver by either party of any condition, term or
provision of this Agreement shall be deemed to be a waiver of any proceeding or
succeeding breach of the same or of any other condition, term or provision of
this Agreement.
11. Assignability. This Agreement, and the rights and obligations of
the parties under this Agreement, may not be assigned by Employee. The Company
may assign any of its rights and obligations under this Agreement to any
successor or surviving corporation resulting from a merger, consolidation, sale
of assets or stock, or other corporate reorganization, upon condition that the
assignee shall assume, either expressly or by operation of law, all of the
Company's obligations under this Agreement.
12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13. Construction. This Agreement shall be construed in accordance with
the laws of the State of California.
14. Survival. This Section 14 and the covenants and agreements
contained in Sections 5.3, 6.6, 6.7, and 6.8 of this Agreement shall survive
termination of Employee's employment.
15. Notices. Any notices or other communication required or permitted
to be given under this Agreement shall be in writing and shall be sent by United
States mail, first class certified or registered postage prepaid, return receipt
requested, or personally delivered to the parties at the following addresses:
To the Company: BioTime, Inc.
935 Pardee Street
Berkeley, California 94710
Attention: President
To Employee: Paul E. Segall, Ph.D.
935 Pardee Street
Berkeley, California 94710
A notice sent by certified or registered mail shall be deemed delivered on the
fourth day after deposit in the United States mail, postage prepaid, and
addressed as aforesaid. Any party may change its address for notice by giving
notice to the other party in the manner provided in this Section.
16. Unenforceable Provisions. If all or part of any one or more of the
provisions contained in this Agreement is for any reason held to be invalid,
illegal, or unenforceable in any respect, the invalidity, illegality, or
unenforceability shall not affect any other provisions, and this
6
<PAGE>
Agreement shall be equitably construed as if it did not contain the invalid,
illegal, or unenforce able provision.
17. Section Headings. Section headings are for the convenience of the
parties and do not form a part of this Agreement.
18. Section and Other References. References in this Agreement to
Sections, subsections, and Exhibits are references to sections and subsections
in this Agreement and exhibits attached to this Agreement unless specified
otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
/s/ Paul E. Segall, Ph.D.
EMPLOYEE: __________________________
Paul E. Segall, Ph.D.
COMPANY: BIOTIME, INC.
/s/ Victoria Bellport
By: __________________________
Chief Financial Officer
Title: _______________________
7
<PAGE>
EXHIBIT A
DUTIES AND RESPONSIBILITIES
The Chief Executive Officer will be responsible for formulating and
overseeing execution of all aspects of the Company's operating plans (including
research and development, manufacturing and marketing) and financial plans in
conjunction with the Board of Directors, and for supervising and delegating
authority to the other officers of the Company. In such capacity, and subject to
the ultimate authority of the Board of Directors, the Chief Executive Officer
shall have the power and authority to review and approve or disapprove all
proposed plans, programs and contracts for: research and development of products
and technologies; manufacturing and marketing of products; acquisition or
disposition of plant, laboratory and office space, equipment and other assets;
licensing of technology; joint ventures and investments in other corporations,
partnerships and similar entities; employment or termination of employment of
employees of the Company; and budgets and financing for the operation of the
Company. Without limiting the generality of the foregoing, the Chief Executive
Officer shall represent the Company in the negotiation of contracts and
agreements with third parties, in regulatory matters involving government or
administrative bodies having jurisdiction over the Company or its operations,
and in other aspects of the Company's affairs.
1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made June 1, 1996, by and between BioTime, Inc. (the
"Company"), and Hal Sternberg, Ph.D. (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee, and Employee is
willing to accept such employment, all on the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee, and Employee hereby
accepts employment with the Company on the terms and conditions herein set
forth.
2. Term of Agreement. This Agreement shall commence on June 1, 1996 and
shall continue in effect until December 31, 2000 (the "Expiration Date"), unless
terminated pursuant to the express provisions of this Agreement.
3. Renewal. This Agreement shall be renewed automatically for an
additional one (1) year period on January 1, 2001 and on each anniversary
thereof, unless one party gives the other advance written notice of non-renewal
at least sixty (60) days prior to such date. Either party may elect not to renew
this Agreement with or without cause.
4. Position; Duties. Employee shall be employed in the position and
shall perform the duties and functions set forth on EXHIBIT A, and such
additional duties and functions as are normally carried out by an executive in a
comparable position with a developer of pharmaceutical or medical products, and
as the Board of Directors or a duly authorized officer of the Company shall from
time to time reasonably determine. Employee shall devote his or her best
efforts, skills and abilities, on a full-time basis, exclusively to the
Company's business pursuant to, and in accordance with, reasonable business
policies and procedures, as fixed from time to time by the Board of Directors of
the Company (the "Board of Directors"). Employee covenants and agrees that he or
she will faithfully adhere to and fulfill such policies as are established from
time to time by the Board of Directors.
5. Compensation
5.1 Salary and Bonuses. During the term of this Agreement, the
Company shall pay to the Employee:
5.1.1 Base Salary. A base annual salary (the "Base
Salary") in the following amounts: Eighty-Five Thousand Dollars ($85,000) during
the calendar year beginning
1
<PAGE>
January 1, 1996; Ninety-Two Thousand Dollars ($92,000) during the calendar year
beginning January 1, 1997; Ninety-Nine Thousand Dollars ($99,000) during the
calendar year beginning January 1, 1998; One Hundred Six Thousand Dollars
($106,000) during the calendar year beginning January 1, 1999; and One Hundred
Thirteen Thousand Dollars ($113,000) during the calendar year beginning January
1, 2000. The Base Salary shall be payable in equal semi-monthly installments or
in such other installments as may be agreed upon between the parties. The Base
Salary may be increased from time to time in the discretion of the Board of
Directors.
5.1.2 Financing Bonus. Employee shall receive a
one-time cash bonus in the amount of Twenty-Five Thousand Dollars ($25,000) if
the Company receives at least One Million Dollars ($1,000,000) of equity
financing from a pharmaceutical company. Such bonus shall be paid within thirty
(30) days after the Company has received such $1,000,000. For the purpose of
this paragraph the following provisions shall apply: (a) all payments made by a
pharmaceutical company on an installment basis, or upon the exercise of options,
warrants or other rights will be aggregated; and (b) in the event of an exchange
or conversion of any debt security or evidence of indebtedness for or into any
equity security of the Company, the indebtedness so converted or exchanged
(including all principal and accrued interest) shall be deemed paid to the
Company as equity financing on the date of such exchange or conversion. The term
"equity financing" means the payment of cash to the Company for the purchase of
(a) shares of capital stock of any class of the Company (whether or not
convertible into another class of capital stock of the Company), and (b) any
option, warrant or other security (other than a debt security or instrument
evidencing indebtedness of the Company) entitling the holder thereof to purchase
or otherwise acquire capital stock.
5.1.3 Other Bonuses. The Company may pay Employee such
bonuses, if any, as the Board of Directors may, from time to time determine.
5.2 Benefit Plans. Employee shall be eligible (to the extent
he or she qualifies) to participate in any retirement, pension, life, health,
accident and disability insurance, stock option plan or other similar employee
benefit plans which may be adopted by the Company (or any other member of a
consolidated group of which the Company is a part) for its executive officers or
other employees; provided, that Employee shall not be eligible to participate in
the Company's 1992 Stock Option Plan (or any similar stock option or stock
purchase plan) so long as Employee is a member of the Stock Option Committee (or
other committee governing such stock option or stock purchase plan) appointed by
the Board of Directors.
5.3 Expense Reimbursement. The Company shall reimburse
Employee for all reasonable expenses incurred by Employee in connection with the
performance of his or her employment duties, subject to the Company's policies
and procedures in effect from time to time, and provided that Employee submits
supporting vouchers.
5.4 Vacation; Sick Leave. Employee shall be entitled to four
weeks of vacation, without reduction in compensation, during each calendar year.
Such vacation shall be taken at
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such time as is consistent with the needs and policies of the Company. All
vacation days shall accrue based upon days of service. The Company may, from
time to time, adopt policies governing the disposition of unused vacation days
remaining at the end of the Company's fiscal year; which policies may govern
whether unused vacation days will be paid, lost, or carried over into subsequent
fiscal years. Employee shall also be entitled to leave from work, without
reduction in compensation, due to illness to the extent allowed by the Company
consistent with its policies and procedures and subject to the provisions of
this Agreement governing termination due to disability, sickness or illness.
6. Termination. This Agreement shall terminate prior to the Expiration
Date upon the happening of any of the following events:
6.1 Death. Automatically and without notice upon the death of
Employee;
6.2 Voluntary Termination by Employee. By Employee voluntarily
leaving the employ of the Company with or without the consent of the Company
(which Employee shall be entitled to do upon thirty (30) days written notice);
6.3 Disability. Upon written notice of termination from the
Company to Employee, after Employee becomes disabled, either totally or
partially, for a period of ninety (90) days during any one hundred fifty (150)
day period, so that he or she is prevented from performing his or her principal
duties pursuant to this Agreement; provided, that the Company's obligation to
pay the compensation due under Section 5 shall continue until this Agreement is
so terminated.
6.4 For Cause. Upon discharge of Employee, on written notice,
by the Board of Directors on grounds of: (i) conviction of a crime of moral
turpitude; (ii) deliberate failure to carry out the reasonable policies of the
Board of Directors, as they may relate to Employee's duties under this
Agreement; (iii) chronic alcohol or drug abuse; (iv) fraud, embezzlement or
misappropriation of Company assets; (v) disloyal, dishonest or illegal conduct
in the course of his or her employment; or (vi) a material default or breach of
any of the covenants made by Employee in this Agreement. The written notice
delivered by the Board of Directors shall specify the ground for termination and
shall be supported by a statement of all relevant facts constituting cause for
termination. Any termination under this Section 6.4 shall be deemed a
termination for "cause".
6.5 Notice and Opportunity to Cure. If the Company intends to
terminate this Agreement under clause (ii) or (vi) of Section 6.4, and if all of
Employee's acts or omissions giving rise to such determination to terminate this
Agreement are, in the reasonable determination of the Board of Directors,
susceptible to substantially complete cure by Employee within a period of thirty
(30) days, the written notice given to Employee pursuant to Section 6.4 shall
state that the effective date of termination shall be thirty (30) days from the
date of such notice, and such notice shall be rescinded if Employee effects a
substantially complete cure within such thirty (30) day period.
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6.6 Payment of Compensation After Termination . Upon the
occurrence of any events set forth in Sections 6.1 through 6.4 hereof or Section
6.8, the Company shall be obligated to pay to Employee (or Employee's estate in
the event of Employee's death) (i) the compensation due him or her under Section
5.1.1 up to the date of termination; (ii) any unpaid bonus previously awarded by
the Board of Directors; and (iii) compensation for any earned but unused
vacation, which compensation shall be paid at the Base Salary rate in effect at
the time such unused vacation accrued.
6.7 Payment Upon Termination by the Company Without Cause. In
the event this Agreement is terminated by the Company for a reason other than
one of those set forth in Section 6.3 or Section 6.4 or Section 6.8, the Company
shall be required to continue to pay Employee, as severance compensation, the
compensation due him or her under Section 5.1.1, for the unexpired term of this
Agreement (without regard to Section 3). Such severance compensation shall be
paid for a period equal to the number of weeks remaining in the unexpired term
of this Agreement (without regard to Section 3). Employee may elect to receive
the severance compensation (or such part of the severance compensation as shall
then remain unpaid) in a lump sum. Such election may be made by written notice
to the Company, and if such election is made the lump sum shall be paid by the
Company within ten (10) days after such notice.
6.8 Change of Control. Notwithstanding the foregoing, the
Company or its successor, or Employee may terminate this Agreement, with or
without cause, in connection with a Change of Control of the Company. In the
event of such a termination, the Company shall pay Employee on the date of
termination a lump sum payment equal to the greater of (a) 2.99 times Employee's
"Base Amount" and (b) the compensation due him or her under Section 5.1.1 for
the unexpired term of this Agreement (without regard to Section 3). Such payment
shall be in addition to any unpaid amounts otherwise then due Employee under
Section 5 of this Agreement. Any termination of this Agreement, except
termination under Sections 6.1 through 6.4, within twelve months after either
(i) the earliest date on which the Company enters into a letter of intent,
memorandum of agreement, or similar document leading to a Change of Control, or
(ii) the effective date of a Change of Control, shall be deemed conclusively to
be a termination in connection with a Change of Control. If the Company or its
successor causes a material reduction in Employee's responsibilities or
compensation after a Change of Control, then Employee may at Employee's option
terminate this Agreement under Section 6.2 any time within one hundred eighty
(180) days after such reduction, and such resignation shall be deemed a
termination by the Company in connection with a Change of Control and shall
entitle Employee to the benefits of this Section 6.8. For purposes of this
Agreement, the following definitions shall apply.
6.8.1 "Change of Control" means (i) the acquisition of
Voting Securities of the Company by a Person or an Affiliated Group entitling
the holder thereof to elect a majority of the directors of the Company;
provided, that an increase in the amount of Voting Securities held by a Person
or Affiliated Group who previously held sufficient Voting Securities to elect a
majority of the directors shall not constitute a Change of Control; and
provided, further, that an
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acquisition of Voting Securities by one or more Persons acting as an underwriter
in connection with a sale or distribution of such Voting Securities shall not
constitute a Change of Control under this clause (i); (ii) the sale of all or
substantially all of the assets of the Company; or (iii) a merger or
consolidation of the Company with or into another corporation or entity in which
the stockholders of the Company immediately before such merger or consolidation
do not own, in the aggregate, Voting Securities of the surviving corporation or
entity (or the ultimate parent of the surviving corporation or entity) entitling
them, in the aggregate (and without regard to whether they constitute an
Affiliated Group) to elect a majority of the directors or persons holding
similar powers of the surviving corporation or entity (or the ultimate parent of
the surviving corporation or entity); provided, however, that in no event shall
any transaction described in clauses (i), (ii) or (iii) be a Change of Control
if all of the Persons acquiring Voting Securities or assets of the Company or
merging or consolidating with the Company are one or more direct or indirect
subsidiary or parent corporations of the Company.
6.8.2 "Voting Securities" means shares of capital stock
or other equity securities entitling the holder thereof to regularly vote for
the election of directors (or for person performing a similar function if the
issuer is not a corporation), but does not include the power to vote upon the
happening of some condition or event which has not yet occurred.
6.8.3 "Person" means any natural person or any
corporation, partnership, limited liability company, trust, unincorporated
business association or other entity.
6.8.4 "Affiliated Group" means (i) a Person and one or
more other Persons in control of, controlled by, or under common control with
such Person; and (ii) two or more Persons who, by written agreement among them,
act in concert to acquire Voting Securities entitling them to elect a majority
of the directors of the Company.
7. Renegotiation. Employee shall be entitled to seek a modification of
this Agreement prior to the Expiration Date if the market value of the Company's
outstanding capital stock exceeds $75,000,000. The Company will negotiate in
good faith with Employee in connection with any such request by the Employee for
such a modification of this Agreement.
8. Intellectual Property Agreement. Employee acknowledges that the
Intellectual Property Agreement previously executed and delivered by Employee
shall remain in effect and shall not be affected by the terms of this Agreement
or the termination of this Agreement.
9. Entire Agreement. The provisions of this Agreement, including the
exhibits attached to this Agreement, constitute the entire agreement between
Employee and the Company with respect to the subject matter of this Agreement,
and supersede any prior oral understanding. No modification, supplement or
discharge of this Agreement shall be effective unless in writing and executed on
behalf of the party to be charged.
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10. Waiver. No waiver by either party of any condition, term or
provision of this Agreement shall be deemed to be a waiver of any proceeding or
succeeding breach of the same or of any other condition, term or provision of
this Agreement.
11. Assignability. This Agreement, and the rights and obligations of
the parties under this Agreement, may not be assigned by Employee. The Company
may assign any of its rights and obligations under this Agreement to any
successor or surviving corporation resulting from a merger, consolidation, sale
of assets or stock, or other corporate reorganization, upon condition that the
assignee shall assume, either expressly or by operation of law, all of the
Company's obligations under this Agreement.
12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13. Construction. This Agreement shall be construed in accordance with
the laws of the State of California.
14. Survival. This Section 14 and the covenants and agreements
contained in Sections 5.3, 6.6, 6.7, and 6.8 of this Agreement shall survive
termination of Employee's employment.
15. Notices. Any notices or other communication required or permitted
to be given under this Agreement shall be in writing and shall be sent by United
States mail, first class certified or registered postage prepaid, return receipt
requested, or personally delivered to the parties at the following addresses:
To the Company: BioTime, Inc.
935 Pardee Street
Berkeley, California 94710
Attention: President
To Employee: Hal Sternberg, Ph.D.
935 Pardee Street
Berkeley, California 94710
A notice sent by certified or registered mail shall be deemed delivered on the
fourth day after deposit in the United States mail, postage prepaid, and
addressed as aforesaid. Any party may change its address for notice by giving
notice to the other party in the manner provided in this Section.
16. Unenforceable Provisions. If all or part of any one or more of the
provisions contained in this Agreement is for any reason held to be invalid,
illegal, or unenforceable in any respect, the invalidity, illegality, or
unenforceability shall not affect any other provisions, and this
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Agreement shall be equitably construed as if it did not contain the invalid,
illegal, or unenforce able provision.
17. Section Headings. Section headings are for the convenience of the
parties and do not form a part of this Agreement.
18. Section and Other References. References in this Agreement to
Sections, subsections, and Exhibits are references to sections and subsections
in this Agreement and exhibits attached to this Agreement unless specified
otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
/s/ Hal Sternberg, Ph.D.
EMPLOYEE: ______________________________
Hal Sternberg, Ph.D.
COMPANY: BIOTIME, INC.
/s/ Paul E. Segall
By: __________________________
President
Title: _______________________
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EXHIBIT A
DUTIES AND RESPONSIBILITIES
The Vice President of Research will (subject to the ultimate authority
of the Board of Directors) design, conduct and manage scientific research and
development. In such capacity, he will participate in the identification of new
areas of research, production and services. He will attend scientific meetings
and work with other professionals in related areas, present and publish
scientific papers, and interface with the mass and professional media. He will
participate in the design and manufacture of equipment and products, and take
part in and manage the delivery of scientific services to the Company's
customers and clientele. He will meet with potential investors, customers and
grant providers. He will aid in the development of advertising and promotional
copy. He will work with scientific and non-technical management in designing
Company policy and direction. He will interface with regulatory and government
officials to obtain product use approval.
1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made June 1, 1996, by and between BioTime, Inc. (the
"Company"), and Harold D. Waitz, Ph.D. (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee, and Employee is
willing to accept such employment, all on the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee, and Employee hereby
accepts employment with the Company on the terms and conditions herein set
forth.
2. Term of Agreement. This Agreement shall commence on June 1, 1996 and
shall continue in effect until December 31, 2000 (the "Expiration Date"), unless
terminated pursuant to the express provisions of this Agreement.
3. Renewal. This Agreement shall be renewed automatically for an
additional one (1) year period on January 1, 2001 and on each anniversary
thereof, unless one party gives the other advance written notice of non-renewal
at least sixty (60) days prior to such date. Either party may elect not to renew
this Agreement with or without cause.
4. Position; Duties. Employee shall be employed in the position and
shall perform the duties and functions set forth on EXHIBIT A, and such
additional duties and functions as are normally carried out by an executive in a
comparable position with a developer of pharmaceutical or medical products, and
as the Board of Directors or a duly authorized officer of the Company shall from
time to time reasonably determine. Employee shall devote his or her best
efforts, skills and abilities, on a full-time basis, exclusively to the
Company's business pursuant to, and in accordance with, reasonable business
policies and procedures, as fixed from time to time by the Board of Directors of
the Company (the "Board of Directors"). Employee covenants and agrees that he or
she will faithfully adhere to and fulfill such policies as are established from
time to time by the Board of Directors.
5. Compensation
5.1 Salary and Bonuses. During the term of this Agreement, the
Company shall pay to the Employee:
5.1.1 Base Salary. A base annual salary (the "Base
Salary") in the following amounts: Eighty-Five Thousand Dollars ($85,000) during
the calendar year beginning
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January 1, 1996; Ninety-Two Thousand Dollars ($92,000) during the calendar year
beginning January 1, 1997; Ninety-Nine Thousand Dollars ($99,000) during the
calendar year beginning January 1, 1998; One Hundred Six Thousand Dollars
($106,000) during the calendar year beginning January 1, 1999; and One Hundred
Thirteen Thousand Dollars ($113,000) during the calendar year beginning January
1, 2000. The Base Salary shall be payable in equal semi-monthly installments or
in such other installments as may be agreed upon between the parties. The Base
Salary may be increased from time to time in the discretion of the Board of
Directors.
5.1.2 Financing Bonus. Employee shall receive a
one-time cash bonus in the amount of Twenty-Five Thousand Dollars ($25,000) if
the Company receives at least One Million Dollars ($1,000,000) of equity
financing from a pharmaceutical company. Such bonus shall be paid within thirty
(30) days after the Company has received such $1,000,000. For the purpose of
this paragraph the following provisions shall apply: (a) all payments made by a
pharmaceutical company on an installment basis, or upon the exercise of options,
warrants or other rights will be aggregated; and (b) in the event of an exchange
or conversion of any debt security or evidence of indebtedness for or into any
equity security of the Company, the indebtedness so converted or exchanged
(including all principal and accrued interest) shall be deemed paid to the
Company as equity financing on the date of such exchange or conversion. The term
"equity financing" means the payment of cash to the Company for the purchase of
(a) shares of capital stock of any class of the Company (whether or not
convertible into another class of capital stock of the Company), and (b) any
option, warrant or other security (other than a debt security or instrument
evidencing indebtedness of the Company) entitling the holder thereof to purchase
or otherwise acquire capital stock.
5.1.3 Other Bonuses. The Company may pay Employee such
bonuses, if any, as the Board of Directors may, from time to time determine.
5.2 Benefit Plans. Employee shall be eligible (to the extent
he or she qualifies) to participate in any retirement, pension, life, health,
accident and disability insurance, stock option plan or other similar employee
benefit plans which may be adopted by the Company (or any other member of a
consolidated group of which the Company is a part) for its executive officers or
other employees; provided, that Employee shall not be eligible to participate in
the Company's 1992 Stock Option Plan (or any similar stock option or stock
purchase plan) so long as Employee is a member of the Stock Option Committee (or
other committee governing such stock option or stock purchase plan) appointed by
the Board of Directors.
5.3 Expense Reimbursement. The Company shall reimburse
Employee for all reasonable expenses incurred by Employee in connection with the
performance of his or her employment duties, subject to the Company's policies
and procedures in effect from time to time, and provided that Employee submits
supporting vouchers.
5.4 Vacation; Sick Leave. Employee shall be entitled to four
weeks of vacation, without reduction in compensation, during each calendar year.
Such vacation shall be taken at
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such time as is consistent with the needs and policies of the Company. All
vacation days shall accrue based upon days of service. The Company may, from
time to time, adopt policies governing the disposition of unused vacation days
remaining at the end of the Company's fiscal year; which policies may govern
whether unused vacation days will be paid, lost, or carried over into subsequent
fiscal years. Employee shall also be entitled to leave from work, without
reduction in compensation, due to illness to the extent allowed by the Company
consistent with its policies and procedures and subject to the provisions of
this Agreement governing termination due to disability, sickness or illness.
6. Termination. This Agreement shall terminate prior to the Expiration
Date upon the happening of any of the following events:
6.1 Death. Automatically and without notice upon the death of
Employee;
6.2 Voluntary Termination by Employee. By Employee voluntarily
leaving the employ of the Company with or without the consent of the Company
(which Employee shall be entitled to do upon thirty (30) days written notice);
6.3 Disability. Upon written notice of termination from the
Company to Employee, after Employee becomes disabled, either totally or
partially, for a period of ninety (90) days during any one hundred fifty (150)
day period, so that he or she is prevented from performing his or her principal
duties pursuant to this Agreement; provided, that the Company's obligation to
pay the compensation due under Section 5 shall continue until this Agreement is
so terminated.
6.4 For Cause. Upon discharge of Employee, on written notice,
by the Board of Directors on grounds of: (i) conviction of a crime of moral
turpitude; (ii) deliberate failure to carry out the reasonable policies of the
Board of Directors, as they may relate to Employee's duties under this
Agreement; (iii) chronic alcohol or drug abuse; (iv) fraud, embezzlement or
misappropriation of Company assets; (v) disloyal, dishonest or illegal conduct
in the course of his or her employment; or (vi) a material default or breach of
any of the covenants made by Employee in this Agreement. The written notice
delivered by the Board of Directors shall specify the ground for termination and
shall be supported by a statement of all relevant facts constituting cause for
termination. Any termination under this Section 6.4 shall be deemed a
termination for "cause".
6.5 Notice and Opportunity to Cure. If the Company intends to
terminate this Agreement under clause (ii) or (vi) of Section 6.4, and if all of
Employee's acts or omissions giving rise to such determination to terminate this
Agreement are, in the reasonable determination of the Board of Directors,
susceptible to substantially complete cure by Employee within a period of thirty
(30) days, the written notice given to Employee pursuant to Section 6.4 shall
state that the effective date of termination shall be thirty (30) days from the
date of such notice, and such notice shall be rescinded if Employee effects a
substantially complete cure within such thirty (30) day period.
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6.6 Payment of Compensation After Termination . Upon the
occurrence of any events set forth in Sections 6.1 through 6.4 hereof or Section
6.8, the Company shall be obligated to pay to Employee (or Employee's estate in
the event of Employee's death) (i) the compensation due him or her under Section
5.1.1 up to the date of termination; (ii) any unpaid bonus previously awarded by
the Board of Directors; and (iii) compensation for any earned but unused
vacation, which compensation shall be paid at the Base Salary rate in effect at
the time such unused vacation accrued.
6.7 Payment Upon Termination by the Company Without Cause. In
the event this Agreement is terminated by the Company for a reason other than
one of those set forth in Section 6.3 or Section 6.4 or Section 6.8, the Company
shall be required to continue to pay Employee, as severance compensation, the
compensation due him or her under Section 5.1.1, for the unexpired term of this
Agreement (without regard to Section 3). Such severance compensation shall be
paid for a period equal to the number of weeks remaining in the unexpired term
of this Agreement (without regard to Section 3). Employee may elect to receive
the severance compensation (or such part of the severance compensation as shall
then remain unpaid) in a lump sum. Such election may be made by written notice
to the Company, and if such election is made the lump sum shall be paid by the
Company within ten (10) days after such notice.
6.8 Change of Control. Notwithstanding the foregoing, the
Company or its successor, or Employee may terminate this Agreement, with or
without cause, in connection with a Change of Control of the Company. In the
event of such a termination, the Company shall pay Employee on the date of
termination a lump sum payment equal to the greater of (a) 2.99 times Employee's
"Base Amount" and (b) the compensation due him or her under Section 5.1.1 for
the unexpired term of this Agreement (without regard to Section 3). Such payment
shall be in addition to any unpaid amounts otherwise then due Employee under
Section 5 of this Agreement. Any termination of this Agreement, except
termination under Sections 6.1 through 6.4, within twelve months after either
(i) the earliest date on which the Company enters into a letter of intent,
memorandum of agreement, or similar document leading to a Change of Control, or
(ii) the effective date of a Change of Control, shall be deemed conclusively to
be a termination in connection with a Change of Control. If the Company or its
successor causes a material reduction in Employee's responsibilities or
compensation after a Change of Control, then Employee may at Employee's option
terminate this Agreement under Section 6.2 any time within one hundred eighty
(180) days after such reduction, and such resignation shall be deemed a
termination by the Company in connection with a Change of Control and shall
entitle Employee to the benefits of this Section 6.8. For purposes of this
Agreement, the following definitions shall apply.
6.8.1 "Change of Control" means (i) the acquisition of
Voting Securities of the Company by a Person or an Affiliated Group entitling
the holder thereof to elect a majority of the directors of the Company;
provided, that an increase in the amount of Voting Securities held by a Person
or Affiliated Group who previously held sufficient Voting Securities to elect a
majority of the directors shall not constitute a Change of Control; and
provided, further, that an
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<PAGE>
acquisition of Voting Securities by one or more Persons acting as an underwriter
in connection with a sale or distribution of such Voting Securities shall not
constitute a Change of Control under this clause (i); (ii) the sale of all or
substantially all of the assets of the Company; or (iii) a merger or
consolidation of the Company with or into another corporation or entity in which
the stockholders of the Company immediately before such merger or consolidation
do not own, in the aggregate, Voting Securities of the surviving corporation or
entity (or the ultimate parent of the surviving corporation or entity) entitling
them, in the aggregate (and without regard to whether they constitute an
Affiliated Group) to elect a majority of the directors or persons holding
similar powers of the surviving corporation or entity (or the ultimate parent of
the surviving corporation or entity); provided, however, that in no event shall
any transaction described in clauses (i), (ii) or (iii) be a Change of Control
if all of the Persons acquiring Voting Securities or assets of the Company or
merging or consolidating with the Company are one or more direct or indirect
subsidiary or parent corporations of the Company.
6.8.2 "Voting Securities" means shares of capital stock
or other equity securities entitling the holder thereof to regularly vote for
the election of directors (or for person performing a similar function if the
issuer is not a corporation), but does not include the power to vote upon the
happening of some condition or event which has not yet occurred.
6.8.3 "Person" means any natural person or any
corporation, partnership, limited liability company, trust, unincorporated
business association or other entity.
6.8.4 "Affiliated Group" means (i) a Person and one or
more other Persons in control of, controlled by, or under common control with
such Person; and (ii) two or more Persons who, by written agreement among them,
act in concert to acquire Voting Securities entitling them to elect a majority
of the directors of the Company.
7. Renegotiation. Employee shall be entitled to seek a modification of
this Agreement prior to the Expiration Date if the market value of the Company's
outstanding capital stock exceeds $75,000,000. The Company will negotiate in
good faith with Employee in connection with any such request by the Employee for
such a modification of this Agreement.
8. Intellectual Property Agreement. Employee acknowledges that the
Intellectual Property Agreement previously executed and delivered by Employee
shall remain in effect and shall not be affected by the terms of this Agreement
or the termination of this Agreement.
9. Entire Agreement. The provisions of this Agreement, including the
exhibits attached to this Agreement, constitute the entire agreement between
Employee and the Company with respect to the subject matter of this Agreement,
and supersede any prior oral understanding. No modification, supplement or
discharge of this Agreement shall be effective unless in writing and executed on
behalf of the party to be charged.
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10. Waiver. No waiver by either party of any condition, term or
provision of this Agreement shall be deemed to be a waiver of any proceeding or
succeeding breach of the same or of any other condition, term or provision of
this Agreement.
11. Assignability. This Agreement, and the rights and obligations of
the parties under this Agreement, may not be assigned by Employee. The Company
may assign any of its rights and obligations under this Agreement to any
successor or surviving corporation resulting from a merger, consolidation, sale
of assets or stock, or other corporate reorganization, upon condition that the
assignee shall assume, either expressly or by operation of law, all of the
Company's obligations under this Agreement.
12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13. Construction. This Agreement shall be construed in accordance with
the laws of the State of California.
14. Survival. This Section 14 and the covenants and agreements
contained in Sections 5.3, 6.6, 6.7, and 6.8 of this Agreement shall survive
termination of Employee's employment.
15. Notices. Any notices or other communication required or permitted
to be given under this Agreement shall be in writing and shall be sent by United
States mail, first class certified or registered postage prepaid, return receipt
requested, or personally delivered to the parties at the following addresses:
To the Company: BioTime, Inc.
935 Pardee Street
Berkeley, California 94710
Attention: President
To Employee: Harold D. Waitz, Ph.D.
935 Pardee Street
Berkeley, California 94710
A notice sent by certified or registered mail shall be deemed delivered on the
fourth day after deposit in the United States mail, postage prepaid, and
addressed as aforesaid. Any party may change its address for notice by giving
notice to the other party in the manner provided in this Section.
16. Unenforceable Provisions. If all or part of any one or more of the
provisions contained in this Agreement is for any reason held to be invalid,
illegal, or unenforceable in any respect, the invalidity, illegality, or
unenforceability shall not affect any other provisions, and this
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Agreement shall be equitably construed as if it did not contain the invalid,
illegal, or unenforce able provision.
17. Section Headings. Section headings are for the convenience of the
parties and do not form a part of this Agreement.
18. Section and Other References. References in this Agreement to
Sections, subsections, and Exhibits are references to sections and subsections
in this Agreement and exhibits attached to this Agreement unless specified
otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
/s/ Harold D. Waitz, Ph.D.
EMPLOYEE: ___________________________
Harold D. Waitz, Ph.D.
COMPANY: BIOTIME, INC.
/s/ Paul E. Segall
By: __________________________
President
Title: _______________________
7
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EXHIBIT A
DUTIES AND RESPONSIBILITIES
The Vice President of Engineering, Regulatory, and Clinical Affairs. He
is responsible for the conception, design, construction, development and testing
of hardware necessary for the construction, development, testing, and
utilization of Company products and services as well as devices utilized for
Company sponsored research. He will supervise all personnel responsible for the
construction, development, testing and quality control of the Company's products
and services.
He will act as the "in house" coordinator of Regulatory and Clinical
Affairs, and in such capacity will directly interface with and assist all
Company Consultants in preparing, organizing, editing and submitting all
documents necessary for the regulatory approval of the Company's products. In
such capacity, he will meet with regulatory officials to clarify and present the
Company's proposals when necessary.He will also meet with Clinicians involved
with the clinical trial development of BioTime's products. He will perform site
visits and audits of clinical trial sites as well as non-clinical facilities.
He will participate in experimentation, services, and manufacturing
requiring sophisticated hardware, and in the design and implementation of
scientific protocols requiring such hardware. He will participate in the
selection and procurement of hardware and software used by Company personnel,
consultants, and research partners. He will attend scientific meetings, present
scientific papers and discussions and interface with the professional and mass
media. He will meet with potential investors, customers and grant providers. He
will participate in programs to support Company products purchased or leased by
customers. In such capacity, and subject to the ultimate authority of the Board
of Directors, he will assist in the procurement, development, design, and
operation of Company facilities. He will work with other members of management
in designing Company policy and direction and its implementation.
1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made June 1, 1996, by and between BioTime, Inc. (the
"Company"), and Judith Segall (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee, and Employee is
willing to accept such employment, all on the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee, and Employee hereby
accepts employment with the Company on the terms and conditions herein set
forth.
2. Term of Agreement. This Agreement shall commence on June 1, 1996 and
shall continue in effect until December 31, 2000 (the "Expiration Date"), unless
terminated pursuant to the express provisions of this Agreement.
3. Renewal. This Agreement shall be renewed automatically for an
additional one (1) year period on January 1, 2001 and on each anniversary
thereof, unless one party gives the other advance written notice of non-renewal
at least sixty (60) days prior to such date. Either party may elect not to renew
this Agreement with or without cause.
4. Position; Duties. Employee shall be employed in the position and
shall perform the duties and functions set forth on EXHIBIT A, and such
additional duties and functions as are normally carried out by an executive in a
comparable position with a developer of pharmaceutical or medical products, and
as the Board of Directors or a duly authorized officer of the Company shall from
time to time reasonably determine. Employee shall devote his or her best
efforts, skills and abilities, on a full-time basis, exclusively to the
Company's business pursuant to, and in accordance with, reasonable business
policies and procedures, as fixed from time to time by the Board of Directors of
the Company (the "Board of Directors"). Employee covenants and agrees that he or
she will faithfully adhere to and fulfill such policies as are established from
time to time by the Board of Directors.
5. Compensation
5.1 Salary and Bonuses. During the term of this Agreement, the
Company shall pay to the Employee:
5.1.1 Base Salary. A base annual salary (the "Base
Salary") in the following amounts: Eighty-Five Thousand Dollars ($85,000) during
the calendar year beginning
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January 1, 1996; Ninety-Two Thousand Dollars ($92,000) during the calendar year
beginning January 1, 1997; Ninety-Nine Thousand Dollars ($99,000) during the
calendar year beginning January 1, 1998; One Hundred Six Thousand Dollars
($106,000) during the calendar year beginning January 1, 1999; and One Hundred
Thirteen Thousand Dollars ($113,000) during the calendar year beginning January
1, 2000. The Base Salary shall be payable in equal semi-monthly installments or
in such other installments as may be agreed upon between the parties. The Base
Salary may be increased from time to time in the discretion of the Board of
Directors.
5.1.2 Financing Bonus. Employee shall receive a
one-time cash bonus in the amount of Twenty-Five Thousand Dollars ($25,000) if
the Company receives at least One Million Dollars ($1,000,000) of equity
financing from a pharmaceutical company. Such bonus shall be paid within thirty
(30) days after the Company has received such $1,000,000. For the purpose of
this paragraph the following provisions shall apply: (a) all payments made by a
pharmaceutical company on an installment basis, or upon the exercise of options,
warrants or other rights will be aggregated; and (b) in the event of an exchange
or conversion of any debt security or evidence of indebtedness for or into any
equity security of the Company, the indebtedness so converted or exchanged
(including all principal and accrued interest) shall be deemed paid to the
Company as equity financing on the date of such exchange or conversion. The term
"equity financing" means the payment of cash to the Company for the purchase of
(a) shares of capital stock of any class of the Company (whether or not
convertible into another class of capital stock of the Company), and (b) any
option, warrant or other security (other than a debt security or instrument
evidencing indebtedness of the Company) entitling the holder thereof to purchase
or otherwise acquire capital stock.
5.1.3 Other Bonuses. The Company may pay Employee such
bonuses, if any, as the Board of Directors may, from time to time determine.
5.2 Benefit Plans. Employee shall be eligible (to the extent
he or she qualifies) to participate in any retirement, pension, life, health,
accident and disability insurance, stock option plan or other similar employee
benefit plans which may be adopted by the Company (or any other member of a
consolidated group of which the Company is a part) for its executive officers or
other employees; provided, that Employee shall not be eligible to participate in
the Company's 1992 Stock Option Plan (or any similar stock option or stock
purchase plan) so long as Employee is a member of the Stock Option Committee (or
other committee governing such stock option or stock purchase plan) appointed by
the Board of Directors.
5.3 Expense Reimbursement. The Company shall reimburse
Employee for all reasonable expenses incurred by Employee in connection with the
performance of his or her employment duties, subject to the Company's policies
and procedures in effect from time to time, and provided that Employee submits
supporting vouchers.
5.4 Vacation; Sick Leave. Employee shall be entitled to four
weeks of vacation, without reduction in compensation, during each calendar year.
Such vacation shall be taken at
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such time as is consistent with the needs and policies of the Company. All
vacation days shall accrue based upon days of service. The Company may, from
time to time, adopt policies governing the disposition of unused vacation days
remaining at the end of the Company's fiscal year; which policies may govern
whether unused vacation days will be paid, lost, or carried over into subsequent
fiscal years. Employee shall also be entitled to leave from work, without
reduction in compensation, due to illness to the extent allowed by the Company
consistent with its policies and procedures and subject to the provisions of
this Agreement governing termination due to disability, sickness or illness.
6. Termination. This Agreement shall terminate prior to the Expiration
Date upon the happening of any of the following events:
6.1 Death. Automatically and without notice upon the death of
Employee;
6.2 Voluntary Termination by Employee. By Employee voluntarily
leaving the employ of the Company with or without the consent of the Company
(which Employee shall be entitled to do upon thirty (30) days written notice);
6.3 Disability. Upon written notice of termination from the
Company to Employee, after Employee becomes disabled, either totally or
partially, for a period of ninety (90) days during any one hundred fifty (150)
day period, so that he or she is prevented from performing his or her principal
duties pursuant to this Agreement; provided, that the Company's obligation to
pay the compensation due under Section 5 shall continue until this Agreement is
so terminated.
6.4 For Cause. Upon discharge of Employee, on written notice,
by the Board of Directors on grounds of: (i) conviction of a crime of moral
turpitude; (ii) deliberate failure to carry out the reasonable policies of the
Board of Directors, as they may relate to Employee's duties under this
Agreement; (iii) chronic alcohol or drug abuse; (iv) fraud, embezzlement or
misappropriation of Company assets; (v) disloyal, dishonest or illegal conduct
in the course of his or her employment; or (vi) a material default or breach of
any of the covenants made by Employee in this Agreement. The written notice
delivered by the Board of Directors shall specify the ground for termination and
shall be supported by a statement of all relevant facts constituting cause for
termination. Any termination under this Section 6.4 shall be deemed a
termination for "cause".
6.5 Notice and Opportunity to Cure. If the Company intends to
terminate this Agreement under clause (ii) or (vi) of Section 6.4, and if all of
Employee's acts or omissions giving rise to such determination to terminate this
Agreement are, in the reasonable determination of the Board of Directors,
susceptible to substantially complete cure by Employee within a period of thirty
(30) days, the written notice given to Employee pursuant to Section 6.4 shall
state that the effective date of termination shall be thirty (30) days from the
date of such notice, and such notice shall be rescinded if Employee effects a
substantially complete cure within such thirty (30) day period.
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6.6 Payment of Compensation After Termination . Upon the
occurrence of any events set forth in Sections 6.1 through 6.4 hereof or Section
6.8, the Company shall be obligated to pay to Employee (or Employee's estate in
the event of Employee's death) (i) the compensation due him or her under Section
5.1.1 up to the date of termination; (ii) any unpaid bonus previously awarded by
the Board of Directors; and (iii) compensation for any earned but unused
vacation, which compensation shall be paid at the Base Salary rate in effect at
the time such unused vacation accrued.
6.7 Payment Upon Termination by the Company Without Cause. In
the event this Agreement is terminated by the Company for a reason other than
one of those set forth in Section 6.3 or Section 6.4 or Section 6.8, the Company
shall be required to continue to pay Employee, as severance compensation, the
compensation due him or her under Section 5.1.1, for the unexpired term of this
Agreement (without regard to Section 3). Such severance compensation shall be
paid for a period equal to the number of weeks remaining in the unexpired term
of this Agreement (without regard to Section 3). Employee may elect to receive
the severance compensation (or such part of the severance compensation as shall
then remain unpaid) in a lump sum. Such election may be made by written notice
to the Company, and if such election is made the lump sum shall be paid by the
Company within ten (10) days after such notice.
6.8 Change of Control. Notwithstanding the foregoing, the
Company or its successor, or Employee may terminate this Agreement, with or
without cause, in connection with a Change of Control of the Company. In the
event of such a termination, the Company shall pay Employee on the date of
termination a lump sum payment equal to the greater of (a) 2.99 times Employee's
"Base Amount" and (b) the compensation due him or her under Section 5.1.1 for
the unexpired term of this Agreement (without regard to Section 3). Such payment
shall be in addition to any unpaid amounts otherwise then due Employee under
Section 5 of this Agreement. Any termination of this Agreement, except
termination under Sections 6.1 through 6.4, within twelve months after either
(i) the earliest date on which the Company enters into a letter of intent,
memorandum of agreement, or similar document leading to a Change of Control, or
(ii) the effective date of a Change of Control, shall be deemed conclusively to
be a termination in connection with a Change of Control. If the Company or its
successor causes a material reduction in Employee's responsibilities or
compensation after a Change of Control, then Employee may at Employee's option
terminate this Agreement under Section 6.2 any time within one hundred eighty
(180) days after such reduction, and such resignation shall be deemed a
termination by the Company in connection with a Change of Control and shall
entitle Employee to the benefits of this Section 6.8. For purposes of this
Agreement, the following definitions shall apply.
6.8.1 "Change of Control" means (i) the acquisition of
Voting Securities of the Company by a Person or an Affiliated Group entitling
the holder thereof to elect a majority of the directors of the Company;
provided, that an increase in the amount of Voting Securities held by a Person
or Affiliated Group who previously held sufficient Voting Securities to elect a
majority of the directors shall not constitute a Change of Control; and
provided, further, that an
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<PAGE>
acquisition of Voting Securities by one or more Persons acting as an underwriter
in connection with a sale or distribution of such Voting Securities shall not
constitute a Change of Control under this clause (i); (ii) the sale of all or
substantially all of the assets of the Company; or (iii) a merger or
consolidation of the Company with or into another corporation or entity in which
the stockholders of the Company immediately before such merger or consolidation
do not own, in the aggregate, Voting Securities of the surviving corporation or
entity (or the ultimate parent of the surviving corporation or entity) entitling
them, in the aggregate (and without regard to whether they constitute an
Affiliated Group) to elect a majority of the directors or persons holding
similar powers of the surviving corporation or entity (or the ultimate parent of
the surviving corporation or entity); provided, however, that in no event shall
any transaction described in clauses (i), (ii) or (iii) be a Change of Control
if all of the Persons acquiring Voting Securities or assets of the Company or
merging or consolidating with the Company are one or more direct or indirect
subsidiary or parent corporations of the Company.
6.8.2 "Voting Securities" means shares of capital stock
or other equity securities entitling the holder thereof to regularly vote for
the election of directors (or for person performing a similar function if the
issuer is not a corporation), but does not include the power to vote upon the
happening of some condition or event which has not yet occurred.
6.8.3 "Person" means any natural person or any
corporation, partnership, limited liability company, trust, unincorporated
business association or other entity.
6.8.4 "Affiliated Group" means (i) a Person and one or
more other Persons in control of, controlled by, or under common control with
such Person; and (ii) two or more Persons who, by written agreement among them,
act in concert to acquire Voting Securities entitling them to elect a majority
of the directors of the Company.
7. Renegotiation. Employee shall be entitled to seek a modification of
this Agreement prior to the Expiration Date if the market value of the Company's
outstanding capital stock exceeds $75,000,000. The Company will negotiate in
good faith with Employee in connection with any such request by the Employee for
such a modification of this Agreement.
8. Intellectual Property Agreement. Employee acknowledges that the
Intellectual Property Agreement previously executed and delivered by Employee
shall remain in effect and shall not be affected by the terms of this Agreement
or the termination of this Agreement.
9. Entire Agreement. The provisions of this Agreement, including the
exhibits attached to this Agreement, constitute the entire agreement between
Employee and the Company with respect to the subject matter of this Agreement,
and supersede any prior oral understanding. No modification, supplement or
discharge of this Agreement shall be effective unless in writing and executed on
behalf of the party to be charged.
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10. Waiver. No waiver by either party of any condition, term or
provision of this Agreement shall be deemed to be a waiver of any proceeding or
succeeding breach of the same or of any other condition, term or provision of
this Agreement.
11. Assignability. This Agreement, and the rights and obligations of
the parties under this Agreement, may not be assigned by Employee. The Company
may assign any of its rights and obligations under this Agreement to any
successor or surviving corporation resulting from a merger, consolidation, sale
of assets or stock, or other corporate reorganization, upon condition that the
assignee shall assume, either expressly or by operation of law, all of the
Company's obligations under this Agreement.
12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13. Construction. This Agreement shall be construed in accordance with
the laws of the State of California.
14. Survival. This Section 14 and the covenants and agreements
contained in Sections 5.3, 6.6, 6.7, and 6.8 of this Agreement shall survive
termination of Employee's employment.
15. Notices. Any notices or other communication required or permitted
to be given under this Agreement shall be in writing and shall be sent by United
States mail, first class certified or registered postage prepaid, return receipt
requested, or personally delivered to the parties at the following addresses:
To the Company: BioTime, Inc.
935 Pardee Street
Berkeley, California 94710
Attention: President
To Employee: Judith Segall
935 Pardee Street
Berkeley, California 94710
A notice sent by certified or registered mail shall be deemed delivered on the
fourth day after deposit in the United States mail, postage prepaid, and
addressed as aforesaid. Any party may change its address for notice by giving
notice to the other party in the manner provided in this Section.
16. Unenforceable Provisions. If all or part of any one or more of the
provisions contained in this Agreement is for any reason held to be invalid,
illegal, or unenforceable in any respect, the invalidity, illegality, or
unenforceability shall not affect any other provisions, and this
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Agreement shall be equitably construed as if it did not contain the invalid,
illegal, or unenforce able provision.
17. Section Headings. Section headings are for the convenience of the
parties and do not form a part of this Agreement.
18. Section and Other References. References in this Agreement to
Sections, subsections, and Exhibits are references to sections and subsections
in this Agreement and exhibits attached to this Agreement unless specified
otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
/s/ Judith Segall
EMPLOYEE: ___________________________
Judith Segall
COMPANY: BIOTIME, INC.
/s/ Victoria Bellport
By: __________________________
Chief Financial Officer
Title: _______________________
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EXHIBIT A
DUTIES AND RESPONSIBILITIES
The Corporate Secretary shall be responsible for the keeping the
corporate records as specified in the bylaws of the Company. In such capacity,
she shall keep, or cause to be kept, at the principal executive office of the
Company, a book of minutes of all meetings of directors and shareholders, with
the time and place of holding, whether regular of special, and if special, how
authorized, the notice thereof given or the waivers of notice, the names of
those present at directors' meetings, the number of shares present or
represented at shareholders' meetings and proceedings thereof. She shall keep,
or cause to be kept, at the principal executive office of the Company, or at the
office of the Company's transfer agent, a share register, as specified in the
Company's bylaws. She shall also keep, or cause to be kept, at the principal
executive office of the Company, the original or a copy of the bylaws as amended
or otherwise altered to date, certified by her. She shall give, or cause to be
given, notice of all meetings of shareholders and directors required to be given
by law or the bylaws. She shall have charge of the seal of the Company and have
such other powers and perform such other duties as may from time to time be
prescribed by the board or the bylaws.
She will also serve as the Vice President of Technology. In such
capacity, and subject to the ultimate authority of the Board of Directors, she
will be involved in the procurement, development, management and maintenance of
Company-operated facilities, laboratories, offices and equipment. She will
participate in the acquisition and use of new apparatus and instrumentation,
including those areas of communications and computer sciences. She will attend
scientific meetings, present scientific papers and discussions and interface
with the mass and professional media. She will participate in and manage company
experimentation, scientific services, and product manufacturing, especially in
the areas of clinical and nutritional chemistry, electronics and computer
sciences. She will work with technical and non-technical management in designing
company policy and direction. She will participate in the design and activities
of the Company's marketing programs.
1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made June 1, 1996, by and between BioTime, Inc. (the
"Company"), and Victoria Bellport (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee, and Employee is
willing to accept such employment, all on the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee, and Employee hereby
accepts employment with the Company on the terms and conditions herein set
forth.
2. Term of Agreement. This Agreement shall commence on June 1, 1996 and
shall continue in effect until December 31, 2000 (the "Expiration Date"), unless
terminated pursuant to the express provisions of this Agreement.
3. Renewal. This Agreement shall be renewed automatically for an
additional one (1) year period on January 1, 2001 and on each anniversary
thereof, unless one party gives the other advance written notice of non-renewal
at least sixty (60) days prior to such date. Either party may elect not to renew
this Agreement with or without cause.
4. Position; Duties. Employee shall be employed in the position and
shall perform the duties and functions set forth on EXHIBIT A, and such
additional duties and functions as are normally carried out by an executive in a
comparable position with a developer of pharmaceutical or medical products, and
as the Board of Directors or a duly authorized officer of the Company shall from
time to time reasonably determine. Employee shall devote his or her best
efforts, skills and abilities, on a full-time basis, exclusively to the
Company's business pursuant to, and in accordance with, reasonable business
policies and procedures, as fixed from time to time by the Board of Directors of
the Company (the "Board of Directors"). Employee covenants and agrees that he or
she will faithfully adhere to and fulfill such policies as are established from
time to time by the Board of Directors.
5. Compensation
5.1 Salary and Bonuses. During the term of this Agreement, the
Company shall pay to the Employee:
5.1.1 Base Salary. A base annual salary (the "Base
Salary") in the following amounts: Eighty-Five Thousand Dollars ($85,000) during
the calendar year beginning
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January 1, 1996; Ninety-Two Thousand Dollars ($92,000) during the calendar year
beginning January 1, 1997; Ninety-Nine Thousand Dollars ($99,000) during the
calendar year beginning January 1, 1998; One Hundred Six Thousand Dollars
($106,000) during the calendar year beginning January 1, 1999; and One Hundred
Thirteen Thousand Dollars ($113,000) during the calendar year beginning January
1, 2000. The Base Salary shall be payable in equal semi-monthly installments or
in such other installments as may be agreed upon between the parties. The Base
Salary may be increased from time to time in the discretion of the Board of
Directors.
5.1.2 Financing Bonus. Employee shall receive a
one-time cash bonus in the amount of Twenty-Five Thousand Dollars ($25,000) if
the Company receives at least One Million Dollars ($1,000,000) of equity
financing from a pharmaceutical company. Such bonus shall be paid within thirty
(30) days after the Company has received such $1,000,000. For the purpose of
this paragraph the following provisions shall apply: (a) all payments made by a
pharmaceutical company on an installment basis, or upon the exercise of options,
warrants or other rights will be aggregated; and (b) in the event of an exchange
or conversion of any debt security or evidence of indebtedness for or into any
equity security of the Company, the indebtedness so converted or exchanged
(including all principal and accrued interest) shall be deemed paid to the
Company as equity financing on the date of such exchange or conversion. The term
"equity financing" means the payment of cash to the Company for the purchase of
(a) shares of capital stock of any class of the Company (whether or not
convertible into another class of capital stock of the Company), and (b) any
option, warrant or other security (other than a debt security or instrument
evidencing indebtedness of the Company) entitling the holder thereof to purchase
or otherwise acquire capital stock.
5.1.3 Other Bonuses. The Company may pay Employee such
bonuses, if any, as the Board of Directors may, from time to time determine.
5.2 Benefit Plans. Employee shall be eligible (to the extent
he or she qualifies) to participate in any retirement, pension, life, health,
accident and disability insurance, stock option plan or other similar employee
benefit plans which may be adopted by the Company (or any other member of a
consolidated group of which the Company is a part) for its executive officers or
other employees; provided, that Employee shall not be eligible to participate in
the Company's 1992 Stock Option Plan (or any similar stock option or stock
purchase plan) so long as Employee is a member of the Stock Option Committee (or
other committee governing such stock option or stock purchase plan) appointed by
the Board of Directors.
5.3 Expense Reimbursement. The Company shall reimburse
Employee for all reasonable expenses incurred by Employee in connection with the
performance of his or her employment duties, subject to the Company's policies
and procedures in effect from time to time, and provided that Employee submits
supporting vouchers.
5.4 Vacation; Sick Leave. Employee shall be entitled to four
weeks of vacation, without reduction in compensation, during each calendar year.
Such vacation shall be taken at
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such time as is consistent with the needs and policies of the Company. All
vacation days shall accrue based upon days of service. The Company may, from
time to time, adopt policies governing the disposition of unused vacation days
remaining at the end of the Company's fiscal year; which policies may govern
whether unused vacation days will be paid, lost, or carried over into subsequent
fiscal years. Employee shall also be entitled to leave from work, without
reduction in compensation, due to illness to the extent allowed by the Company
consistent with its policies and procedures and subject to the provisions of
this Agreement governing termination due to disability, sickness or illness.
6. Termination. This Agreement shall terminate prior to the Expiration
Date upon the happening of any of the following events:
6.1 Death. Automatically and without notice upon the death of
Employee;
6.2 Voluntary Termination by Employee. By Employee voluntarily
leaving the employ of the Company with or without the consent of the Company
(which Employee shall be entitled to do upon thirty (30) days written notice);
6.3 Disability. Upon written notice of termination from the
Company to Employee, after Employee becomes disabled, either totally or
partially, for a period of ninety (90) days during any one hundred fifty (150)
day period, so that he or she is prevented from performing his or her principal
duties pursuant to this Agreement; provided, that the Company's obligation to
pay the compensation due under Section 5 shall continue until this Agreement is
so terminated.
6.4 For Cause. Upon discharge of Employee, on written notice,
by the Board of Directors on grounds of: (i) conviction of a crime of moral
turpitude; (ii) deliberate failure to carry out the reasonable policies of the
Board of Directors, as they may relate to Employee's duties under this
Agreement; (iii) chronic alcohol or drug abuse; (iv) fraud, embezzlement or
misappropriation of Company assets; (v) disloyal, dishonest or illegal conduct
in the course of his or her employment; or (vi) a material default or breach of
any of the covenants made by Employee in this Agreement. The written notice
delivered by the Board of Directors shall specify the ground for termination and
shall be supported by a statement of all relevant facts constituting cause for
termination. Any termination under this Section 6.4 shall be deemed a
termination for "cause".
6.5 Notice and Opportunity to Cure. If the Company intends to
terminate this Agreement under clause (ii) or (vi) of Section 6.4, and if all of
Employee's acts or omissions giving rise to such determination to terminate this
Agreement are, in the reasonable determination of the Board of Directors,
susceptible to substantially complete cure by Employee within a period of thirty
(30) days, the written notice given to Employee pursuant to Section 6.4 shall
state that the effective date of termination shall be thirty (30) days from the
date of such notice, and such notice shall be rescinded if Employee effects a
substantially complete cure within such thirty (30) day period.
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6.6 Payment of Compensation After Termination . Upon the
occurrence of any events set forth in Sections 6.1 through 6.4 hereof or Section
6.8, the Company shall be obligated to pay to Employee (or Employee's estate in
the event of Employee's death) (i) the compensation due him or her under Section
5.1.1 up to the date of termination; (ii) any unpaid bonus previously awarded by
the Board of Directors; and (iii) compensation for any earned but unused
vacation, which compensation shall be paid at the Base Salary rate in effect at
the time such unused vacation accrued.
6.7 Payment Upon Termination by the Company Without Cause. In
the event this Agreement is terminated by the Company for a reason other than
one of those set forth in Section 6.3 or Section 6.4 or Section 6.8, the Company
shall be required to continue to pay Employee, as severance compensation, the
compensation due him or her under Section 5.1.1, for the unexpired term of this
Agreement (without regard to Section 3). Such severance compensation shall be
paid for a period equal to the number of weeks remaining in the unexpired term
of this Agreement (without regard to Section 3). Employee may elect to receive
the severance compensation (or such part of the severance compensation as shall
then remain unpaid) in a lump sum. Such election may be made by written notice
to the Company, and if such election is made the lump sum shall be paid by the
Company within ten (10) days after such notice.
6.8 Change of Control. Notwithstanding the foregoing, the
Company or its successor, or Employee may terminate this Agreement, with or
without cause, in connection with a Change of Control of the Company. In the
event of such a termination, the Company shall pay Employee on the date of
termination a lump sum payment equal to the greater of (a) 2.99 times Employee's
"Base Amount" and (b) the compensation due him or her under Section 5.1.1 for
the unexpired term of this Agreement (without regard to Section 3). Such payment
shall be in addition to any unpaid amounts otherwise then due Employee under
Section 5 of this Agreement. Any termination of this Agreement, except
termination under Sections 6.1 through 6.4, within twelve months after either
(i) the earliest date on which the Company enters into a letter of intent,
memorandum of agreement, or similar document leading to a Change of Control, or
(ii) the effective date of a Change of Control, shall be deemed conclusively to
be a termination in connection with a Change of Control. If the Company or its
successor causes a material reduction in Employee's responsibilities or
compensation after a Change of Control, then Employee may at Employee's option
terminate this Agreement under Section 6.2 any time within one hundred eighty
(180) days after such reduction, and such resignation shall be deemed a
termination by the Company in connection with a Change of Control and shall
entitle Employee to the benefits of this Section 6.8. For purposes of this
Agreement, the following definitions shall apply.
6.8.1 "Change of Control" means (i) the acquisition of
Voting Securities of the Company by a Person or an Affiliated Group entitling
the holder thereof to elect a majority of the directors of the Company;
provided, that an increase in the amount of Voting Securities held by a Person
or Affiliated Group who previously held sufficient Voting Securities to elect a
majority of the directors shall not constitute a Change of Control; and
provided, further, that an
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acquisition of Voting Securities by one or more Persons acting as an underwriter
in connection with a sale or distribution of such Voting Securities shall not
constitute a Change of Control under this clause (i); (ii) the sale of all or
substantially all of the assets of the Company; or (iii) a merger or
consolidation of the Company with or into another corporation or entity in which
the stockholders of the Company immediately before such merger or consolidation
do not own, in the aggregate, Voting Securities of the surviving corporation or
entity (or the ultimate parent of the surviving corporation or entity) entitling
them, in the aggregate (and without regard to whether they constitute an
Affiliated Group) to elect a majority of the directors or persons holding
similar powers of the surviving corporation or entity (or the ultimate parent of
the surviving corporation or entity); provided, however, that in no event shall
any transaction described in clauses (i), (ii) or (iii) be a Change of Control
if all of the Persons acquiring Voting Securities or assets of the Company or
merging or consolidating with the Company are one or more direct or indirect
subsidiary or parent corporations of the Company.
6.8.2 "Voting Securities" means shares of capital stock
or other equity securities entitling the holder thereof to regularly vote for
the election of directors (or for person performing a similar function if the
issuer is not a corporation), but does not include the power to vote upon the
happening of some condition or event which has not yet occurred.
6.8.3 "Person" means any natural person or any
corporation, partnership, limited liability company, trust, unincorporated
business association or other entity.
6.8.4 "Affiliated Group" means (i) a Person and one or
more other Persons in control of, controlled by, or under common control with
such Person; and (ii) two or more Persons who, by written agreement among them,
act in concert to acquire Voting Securities entitling them to elect a majority
of the directors of the Company.
7. Renegotiation. Employee shall be entitled to seek a modification of
this Agreement prior to the Expiration Date if the market value of the Company's
outstanding capital stock exceeds $75,000,000. The Company will negotiate in
good faith with Employee in connection with any such request by the Employee for
such a modification of this Agreement.
8. Intellectual Property Agreement. Employee acknowledges that the
Intellectual Property Agreement previously executed and delivered by Employee
shall remain in effect and shall not be affected by the terms of this Agreement
or the termination of this Agreement.
9. Entire Agreement. The provisions of this Agreement, including the
exhibits attached to this Agreement, constitute the entire agreement between
Employee and the Company with respect to the subject matter of this Agreement,
and supersede any prior oral understanding. No modification, supplement or
discharge of this Agreement shall be effective unless in writing and executed on
behalf of the party to be charged.
5
<PAGE>
10. Waiver. No waiver by either party of any condition, term or
provision of this Agreement shall be deemed to be a waiver of any proceeding or
succeeding breach of the same or of any other condition, term or provision of
this Agreement.
11. Assignability. This Agreement, and the rights and obligations of
the parties under this Agreement, may not be assigned by Employee. The Company
may assign any of its rights and obligations under this Agreement to any
successor or surviving corporation resulting from a merger, consolidation, sale
of assets or stock, or other corporate reorganization, upon condition that the
assignee shall assume, either expressly or by operation of law, all of the
Company's obligations under this Agreement.
12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13. Construction. This Agreement shall be construed in accordance with
the laws of the State of California.
14. Survival. This Section 14 and the covenants and agreements
contained in Sections 5.3, 6.6, 6.7, and 6.8 of this Agreement shall survive
termination of Employee's employment.
15. Notices. Any notices or other communication required or permitted
to be given under this Agreement shall be in writing and shall be sent by United
States mail, first class certified or registered postage prepaid, return receipt
requested, or personally delivered to the parties at the following addresses:
To the Company: BioTime, Inc.
935 Pardee Street
Berkeley, California 94710
Attention: President
To Employee: Victoria Bellport
935 Pardee Street
Berkeley, California 94710
A notice sent by certified or registered mail shall be deemed delivered on the
fourth day after deposit in the United States mail, postage prepaid, and
addressed as aforesaid. Any party may change its address for notice by giving
notice to the other party in the manner provided in this Section.
16. Unenforceable Provisions. If all or part of any one or more of the
provisions contained in this Agreement is for any reason held to be invalid,
illegal, or unenforceable in any respect, the invalidity, illegality, or
unenforceability shall not affect any other provisions, and this
6
<PAGE>
Agreement shall be equitably construed as if it did not contain the invalid,
illegal, or unenforce able provision.
17. Section Headings. Section headings are for the convenience of the
parties and do not form a part of this Agreement.
18. Section and Other References. References in this Agreement to
Sections, subsections, and Exhibits are references to sections and subsections
in this Agreement and exhibits attached to this Agreement unless specified
otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
/s/ Victoria Bellport
EMPLOYEE: ____________________________
Victoria Bellport
COMPANY: BIOTIME, INC.
/s/ Paul E. Segall
By: __________________________
President
Title: _______________________
7
<PAGE>
EXHIBIT A
DUTIES AND RESPONSIBILITIES
The Chief Financial Officer will be involved in the procurement,
development and management of Company-operated facilities and personnel. In such
capacity, and subject to the authority of the Board of Directors, she will
supervise the business of the Company, which includes, but is not limited to:
cash management and investing, accounting, financial reports, interfacing with
government agencies and regulators, representatives from other companies,
organizations and institutions, professional and mass media; budgeting, investor
relations, accounts receivable, purchasing, and payroll. She will aid in the
development of advcrtising and promotional copy, will manage the daily
operations of the Company and will work with management in designing company
strategy, policy and direction.
She will also, as needed, serve the Company in the capacity of a
biochemist. She will participate in providing certain skilled scientific
services for Company clientele, in the presentation of her research to the
scientific and general public, and in the production and development of
scientific products and services. She will be involved in the design and
implementation of the Company's marketing programs.
1
SEVERANCE AGREEMENT
THIS AGREEMENT is made as of August 19, 1996 by and between BioTime,
Inc., a California corporation (hereinafter referred to as the "Company"), and
Lawrence Cohen (hereinafter referred to as "Cohen").
W I T N E S S E T H:
WHEREAS, Cohen is presently a director of the Company and is employed
by the Company in the capacity of Chairman of the Board; and
WHEREAS, Cohen desires to retire from the Company and the Company and
Cohen desire to implement certain arrangements in connection with Cohen's
retirement from the Company.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Stock Options. The Company hereby grants to Cohen stock options
("Options") to purchase up to 25,000 of the Company's Common Shares, no par
value ("Shares") at an exercise price of $14.88 per Share. All such Options are
granted pursuant to and shall be governed by the Company's 1992 Stock Option
Plan, as amended, and by that certain Stock Option Agreement between the Cohen
and the Company in the form attached as EXHIBIT A. The grant of Options to Cohen
under this Agreement is subject to the express condition that Cohen execute and
deliver the Stock Option Agreement.
(a) Exercise Period and Expiration of Options. The Stock
Option Agreement shall provide, among other things, that the Options granted
under this Section 1 shall not become exercisable unless and until vested. Such
Options shall vest and thereby become exercisable ninety (90) days after the
date of this Agreement if (i) concurrently with Cohen's execution and delivery
of this Agreement, his wife, Donna Cohen, shall have executed and delivered to
the Company that certain Stock Lock-Up Agreement in the form attached as EXHIBIT
B, and (ii) no breach or default by Cohen or Donna Cohen under this Agreement,
the Stock Option Agreement or the Stock Lock-Up Agreement shall have occurred.
The Stock Option Agreement shall provide, among other things, that the Options
shall expire on the earliest to occur of: (A) two years after the date of grant;
and (B) any breach or default by Cohen or Donna Cohen under this Agreement, the
Stock Option Agreement or the Stock Lock-Up Agreement.
2. Resignation. Cohen hereby resigns as a director, officer (Chairman
of the Board) and employee of BioTime.
1
<PAGE>
3. Severance Compensation. As severance compensation, the Company
agrees to pay to Cohen the unpaid portion of his salary and other benefits
payable to him under the terms of his Employment Agreement, dated April 25,
1994, through April 24, 1997, provided that Cohen fully and faithfully performs
and complies with all of his agreements and obligations under this Agreement,
and Donna Cohen fully and faithfully performs and complies with all of her
agreements and obligations under the Stock Lock-Up Agreement; provided, however,
that the provisions of Section 6.8 of Cohen's Employment Agreement shall not
apply in the event that a "Change in Control" as defined therein occurs; and
provided, further, that Cohen agrees that the unpaid portion of his salary plus
other cash benefits payable for the remainder of the term of his Employment
Agreement (ie. through April 24, 1997) is $42,500.
4. Confidentiality. In the course of serving as an officer, director
and employee of the Company, the Company has disclosed to Cohen, and Cohen may
otherwise have obtained knowledge of or access to, trade secrets and other
proprietary and confidential information concerning the Company, the Company
products, financial condition, research and development plans, and other matters
pertaining to the Company's business ("Confidential Information"). Cohen agrees
to treat and hold all Confidential Information as secret and confidential, and
to apply strict standards of care to maintain the secrecy of the Confidential
Information. In this regard, Consultant agrees not to copy or reproduce any
Confidential Information and not to disclose the contents of any Confidential
Information to any person or entity, other than officers and directors of the
Company. Cohen further agrees to return to the Company written or other copies
(including electronic media containing Confidential Information) of any and all
Confidential Information in Cohen's possession. The provisions of this Section 4
shall not apply to any Confidential Information that Cohen is obligated by law
to disclose to any court or any federal or state government agency.
5. Restrictions on Certain Sales. Cohen agrees that, for a period of
six months from the date of this Agreement, he will not, directly or indirectly,
in his own name, in the name of any other person or entity, or through any
account owned or controlled by Cohen or over which Cohen holds any power to
direct the sale or other disposition of securities (a) sell, offer for sale,
transfer or exchange any Common Shares of the Company, or (b) grant, write,
purchase or sell any call, put or other option giving Cohen or any other person
or entity the right to sell, or giving any other person or entity the right to
purchase, Common Shares of the Company, except for such sales or other
transactions in or pertaining to Common Shares of the Company for which no
report, statement, form, notice or other document (including, without
limitation, any notice under Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"), or any Form 4 under Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) is required to
be filed with the Securities and Exchange Commission.
6. Restrictions on Certain Actions. For a period of five (5) years
commencing on the date of this Agreement, Cohen agrees not to (a) make any
statement (public or private) critical of the Company, its management (or any
officer or director of the Company), technology, products, business or
prospects, (b) recommend that anyone sell or refrain from purchasing Common
Shares
2
<PAGE>
of the Company, (c) engage (directly, or indirectly through the participation in
any group, or ownership of any direct or indirect interest in account,
corporation, partnership or other entity) in any short sale of Common Shares of
the Company, (d) acquire, directly or indirectly, as part of a group or
otherwise, beneficial ownership of 5% or more of any outstanding class of the
Company equity securities, and Cohen will not join in any group that
beneficially owns 5% or more of any such class of equity securities, and (e)
participate in or support any group or slate of candidates seeking to replace
any incumbent director of the Company. Beneficial ownership shall be determined
under Section 13(d) of the Exchange Act and the rules promulgated thereunder.
7. Injunctive Relief. Cohen acknowledges that the Company would be
irreparably harmed by the disclosure or use of any Confidential Information in
violation of this Agreement. Cohen agrees that, in addition to all other
remedies available to the Company at law or in equity, the Company shall be
entitled to equitable relief enjoining any use, appropriation or disclosure of
Confidential Information in violation of this Agreement.
8. Certain Remedies for Breach. Cohen agrees that the Options to be
granted under Subsection 1 are being granted in consideration of Cohen's
agreement to comply with the provisions of this Agreement and the Stock Option
Agreement, and Donna Cohen's Agreement to comply with the provisions of the
Stock Lock-Up Agreement, and Cohen's right to exercise such Options is
conditioned upon Cohen's full compliance with this Agreement and the Stock
Option Agreement, and Donna Cohen's full compliance with the Stock Lock-Up
Agreement. Because a breach of the provisions of this Agreement and the Stock
Lock-Up Agreement could not adequately be compensated by money damages, and/or
because determination of any monetary damages incurred by the Company would be
difficult to calculate, in the event of a breach of this Agreement or the Stock
Lock-Up Agreement, the Company shall be entitled (in addition to, and not in
lieu of, any other right or remedy available to it under this Agreement, the
Stock Option Agreement, and the Stock Lock-Up Agreement to cancel any or all of
the Options granted to Cohen under this Agreement which have not theretofore
been exercised in accordance with their terms and conditions. Such cancellation
may be effected without any compensation to Cohen or Donna Cohen for the value
of such Options or the value of the Shares or other securities underlying such
Options.
9. Reasonable Restrictions. Cohen agrees that the provisions of
Sections 4, 5 and 6 are reasonable and necessary to protect the Company and its
business. It is the desire and intent of the parties that the provisions of
Sections 4, 5 and 6 shall be enforced to the fullest extent permitted under the
public policies and laws applied in each jurisdiction in which enforcement is
sought. If any restriction contained in Sections 4, 5 and 6 shall be deemed to
be invalid, illegal or unenforceable by reason of the extent or duration
thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent or other provisions hereof and in its reduced form
such restriction shall then be enforceable in the manner contemplated hereby.
10. Release. Cohen hereby forever releases, acquits and discharges the
Company and each officer, director and employee of the Company from any and all
liability, whether in
3
<PAGE>
contract, tort, or otherwise, that Cohen may now have or which may hereafter
accrue, arising out of or connected with the service of Cohen as a director,
officer or employee of the Company, or as a shareholder of the Company, prior to
the date of this Agreement. Cohen further agrees not to participate as a party
adverse to the Company in any lawsuit or other proceeding and not to finance or
otherwise assist any party adverse to the Company in any lawsuit or other
proceeding, other than proceedings pertaining to any actual or alleged breach of
this Agreement or the Stock Option Agreement. The Company hereby forever
releases, acquits and discharges Cohen from any and all liability, whether in
contract, tort, or otherwise, that the Company may now have or which may
hereafter accrue, arising out of or connected with the service of Cohen as a
director, officer or employee of the Company, or as a shareholder of the
Company, prior to the date of this Agreement. The Company and Cohen agree that
this release includes all claims of every kind and nature, past, present and
future, known or unknown, suspected or unsuspected. With respect to the subject
matter of this release, the Company and Cohen expressly waive any and all rights
or claims under Section 1542 of the California Civil Code, which provides:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
This Section 10 shall not affect Cohen's rights to indemnification arising from
his acting as an officer, director or employee of the Company, as provided in
the articles of incorporation and bylaws of the Company or Section 317 of the
California Corporations Code. The Company's articles of incorporation authorize
the corporation to indemnify officers and directors to the fullest extent
permitted under California law, and the Company agrees to so indemnify Cohen but
only to the same extent as such indemnification is provided to other officers
and directors of the Company; provided, however, that the Company does not
presently maintain insurance indemnifying its officers and directors from
liabilities arising from their acts and omissions, and the Company shall not be
obligated to provide Cohen with any such insurance even if such insurance is
obtained for other officers and directors in the future.
11. Tax Withholding. Cohen agrees that the Company may withhold from
the severance payments all federal, state, and local income, employment, FICA,
SDI and other taxes. Cohen also agrees to remit to the Company on demand all
federal, state, and local income tax withholdings arising from the grant of the
Option, as may be required by applicable law. In this regard, Cohen acknowledges
that the exercise price of the Option on the date of grant is less than the fair
market value per share of the Shares issuable upon Cohen's exercise of the
Option.
12. Transfers of Restricted Shares. The Company agrees that it will not
act to materially delay or prohibit any sale of restricted Company Shares owned
by Cohen or Donna Cohen, and will not impose any fee as a condition of such
transfer, provided that the sale (a) does not violate the terms of this
Agreement or the Stock Lock-Up Agreement, (b) is made in compliance with Rule
144(k) under the Securities Act, (c) does not violate Section 10 or Section 16
of the Exchange Act or any regulation thereunder, and (d) does not violate the
securities or "Blue Sky" laws of any state. For the purpose of this Section, the
Company shall not be deemed to have caused a restriction or delay on any sale
resulting from (i) the placement of a legend on any stock certificate
restricting sales or transfers without registration or an exemption from
registration under the Securities Act and applicable state securities or Blue
Sky laws, (ii) the entry of any stop transfer order or legend on the books and
records of the transfer agent of the Shares relating to the restrictions on
transfer described in (i), and (iii) any requirement that Cohen or Donna Cohen
provide the transfer agent for the Shares with an opinion of counsel to the
effect that the proposed sale may be made without registration under the
Securities Act or the securities or Blue Sky laws of any state.
13. Entire Agreement. The provisions of this Agreement, the Stock
Option Agreement and the Stock Lock-Up Agreement constitute the entire agreement
between Cohen and the Company with respect to the subject matter of this
Agreement, and supersede any prior oral understanding. No modification,
supplement or discharge of this Agreement shall be effective unless in writing
and executed on behalf of the party to be charged.
14. Waiver. No waiver by either party of any condition, term or
provision of this Agreement shall be deemed to be a waiver of any proceeding or
succeeding breach of the same or of any other condition, term or provision of
this Agreement.
15. Successors and Assigns. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of Cohen, and shall
inure to the benefit of the successors and assigns of the Company.
16. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. Construction. This Agreement shall be construed in accordance with
the laws of the State of California.
18. Notices. Any notices or other communication required or permitted
to be given under this Agreement shall be in writing and shall be deemed
received when personally delivered to the party to whom it is to be given, or
four (4) days after being deposited in the United States mail, first class
certified postage prepaid, and addressed as follows:
To the Company: BioTime, Inc.
935 Pardee Street
Berkeley, California 94710
To Cohen: Lawrence Cohen
3311 N.E. 26th Avenue
Lighthouse Point, Florida 33064
Either party may change its address for notices by giving the other party notice
of such new address in the manner provided in this Section.
19. Titles and Subtitles. The titles or headings of the Sections and
Subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
20. Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, each such unenforceable provision
shall be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if each such unenforceable provision were so excluded, and the
balance of this Agreement as so interpreted shall be enforceable in accordance
with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BIOTIME, INC.
By _______________________________________
Paul E. Segall, President
---------------------------------------
Lawrence Cohen
4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by refernece in this Registration Statement Nos.
33-56766 and 33-88968 of BioTime, Inc. on From S-8 of our report dated August 8,
1996 (which expressed an unqualified opinion and includes an explanatory
paragraph related to the development stage of the Company's operations),
appearing in the Annual Report on Form 10-K of BioTime, Inc. for the year ended
June 30, 1996.
DELOITTE & TOUCH
San Francisco, California
September 23, 1996
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