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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
[ ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
or
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from September 1, 1995 to June 30, 1996
Commission file number 0-22686
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PALATIN TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 95-4078884
(State of incorporation or organization) (I.R.S. Employer Identification No.)
214 CARNEGIE CENTER - SUITE 100
PRINCETON, NEW JERSEY 08540
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 520-1911
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
Check whether the Registrant (1) 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. |X|
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or by any
amendment to this Form 10-KSB. |_|
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold, or the average bid and
asked price of such stock, as of September 24, 1996, was $21,111,385.
The Registrant's revenues for the period ended June 30, 1996 were $24,457.
As of September 24, 1996, 11,537,412 shares of the Registrant's common stock,
par value $.01 per share, were outstanding.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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TABLE OF CONTENTS
PART I PAGE
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Item 1. Business......................................................... 1
Item 2. Property......................................................... 16
Item 3. Legal Proceedings................................................ 16
Item 4. Submission of Matters to a Vote of Security Holders.............. 17
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.................................. 17
Item 6. Management's Discussion and Analysis
of Financial Condition and Results of Operations................. 18
Item 7. Financial Statements............................................. 21
Item 8. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure........................... 21
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act................ 22
Item 10. Executive Compensation........................................... 25
Item 11. Security Ownership of Certain Beneficial Owners and Management... 30
Item 12. Certain Relationships and Related Transactions................... 33
Item 13. Exhibits, Financial Statements and Reports on Form 8-K........... 36
Signatures.................................................................. 40
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Unless the context otherwise requires, (a) all references to the
"Company" or "Palatin" include Palatin Technologies, Inc. and its wholly-owned
subsidiary, RhoMed Incorporated ("RhoMed"), (b) all references to "Interfilm"
relate to the Company prior to June 25, 1996 (the effective date of the Merger,
as such term is hereafter defined), and (c) all references to the Company's
activities, results of operations and financial condition prior to June 25,
1996 relate to RhoMed.
PART I
ITEM 1. BUSINESS.
INTRODUCTION
Through its wholly-owned subsidiary, RhoMed, the Company is a
development-stage biopharmaceutical company dedicated to developing and
commercializing products and technologies for diagnostic imaging, cancer
therapy and ethical drug development utilizing peptide, monoclonal antibody and
radiopharmaceutical technologies. Since June 25, 1996, the effective date of
the Merger, the business of RhoMed represents the on-going business of the
Company (see "History and Merger" in this Item 1).
The Company concentrates its activities in two technology areas, each of
which the Company believes has potential diagnostic and therapeutic
applications. These technologies involve the Company's (1) Metal Ion-induced
Distinctive Array of Structures ("MIDAS") metallopeptide technology and (2)
direct radiolabeling techniques.
The Company believes that the MIDAS technology represents a platform
technology which could enable the design and synthesis of novel peptide analogs
or mimics (see "Research and Development -- MIDAS Technology" in this Item 1).
Further, the Company believes that its MIDAS technology may provide the Company
with the flexibility to generate its own pharmaceutical products, and the
ability to target and complement existing product portfolios and technological
bases of other companies.
The Company is developing two products incorporating its direct
radiolabeling technology, (1) Leu-Tech, an infection and inflammation imaging
product (see "Direct Radiolabeling Technology -- Leu-Tech Diagnostic Imaging
Product" in this Item 1), and (2) PT-2, a radiotherapeutic peptide somatostatin
analog for cancer therapy (see "Direct Radiolabeling Technology -- PT-2 Cancer
Therapeutic Product" in this Item 1).
The Company is at an early stage of development and has not yet completed
the development of any products based on either its metallopeptide technology
(MIDAS) or its radiolabeling technology. Accordingly, the Company has not begun
to market or generate revenues from the commercialization of any such products.
It will be a number of years, if ever, before the Company will recognize
significant revenues from product sales or royalties. There can be no assurance
that the Company will be successful in entering into strategic alliances or
collaborative arrangements that might result in significant revenues to the
Company. The Company's technologies and products under development will require
significant time-consuming and costly research, development, pre-clinical
studies, clinical testing, regulatory approval and significant additional
investment prior to their commercialization, which may never occur. There can
be no assurance that the Company's research and development programs will be
successful, that its products will exhibit the expected biological results in
humans, that its products will prove to be safe and efficacious in clinical
trials, that its products will obtain the required regulatory approvals or that
the Company or its collaborators will be successful in obtaining market
acceptance of any of the
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Company's products. The Company or its collaborators may encounter problems and
delays relating to research and development, regulatory approval, manufacturing
and marketing. The failure by the Company to address successfully such problems
and delays would have a material adverse effect on the Company's business,
financial condition and results of operations.
When used herein, the words "believes," "anticipates" and similar
expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements that
may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
HISTORY AND MERGER
Palatin Technologies, Inc., formerly Interfilm, Inc., was incorporated
under the laws of the State of Delaware on November 21, 1986. From November 4,
1993, when Interfilm acquired Interfilm Technologies, Inc., a New York
corporation, through May 9, 1995, Interfilm was primarily engaged in the
business of exploiting the rights related to its interactive motion picture
process, including the production and distribution of interactive motion
pictures for initial exhibition in theaters and subsequently in enhanced
versions for distribution to the home market. Interfilm consummated an initial
public offering on October 28, 1993, and on May 10, 1995, the Board of
Directors of Interfilm decided to substantially curtail the operations of
Interfilm and its subsidiaries. Interfilm, prior to June 25, 1996, had
conducted no business activities since May 10, 1995.
Merger with RhoMed. On June 25, 1996, a newly formed, wholly-owned
subsidiary of Interfilm, Interfilm Acquisition Corporation ("InSub"), a New
Mexico corporation, merged with and into RhoMed Incorporated ("RhoMed"), a New
Mexico corporation, and all of RhoMed's outstanding equity securities were
ultimately exchanged for equity securities of the Company (the "Merger"). As a
result of the Merger, RhoMed became a wholly-owned subsidiary of the Company,
with the holders of RhoMed preferred stock and RhoMed common stock (including
the holders of "RhoMed Derivative Securities" as hereafter defined) receiving
an aggregate of an approximately 96% interest in the equity securities of the
Company on a fully-diluted basis. Additionally, all warrants and options to
purchase common stock of RhoMed outstanding immediately prior to the Merger
(the "RhoMed Derivative Securities"), including without limitation, any rights
underlying RhoMed's qualified and nonqualified stock option plans, were
automatically converted into rights to receive, upon exercise, the Company's
common stock, $.01 par value per share (the "Common Stock"), in the same manner
in which shares of RhoMed common stock were converted. Since the former
stockholders of RhoMed acquired, by reason of the Merger, more than a 50%
controlling interest in the Company, the Merger has been treated, for
accounting purposes, as a reverse acquisition. Consequently, the historical
financial statements of the Company prior to June 25, 1996, are those of
RhoMed.
In connection with the Merger, certain pre-Merger assets and liabilities
of the Company and one of its wholly-owned subsidiaries, consisting principally
of certain intellectual property and litigation claims against Sony Corporation
of America and related entities, were transferred to an unaffiliated limited
liability partnership for the benefit of the Company's pre-Merger stockholders
as of a record date of June 21, 1996 (see Item 3, Legal Proceedings).
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On July 19, 1996, the Company filed an amendment to its Certificate of
Incorporation (the "Charter Amendment"), which (1) effected the change of name
of the Company from Interfilm, Inc. to Palatin Technologies, Inc., (2)
increased the total number of authorized shares of the Company's Common Stock
from 10,000,000 to 25,000,000 and (3) effected a 1-for-10 reverse split of the
Common Stock.
As a result of the Merger and the Charter Amendment, each share of RhoMed
preferred stock was converted into .46695404349 shares of Common Stock, and
each share of RhoMed common stock was converted into .184332593 shares of
Common Stock.
RESEARCH AND DEVELOPMENT -- MIDAS TECHNOLOGY
Role and Function of Peptides. Peptides, short chains of amino acids,
play important roles in regulating a variety of biological functions. Natural
peptides function by conforming or bending to fit specific molecules on cell
surfaces, called receptors, thereby signaling the cell to initiate a biological
activity. Many important biological functions that are affected in this manner
include overall growth and behavior, inflammatory responses, immune responses
and wound healing.
In order to effectively regulate cell signaling, a peptide must bind to
its target receptor with high affinity. The affinity of a peptide for its
target receptor is highly dependent on its three-dimensional shape or
conformation. Many naturally occurring peptides are flexible and can take on
multiple conformations, allowing them to interact with more than one type of
cell receptor, and to control multiple functions within the body. However, when
such peptides are used as drugs, this multiple reactivity is a disadvantage as
it may lead to side effects. The ability to construct high-affinity, receptor-
specific peptides offers a significant opportunity to develop potent
receptor-specific drugs.
Introduction to MIDAS Technology. The Company believes that its MIDAS
technology can be used to rationally design and produce receptor-specific
drugs. Using MIDAS, highly stable metallopeptide complexes are formed, in which
the metal ion locks or constrains the peptide into a specific conformation. By
designing MIDAS metallopeptides to mimic the conformation required for a
specific receptor, a stable, receptor-specific drug, with high affinity and
enhanced biological activity, can be made.
The Company believes that it has been difficult for the pharmaceutical
industry to develop effective peptide-based drugs for two major reasons:
1. Molecular instability - Many peptides are highly unstable in the
body, becoming rapidly degraded by proteases and peptidases (natural
enzymes).
2. Inefficient binding affinity - The molecular configuration of
peptides often precludes them from binding efficiently to the
three-dimensional shaped receptor site present on the target cell.
This inefficiency results in low levels of biological response.
The Company believes that it has demonstrated, in both in vitro testing
and animal models, the ability of specific MIDAS-based peptides to overcome
these two hurdles. Accordingly, the Company believes that this technology
offers a new platform for drug development, with the potential to overcome
obstacles which have limited the development of peptide drugs. No MIDAS peptide
product has been tested in humans, and there can be no assurance that results
obtained in animal and in vitro studies can be obtained in human studies, or
that MIDAS peptide products will prove to be safe and efficacious in clinical
trials.
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The Company's MIDAS technology is intended to allow the design and
development of metallopeptide mimics of native peptides, as well as other types
of molecules, such as steroids. The Company believes that MIDAS metallopeptides
can be specifically and rationally designed to act as drugs to treat diseases
for which a receptor-specific pathway or interaction has been identified.
Because of the intrinsic design of MIDAS peptides as metallopeptides,
they are highly resistant to peptidase and enzyme degradation. The Company
believes that MIDAS peptides will provide superior performance, compared to
conventional peptides, by remaining biologically active in the body, with
minimal degradation, for longer periods of time. The Company believes that at
least some peptides made using this technology can be administered orally, with
no significant enzymatic degradation.
In addition, the Company believes that random combinatorial libraries of
MIDAS molecules can be developed and used for screening to provide one or more
lead molecules specific to a given biological receptor target. The Company has
designed methods for random combinatorial libraries using MIDAS, but has not
yet constructed any such libraries.
To date, the Company's research efforts have focused on development of
MIDAS analogs of tuftsin, a natural immunomodulatory peptide, and on
development and evaluation of a series of MIDAS analogs specific to the family
of RGD amino acid-specific receptors, which are involved in platelet
activation, angiogenesis and related biological events.
MIDAS RM-T-1 Construct. The Company's lead MIDAS tuftsin analog, RM-T-1,
is a five-amino acid construct, which may be labeled with technetium-99m or
isotopes of rhenium. When labeled with technetium-99m, the Company believes
that RM-T-1 can be used as a diagnostic agent to diagnose infections and
inflammations. RM-T-1 is in pre-clinical evaluation, with animal studies being
conducted at the Company's facilities and at Brookhaven National Laboratory.
The Company is also evaluating the use of RM-T-1 and related analogs,
complexed with a non-radioactive isotope of rhenium, as immunostimulatory
agents, to stimulate and regulate the body's immune system, with potential
application as a therapeutic agent for treatment of a variety of conditions
involving a compromised or deficient immune system.
The Company intends to continue animal and in vitro studies with RM-T-1
and related analogs for identified indications, and if results warrant, to
initiate one or more clinical trials for use of RM-T-1 and related analogs.
There can be no assurance that the Company's tuftsin program will be
successful, that products, if any, will exhibit the expected biological results
in humans, or that products will prove to be safe and efficacious in clinical
trials.
MIDAS RGD Constructs. RGD is a well characterized three-amino acid
peptide sequence which binds to a variety of integrin receptors, including the
GP IIb/IIIa receptor found on platelets, and vitronectin and fibronectin
receptors found on a variety of cells, including endothelial cells and certain
tumor cells. The Company is developing and evaluating a series of MIDAS RGD
analogs, and is conducting in vitro evaluation of specificity and affinity to
various integrin receptors, including platelet GP IIb/IIIa receptors and
vitronectin receptors.
Initial pre-clinical work on development of a MIDAS metallopeptide for
the GP IIb/IIIa receptor is supported, in part, by a Phase I grant under the
Small Business Innovative Research ("SBIR") program awarded to the Company by
the National Institutes of Health of the Department of Health and Human
Services. The Phase I award is for $94,970, and, contingent upon completion of
Phase I, the Company
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can apply for a Phase II SBIR grant in an amount of up to $750,000, although
there can be no assurance that Phase I will be satisfactorily completed, or
that a Phase II grant will be awarded.
The Company is continuing its research on biological activity and
specificity of MIDAS RGD constructs, but has not yet identified specific
product applications. There can be no assurance that the Company's MIDAS RGD
research and development programs will be successful, that products, if any,
will exhibit the expected biological results in humans, or that products will
prove to be safe and efficacious in clinical trials.
Other Opportunities. The Company develops MIDAS peptides by applying its
proprietary technologies in the areas of peptide design and engineering and
radiolabeling chemistry. After the Company identifies a receptor-specific
pathway or interaction relating to a selected disease, the Company intends to
use rational drug design principles to develop a MIDAS peptide that it believes
will, upon labeling with a metal ion, bind to the receptor target with high
affinity.
The Company is evaluating a number of product opportunities for its MIDAS
technology, and believes that this technology may have medical applications in
a variety of areas, including immune disorders, cancers and cardiology. The
Company intends to expand the research and development of these other MIDAS
applications primarily through strategic alliances with other entities. No
predictions can be made regarding the establishment or the timing of such
alliances. The Company expects to devote resources to these other areas to the
extent funding is available. No prediction can be made, however, as to when or
whether the areas of research described above will yield new scientific
discoveries, or whether such research will lead to new commercial products.
DIRECT RADIOLABELING TECHNOLOGY
The Company has developed and patented radiolabeling technologies for the
direct radiolabeling of antibodies, peptides and other proteins with diagnostic
and therapeutic radioisotopes.
Leu-Tech Diagnostic Imaging Product. Leu-Tech, a product under
development that utilizes direct radiolabeling technology, is a murine (or
mouse) monoclonal antibody-based product designed to be labeled with the
diagnostic radioisotope technetium-99m, a commonly-used radioisotope which
emits signals that can be detected using widely available nuclear medicine
diagnostic equipment. When labeled with technetium-99m, Leu-Tech is intended
for diagnosis of infections, occult abscesses, sites of inflammatory disease
and other conditions involving high concentrations of white blood cells.
The Company believes that the Leu-Tech product can be used for the rapid
diagnosis of a variety of undiagnosed infections and occult abscesses. Occult
abscesses are hidden infections that are generally characterized as being
highly localized. Examples of typical occult abscesses include infections of
the intra-abdominal area, such as intestinal, spleen, liver or urinary tract
abscesses, as well as bone, prosthetic and other abscesses. In a typical
abscess, as in most infections, large numbers of white blood cells congregate
at the site of the infection. Thus, if the location of concentrations of white
blood cells is known, the site of the infection is also known. It is crucial in
the diagnosis and treatment of occult abscesses that the location of the
infection be determined, as location will frequently determine the type of
therapy which is appropriate. The rapidity of diagnosis with Leu-Tech is
intended to make it possible to apply nuclear medicine technology to emergency
critical care problems such as appendicitis, an acute diagnostic emergency not
currently addressed by nuclear medicine.
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The most specific procedure currently available for nuclear medicine
imaging of sites of infection involves removal of blood from the patient,
isolating white blood cells in the patient's blood, radiolabeling the white
blood cells and injecting the radiolabeled white blood cells back into the
patient. The radiolabeled white blood cells then localize at the site of the
infection, and can be detected using nuclear medicine diagnostic equipment.
This procedure is expensive, difficult to perform and generally takes at least
twelve hours to perform.
The Leu-Tech product has been formulated as a lyophilized, or
freeze-dried, kit containing the modified antibody and chemicals required for
the radiolabeling process. Prior to use, Leu-Tech is labeled with
technetium-99m by a radiopharmacy, which is a specialized nuclear medicine
pharmacy, or by a hospital's nuclear medicine department. Leu-Tech is designed
to bind, in the body, to white blood cells already present at the site of the
infection. In addition, Leu-Tech does not require handling or processing of
patient blood.
Preliminary human clinical trials have been conducted under an
Investigational New Drug application (see "Governmental Regulation" in this
Item 1) held in the name of an investigator, using product provided by the
Company. Twelve patient studies have been conducted using the current product
formulation, with images obtained in a variety of diseases, including acute and
suspected appendicitis, pulmonary infections and other abdominal infections. In
some cases, diagnostic images have been obtained within five minutes of
administration of Leu-Tech, and in all cases in which a definitive diagnosis
could be made, diagnostic images have been obtained within ninety minutes.
The Company has obtained an exclusive option and is currently negotiating
a definitive license agreement for the antibody and cell line used for the
Leu-Tech product. In addition, the Company is negotiating long-term contractual
arrangements for the manufacture of purified antibody necessary for Leu-Tech,
as well as the final manufacture of Leu-Tech. Such manufacture must be done
under good manufacturing practice requirements prescribed by the United States
Food and Drug Administration and other agencies (see "Manufacturing and
Marketing" in this Item 1). To date, the Company has manufactured only small or
pilot lots of the Leu-Tech product, and has not determined whether commercial
quantities of Leu-Tech can be manufactured. There can be no assurance that the
Company can successfully negotiate acceptable contractual arrangements for the
manufacture and production of Leu-Tech, or that contractors will be able to
successfully manufacture Leu-Tech.
If the Company successfully negotiates acceptable contractual
arrangements for the manufacture and production of Leu-Tech, and if clinical
results warrant further development, the Company intends to file an
Investigational New Drug application in its name and initiate human clinical
trials on one or more selected indications. There can be no assurance that the
Company's Leu-Tech development program will be successful, that Leu-Tech will
prove to be safe and efficacious in clinical trials, that Leu- Tech can be
manufactured in commercially required quantities at an acceptable price, that
Leu-Tech will obtain the required regulatory approvals or that the Company or
its collaborators will be successful in obtaining market acceptance of
Leu-Tech. The Company or its collaborators may encounter problems and delays
relating to research and development, regulatory approval, manufacturing and
marketing.
PT-2 Cancer Therapeutic Product. PT-2 is a rhenium-labeled somatostatin
peptide analog being developed by the Company which is intended to treat
cancers by regional delivery of tumor cell-targeted radiotherapy. Somatostatin
is a class of peptides which targets receptors found on certain cancers, and at
lower levels on certain normal tissues. The product is intended to combine the
tumor targeting
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potential of somatostatin analogs with the cancer toxicity of rhenium-188, a
radioisotope which emits high energy beta radiation.
In development work to date, the Company has developed a reproducible,
easy to use, and high efficiency direct radiolabeling method for PT-2;
developed a lyophilized final product formulation; conducted biodistribution
studies of PT-2 in normal animals using several different routes of
administration, including intra-venous and intra-cavity administration;
conducted biodistribution studies of PT-2 in tumor-bearing animals; and
demonstrated that PT-2 has a specific therapeutic effect in animal models of
three different human tumors -- lung, prostate and breast cancers.
With regard to administration of PT-2, the Company believes that systemic
administration of somatostatin-based radiotherapeutic agents will not be
efficacious. In trials conducted by other groups to date, the absolute uptake
of the radiotherapeutic agent following intravenous administration is generally
too low to effect a therapeutic response. The Company is developing methods and
protocols for local and regional administration of PT-2 which the Company
believes will overcome problems associated with intravenous administration. The
Company believes these methods provide significant advantages over systemic
administration, including: high probability of tumor binding, resulting from
sequestration and juxtaposition of the radiolabeled peptide against the tumor;
maximal tumor irradiation, resulting from both direct binding of the
somatostatin peptide to its receptor and non-specific local irradiation;
irradiation of micro-metastasis in regional lymph nodes through regional
lymphatic system clearance mechanisms; and rapid clearance from the blood
stream, once PT-2 has entered the blood stream, minimizing irradiation of
non-target organs.
The Company believes PT-2 may have applications with any
compartmentalized cancer which is somatostatin-receptor positive. The cancer
must be compartmentalized in order for local or regional administration to work
and must express somatostatin receptors in reasonably high levels in order to
obtain the targeting benefits of PT-2. Expression of somatostatin receptors
varies by type of cancer. However, until human clinical trials are conducted,
specific clinical utility and applications, if any, cannot be determined.
The Company has completed a series of pre-clinical studies and is
designing initial clinical trials to obtain proof-of-concept. The initial
patient population to be studied are patients with metastatic breast cancer to
the pleura. PT-2 will be administered by infusion directly into the pleural
cavity. This trial will be designed to obtain objective evidence of efficacy,
including tumor stasis or regression and improvement in cancer-associated
biological markers. The trial will be designed so that results can be obtained
within six to eight months of initiating human clinical trials.
There can be no assurance that the Company's PT-2 development program
will be successful, that PT-2 will exhibit the expected biological results in
humans, that PT-2 will prove to be safe and efficacious in clinical trials,
that the Company will obtain the required regulatory approvals for PT-2, or
that the Company or its collaborators will be successful in obtaining market
acceptance of PT-2. The Company or its collaborators may encounter problems and
delays relating to research and development, regulatory approval, manufacturing
and marketing of PT-2.
PT-2 requires a source of radioactive rhenium, preferably rhenium-188.
This isotope can be produced by a variety of methods, including a generator
system; however, clinical grade radioactive rhenium is not currently available
in the United States. The Company is aware of an experimental generator system
developed in the United States by Oak Ridge National Laboratory, and an
additional
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experimental generator system available in Europe. The Company does not intend
to seek to commercialize any source of radioactive rhenium, but is aware of and
is in discussions with other companies seeking to commercialize radioactive
rhenium. There can be no assurance that, regardless of the status of product
development by the Company, any acceptable form of radioactive rhenium will
ever be commercially available in the United States or other countries.
The Company is currently negotiating a license to use a specific
somatostatin analog for its PT-2 product. There can be no assurance that the
Company will be able to conclude a license agreement on acceptable terms. If
the Company cannot conclude a license, the Company will either abandon PT-2
product development or will seek to develop a substitute using its MIDAS
technology. There can be no assurance that the Company would be able to develop
a substitute using its MIDAS technology in a reasonable period of time.
Research and Development Expenditures. In the ten months ended June 30,
1996 and the fiscal year ended August 31, 1995, the Company spent $869,896 and
$619,354, respectively, on research and development activities, including
MIDAS.
Other Products. The Company manufactures and markets, under the trade
name RhoChek, a quality control test product for measuring the immunoreactive
fraction of radiolabeled antibodies specific to certain cancer antigens. The
Company intends to discontinue product sales of RhoChek in fiscal 1997 (see
"Results of Operations" in Item 6).
MARKETS FOR PRODUCTS
The Company's products and technology are intended to be utilized in two
distinct pharmaceutical markets. One market, intended to be addressed by the
Company's Leu-Tech and PT-2 products and certain potential products resulting
from its MIDAS technology, is the nuclear medicine market. The other market,
intended to be addressed by other products resulting from the Company's MIDAS
technology, is the larger market of pharmaceutical drugs.
The nuclear medicine market involves both diagnostic imaging and
therapeutic applications. For imaging, trace amounts of a radioisotope are
injected into a patient and detected with nuclear medicine diagnostic
equipment, generally a gamma camera. For therapy, radioisotopes which emit
radiation lethal to cancer cells are employed.
While all of the Company's proposed products, including products
resulting from its MIDAS technology, employ a metal ion component, the metal
ion is used for MIDAS applications to provide the required three-dimensional
conformation to the molecule, but the metal ion need not be radioactive. Thus,
the Company believes that products resulting from its MIDAS technology can be
used for a variety of medical applications where non-radioactive,
receptor-specific drugs are desired. The Company believes the MIDAS technology
may be applicable, for instance, to include immune disorder, cancer, and
cardiac therapy. There are a limited number of receptor-specific, peptide-based
drugs commercially available, but none which employ a metallopeptide.
GRANTS AND COLLABORATIVE RESEARCH
The Company applies for grants with the National Institutes of Health and
other federally-funded agencies ("Research Grants") to develop its products and
technologies. Since inception, the Company has been awarded over $2.1 million
in peer-reviewed Research Grants. At June 30, 1996, the Company had one active
SBIR Phase I Research Grant, and subsequently has received preliminary
indication that
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three additional SBIR Phase I Research Grants will be awarded. There can be no
assurance that these Phase I grants will be awarded, nor can there be any
assurance that Phase I will be satisfactorily completed.
The Company has, where scientifically or technologically merited,
actively solicited Cooperative Research and Development Agreements ("CRADA")
with agencies of the federal government, involving collaborative development
activities with the Company. The Company currently has one active CRADA with
Brookhaven National Laboratory, and has completed CRADAs with Los Alamos
National Laboratory, Oak Ridge National Laboratory and Sandia National
Laboratory.
COMPETITION
The biopharmaceutical industry is highly competitive, both in the area of
monoclonal antibody-based products and in the area of peptide-based products.
The Company is likely to encounter significant competition with respect to its
proposed products currently under development. Some companies with established
positions in the pharmaceutical industry are better equipped than the Company
to develop, refine and market products based on technologies applied to the
diagnosis and treatment of infectious diseases and cancers. Many of the
Company's competitors which are engaged in the biopharmaceutical field, and in
particular the development of antibody-based and peptide-based products, have
substantially greater financial and technological resources and sales and
marketing capabilities than the Company, and have significantly greater
experience in research and development. Accordingly, the Company's competitors
may succeed in developing products and the underlying technology more rapidly
than the Company and in developing products that are more accurate and useful
and less costly than any that may be developed by the Company, and may also be
more successful than the Company in marketing such products.
The Company is pursuing an area of product development in which there is
the potential for extensive technological innovation in relatively short
periods of time. The Company's competitors may succeed in developing products
that are safer or more effective than those of the Company's potential
products. Rapid technological change or developments by others may result in
the Company's present products and potential products becoming obsolete or
non-competitive.
The Company believes that the technological attributes of its proposed
Leu-Tech diagnostic imaging product, including the ease of preparation,
rapidity of imaging, apparent targeting specificity and use of technetium-99m
(the most widely available radioisotope) will enable the Company to compete
effectively in this market. However, the Company is aware of at least one other
company developing an antibody-based diagnostic imaging agent for specific
infection-related indications, on which clinical trials have been completed,
and another company developing a peptide-based diagnostic imaging agent for
similar indications, which is in early phase clinical trials.
PATENTS AND PROPRIETARY INFORMATION
The Company aggressively seeks patent protection for its technology in
the United States and, selectively, in those foreign countries where in the
Company's judgment such protection is important to the development of the
Company's business.
The Company's patents and pending applications are directed to
radiolabeling of antibodies, antibody fragments, and peptides; MIDAS
metallopeptides; and to methods for making and
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using the foregoing in diagnostic and therapeutic applications. The Company
owns or has rights to 13 U.S. patents, 17 pending U.S. patent applications, and
counterpart patents and applications in strategically selected foreign
countries.
Certain of the patents and pending applications owned by the Company have
been assigned to a third party to secure long-term financing but the Company
has retained the exclusive right to practice these patents itself and to grant
license under these patents to third parties. The Company is obligated to make
monthly payments to the third party in discharge of the Company's debt
obligation. From June 1, 1996 through May 1, 1997 the payments are $20,000 per
month, and thereafter $91,695 per month through May 1, 1999. On completion of
scheduled payments, all rights to the patents and pending applications will be
assigned to the Company. In the event of default by the Company, the third
party has the right to require the Company to cease using the patents, and to
sell or exclusively license the patents to other parties. The patents and
pending applications pertain to the Company's Leu-Tech and PT-2 products. In
addition, the Company has semi-exclusive rights in a basic United States patent
relating to direct radiolabeling of antibodies, and its Canadian counterpart.
Two of the Company's basic U.S. patents for direct radiolabeling of
antibodies and other proteins were involved in a priority-of-invention contest
(interference) in the U.S. Patent and Trademark Office with a patent
application owned by a third party. This proceeding has been settled, and the
Company's patents are now emerging from reissue proceedings in which the scope
of the Company's claims has been somewhat limited. Management believes that the
current claim scope will not materially adversely affect the Company's current
product development plans, and is sufficient to protect the Company's
underlying inventions.
One of the Company's granted European patents (directed to selection of
patient-specific antibody cocktails) is involved in an opposition proceeding at
the European Patent Office. The Company has received a favorable first
decision, but the opposing party has filed an appeal. Management believes that
the final outcome of this proceeding, even if adverse to the Company, will not
have a material adverse effect on the Company's current product development
plans.
The Company's success will depend in substantial part on its ability to
obtain patents, defend and enforce its patents, maintain trade secrets and
operate without infringing upon the proprietary rights of others, both in the
United States and abroad.
In general, the patent positions of companies relying upon biotechnology
are highly uncertain in general and involve complex legal and factual
questions. To date there has emerged no consistent policy regarding the breadth
of claims that are properly accorded to biotechnology patents. There can thus
be no assurance that patents will issue from the patent applications filed by
the Company or its licensors or that the scope of any claims granted in any
patent will provide meaningful proprietary protection or a competitive
advantage to the Company. There can be no assurance that the validity or
enforceability of patents issued or licensed to the Company will not be
challenged by others or that, if challenged, a court will find the patents to
be valid and enforceable. In addition, there can be no assurance that
competitors will not be able to circumvent any patents issued or licensed to
the Company. In the United States, patent applications are maintained in
secrecy until patents issue, and publications in the scientific and patent
literature lag behind actual discoveries. As a result, the Company cannot be
certain that its scientists were the first to make inventions covered by its
patents and patent applications.
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In the event a third party has also filed a patent application relating
to an invention claimed in a Company patent application, the Company may be
required to participate in an interference proceeding decided upon by the
United States Patent and Trademark Office to determine priority of invention,
which could result in substantial uncertainties and cost for the Company, even
if the eventual outcome is favorable to the Company. An adverse outcome could
subject the Company to significant liabilities to third parties and require the
Company to license disputed rights from third parties at undetermined cost or
to cease using the technology. There can be no assurance that the validity or
enforceability of the Company's patents, if issued, would be upheld by a court.
While no patent that could be potentially infringed by manufacture, use
or sale of the Company's product candidates has come to the attention of the
Company, the Company's product candidates are still in the development stage,
and neither their formulations nor their method of manufacture have been
finalized. There can thus be no assurance that the manufacture, use or sale of
the Company's product candidates will not infringe patent rights of others. The
Company may be unable to avoid infringement of any such patents and may have to
seek a license, defend an infringement action, or challenge the validity of the
patents in court. There can be no assurance that a license will be available to
the Company, if at all, upon terms and conditions acceptable to the Company or
that the Company will prevail in any patent litigation. Patent litigation is
costly and time consuming, and there can be no assurance that the Company will
have sufficient resources to pursue such litigation. If the Company does not
obtain a license under any such patents, is found liable for infringement, or
is not able to have them declared invalid, the Company may be liable for
significant money damages, may encounter significant delays in bringing
products to market, or may be precluded from participating in the manufacture,
use or sale of products or methods of treatment covered by such patents.
The Company relies substantially in its product development activities on
certain technologies which are not patentable or proprietary and are therefore
available to the Company's competitors. The Company also relies on certain
proprietary trade secrets and know-how which are not patentable. Although the
Company has taken steps to protect its unpatented trade secrets and know-how,
in part through the use of confidentiality agreements with its employees,
consultants and certain of its contractors, there can be no assurance that
these agreements will not be breached, that the Company would have adequate
remedies for any breach or that the Company's trade secrets will not otherwise
become known or be independently developed or discovered by competitors. If the
Company's employees, scientific consultants or collaborators develop inventions
or processes independently that may be applicable to the Company's product
candidates, disputes may arise about ownership of proprietary rights to those
inventions and processes. Such inventions and processes will not necessarily
become the Company's property, but may remain the property of those persons or
their employers. Protracted and costly litigation could be necessary to enforce
and determine the scope of the Company's proprietary rights. Failure to obtain
or maintain patent and trade secret protection, for any reason, could have a
material adverse effect on the Company.
Certain of the Company's patents are direct to inventions developed with
the Company or within academic institutions from which the Company earlier
acquired rights to such patents with funds from United States government
agencies. As a result of these arrangements, the U.S. government may have
rights in certain inventions developed during the course of the performance of
federally funded projects as required by law or agreements with the funding
agency.
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Several bills affecting patent rights have been introduced in the United
States Congress. These bills address various aspects of patent law, including
publication, patent term, re-examination, subject matter and enforceability. It
is not certain whether any of these bills will be enacted into law or what form
new laws may take. Accordingly, the effect of legislative change on the
Company's intellectual property estate is uncertain.
GOVERNMENTAL REGULATION
The manufacture and marketing of pharmaceutical or biological products
requires approval of the United States Food and Drug Administration ("FDA") and
comparable agencies in foreign countries and, to a lesser extent, state
regulatory authorities. In the United States, the regulatory approval process
for antibody-based products, which are considered "biologics" under FDA
regulations, and for peptide-based products, which are not considered
"biologics," is similar to that for any new drug for human use. The FDA has
established mandatory procedures and safety standards which apply to the
clinical testing, manufacturing and marketing of pharmaceutical products.
Noncompliance with applicable requirements can result in fines, recalls or
seizure of products, total or partial suspension of production, refusal of the
FDA to approve product license applications or to allow the Company to enter
into supply contracts, and criminal prosecution. The FDA also has the authority
to revoke previously granted product licenses and establishment licenses.
Generally, there is a substantial period of time between technological
conception of a proposed product and its availability for commercial sale. The
period between technological conception and product license application to the
FDA is usually five to ten years for in vivo products. The period between the
date of submission to the FDA and the date of approval has averaged two to four
years for in vivo products, although the approval process may take longer. The
amount of time taken for this approval process is a function of a number of
variables, including the quality of the submission and studies presented, the
potential contribution that the compound will make in improving the treatment
of the disease in question and the workload at the FDA. There can be no
assurance that any new drug will successfully proceed through this approval
process or that it will be approved in any specific period of time. Depending
upon marketing and distribution plans and arrangements for a particular
product, the Company may require additional time before a proposed in vivo
product is available for commercial sale.
The steps required before biological products can be produced and
marketed usually include pre-clinical non-human studies, the filing of an
Investigational New Drug ("IND") application, human clinical trials and the
filing and approval of a Product License Application ("PLA"). In addition to
obtaining FDA approval for each product, an Establishment License Application
("ELA") must be filed and the FDA must approve any production facilities for
the product.
Similar steps are required before peptide products, which are not
biological products, can be produced and marketed, except that a New Drug
Application ("NDA") must be filed and approved, and no PLA or ELA is required.
Pre-clinical studies are conducted in the laboratory and in animal model
systems to gain preliminary information on the drug's effectiveness and to
identify major safety problems. The results of these studies are submitted to
the FDA as part of the IND application before approval can be obtained for the
commencement of testing in humans. The human clinical testing program required
for a new biological or pharmaceutical product involves several phases. The
initial clinical evaluation, Phase I, consists of
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administering the product and testing for safe and tolerable dosages while
noting the effectiveness of the product at the various dose levels. Phase II
involves a study to evaluate the effectiveness of the product for a particular
indication and to refine optimal dosage and schedule of administration and
identify possible side effects and risks in a larger patient group. For in vivo
imaging agents, typically the smallest quantity of product producing
satisfactory images will be employed. When a product is determined to be
effective in Phase II trials, it is then evaluated in Phase III clinical
trials. Phase III trials consist of additional testing for effectiveness and
safety with a further expanded patient group, usually at multiple test sites.
Therapeutic products must be compared to standard treatments, if such
treatments exist, to determine its relative effectiveness in randomized trials.
Human clinical trials of both peptide-based and monoclonal antibody-based
in vivo imaging products may combine Phase I and Phase II trials. When Phase
III studies are complete, the results of the pre-clinical and clinical studies,
along with manufacturing information, are submitted to the FDA in the form of a
PLA for monoclonal antibody-based products, and an NDA for peptide-based
products. Both the PLA and NDA involves considerable data collection,
verification and analysis, as well as the preparation of summaries of the
production and testing processes, pre-clinical studies and clinical trials. The
FDA must approve the PLA or NDA, as applicable, and in the case of monoclonal
antibody-based products, an ELA, before the product may be marketed. The FDA
may also require post-marketing testing, including extensive Phase IV studies,
and surveillance to monitor the effects of the product in general use. Product
approvals may be withdrawn if compliance with regulatory standards is not
maintained or if problems occur following initial marketing. In addition, the
FDA may in some circumstances impose restrictions on the use of the drug that
may limit its market potential, and also make it difficult and expensive to
administer, and usually requires prior approval of promotional materials.
The Company has very limited experience in conducting clinical trials.
The Company will either need to rely on third parties to design and conduct any
required clinical trials or expend resources to hire additional personnel to
administer such clinical trials. There can be no assurance that the Company
will be able to find appropriate third parties to design and conduct clinical
trials or that it will have the resources to hire personnel to administer
clinical trials in-house.
No compound or drug candidate being evaluated by the Company has been
submitted for approval or approved by the FDA or any other regulatory authority
for marketing, and there can be no assurance that any such product or compound
will ever be approved for marketing or that the Company will be able to obtain
the labeling claims desired for its products or compounds. The Company is and
will continue to be dependent upon the laboratories and medical institutions
conducting its pre-clinical studies and clinical trials to maintain both good
laboratory and good clinical practices. Data obtained from pre-clinical
studies and clinical trials are subject to varying interpretations which could
delay, limit or prevent FDA regulatory approval. Delays or rejections may be
encountered based upon changes in FDA policy for drug approval during the
period of development and FDA regulatory review. Similar delays also may be
encountered in foreign countries.
There can be no assurance that FDA or other regulatory approval for any
products developed by the Company will be granted on a timely basis, or at all.
Delay in obtaining or failure to obtain such regulatory approvals will
materially adversely affect the marketing of any products which may be
developed by the Company as well as the Company's results of operations.
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MANUFACTURING AND MARKETING
To be successful, the Company's products must be manufactured in
commercial quantities in accordance with good manufacturing practice ("GMP")
requirements prescribed by the FDA and at acceptable costs. The Company has not
yet manufactured any products in commercial quantities and currently does not
have the facilities to manufacture any products in commercial quantities in
accordance with GMP requirements. Therefore, the Company will need to develop
its own GMP manufacturing facility and/or depend on its collaborators,
licensees or contract manufacturers for the commercial manufacture of its
products. In the event the Company determines to establish a manufacturing
facility, it will require substantial additional funds, the hiring and
retention of significant additional personnel and compliance with extensive
regulations applicable to such a facility. The Company has no experience in
such commercial manufacturing, and there can be no assurance that the Company
will be able to successfully establish such a facility and, if established,
that it will be able to manufacture products in commercial quantities for sale
at competitive prices. If the Company determines to rely on collaborators,
licensees or contract manufacturers for the commercial manufacture of its
products, the Company will be dependent on such corporate partners or other
entities for, and will have only limited control over, the commercial
manufacturing of its products. There can be no assurance that the Company will
be able to enter into any such manufacturing arrangements on acceptable terms,
if at all.
The Company's Leu-Tech product requires purified monoclonal antibody,
made from a specific parent cell line. There are, on a global basis, a limited
number of contract manufacturers capable of producing purified monoclonal
antibodies, and there can be no assurance that the Company will be able to
enter into such production and purification arrangements on acceptable terms,
if at all.
The Company's PT-2 product, and any products resulting from its MIDAS
technology, are synthetic peptides. The peptides are synthesized from readily
available amino acids, and the production process involves well-established
technology. The Company currently contracts with third-party manufacturers for
the production of peptides and anticipates doing so in the future.
The Company's PT-2 product requires a source of radioactive rhenium in
order to be commercialized (see "Direct Radiolabeling Technology -- PT-2
Cancer Therapeutic Product" in this Item 1). There can be no assurance that,
regardless of the status of product development by the Company, any acceptable
form of radioactive rhenium will ever be commercially available in the United
States or other countries.
The Company plans to package and ship its radiopharmaceutical products in
the form of non-radioactive kits. Prior to patient administration, the product
would be radiolabeled with the specified radioisotope, generally by a
specialized radiopharmacy. The Company does not intend to sell or distribute
any radioactive substance.
The Company has limited experience in marketing, distributing or selling
pharmaceutical products, and will have to develop a sales force and/or rely on
its collaborators, licensees or arrangements with others to provide for the
marketing, distribution and sales of its products. There can be no assurance
that the Company will be able to establish marketing, distribution and sales
capabilities or make arrangements with third parties to perform such activities
on acceptable terms, if at all.
Successful sales of the Company's products in the United States and other
countries will depend on the availability of adequate reimbursement to the
end-user of the Company's products from third-party payors such as governmental
entities, managed care organizations and private insurance
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plans. Reimbursement by a third-party payor may depend on a number of factors,
including the payor's determination that use of a product is safe and
effective, neither experimental nor investigational, medically necessary,
appropriate for the specific patient and cost effective. Since reimbursement
approval is required from each payor individually, seeking such approvals is a
time-consuming and costly process. Third-party payors routinely limit
reimbursement coverage and in many instances are exerting significant pressure
on medical suppliers to lower their prices. There is significant uncertainty
concerning third-party reimbursement for the use of any pharmaceutical product
incorporating new technology, and there can be no assurance that third-party
reimbursement will be available for the Company's products, or that such
reimbursement, if obtained, will be adequate. Less than full reimbursement by
governmental and other third-party payors for the Company's products would have
a material adverse effect on the Company's business, financial condition and
results of operations. Further, health care reimbursement systems vary from
country to country, and there can be no assurance that third-party
reimbursement will be made available for the Company's products under any other
country's reimbursement system.
PRODUCT LIABILITY AND INSURANCE
The Company's business may be affected by potential product liability
risks which are inherent in the testing, manufacturing and marketing of
pharmaceutical and other products to be developed by the Company. There can be
no assurance that product liability claims will not be asserted against the
Company, its collaborators or licensees. The use of products developed by the
Company in clinical trials and the subsequent sale of such products is likely
to cause the Company to bear all or a portion of those risks. Such litigation
claims could have a material adverse effect on the business or financial
condition of the Company. The Company is seeking product liability insurance
relating to clinical trials, and will seek to obtain liability insurance before
the commercialization of its products. There can be no assurance, however, that
insurance will be available to the Company on acceptable terms, if at all, or
that such coverage once obtained would be adequate to protect the Company
against future claims, or that a medical malpractice or other claim would not
materially and adversely affect the business, prospects, financial condition or
results of operations of the Company. Furthermore, there can be no assurance
that any collaborators or licensees of the Company will agree to indemnify the
Company, be sufficiently insured or have a net worth sufficient to satisfy any
such product liability claims.
EMPLOYEES
As of June 30, 1996, the Company employed 16 persons full time and 1 part
time, of whom 8 were engaged in research and development activities and 9 were
engaged in administration and management. Of the Company's employees, 2 hold
Ph.D. degrees and 6 hold other advanced degrees. The Company, from time to
time, hires scientific consultants to work on certain of its research and
development programs. The Company believes that it has been successful in
attracting skilled and experienced scientific personnel; however, competition
for such personnel is intense.
None of the Company's employees is covered by a collective bargaining
agreement. All of the Company's employees have executed confidentiality
agreements. The Company considers relations with its employees to be good.
The Company is highly dependent upon the efforts of its management. The
loss of the services of one or more members of management could impede the
achievement of development objectives. Due to the specialized scientific nature
of the Company's business, the Company is also highly dependent
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upon its ability to attract and retain qualified scientific, technical and key
management personnel. There is intense competition for qualified personnel in
the areas of the Company's activities and there can be no assurance that the
Company can presently, or will be able to continue to, attract and retain the
qualified personnel necessary for the development of its existing business and
its expansion into areas and activities requiring additional expertise. In
addition, the Company's intended or possible growth and expansion into areas
requiring additional skill and expertise, such as sales and marketing, will
require the addition of new management personnel and the development of
additional expertise by existing management personnel. The loss of, or failure
to recruit, scientific, technical, sales and marketing and managerial personnel
could have a material adverse effect on the Company.
ITEM 2. PROPERTY.
The Company's headquarters are located at 214 Carnegie Center, Suite 100,
Princeton, New Jersey, where it rents, on a month-to-month tenancy,
approximately 3,500 square feet. The Company is currently negotiating a longer
term lease of such facility, but there can be no assurance that a lease can be
entered into on acceptable terms, if at all. The Company also leases
approximately 14,000 square feet in Albuquerque, New Mexico, which serves as
the Company's research and development facility, under a lease which expires
December 31, 1996. The Company is currently negotiating a short-term lease,
through August 31, 1997, for its Albuquerque facility, but there can be no
assurance that a lease can be entered into on acceptable terms, if at all.
The Company currently intends to relocate all of its facilities,
including research and development, to the Princeton, New Jersey area. To date,
no lease has been entered into for new research and development facilities in
the Princeton, New Jersey area, and there can be no assurance that any lease
can be entered into on acceptable terms, if at all.
ITEM 3. LEGAL PROCEEDINGS.
In April 1996, prior to the Merger, the Company and one of its
subsidiaries, Interfilm Technologies, Inc. (collectively, "IT"), filed a
complaint in the Supreme Court of the State of New York, County of New York,
against Sony Corporation of America and certain of its affiliates and
subsidiaries (collectively, "Sony"), for breach of contract and breach of duty
of good faith and fair dealing (the "IT Litigation"), seeking contract damages
of $18 million, punitive damages of $100 million and costs. The IT Litigation
relates solely to the business activities of the Company prior to the Merger
and, pursuant to the Merger, was included in certain assets and liabilities of
IT transferred to an unaffiliated limited liability partnership solely for the
benefit of the Company's stockholders as of June 21, 1996. Accordingly, the
litigation is under the control of and at the expense of the limited liability
partnership, and the Company will receive no financial benefit from the
litigation, even if the litigation is successfully concluded. The assets of the
limited liability partnership, including any proceeds from the IT Litigation,
whether by judgment, settlement or otherwise, are available to indemnify the
Company from certain liabilities arising out of the Merger.
The causes of action in the IT Litigation relate to the actions or
inactions of Sony under certain agreements entered into between IT and Sony in
April 1993, and as amended in November 1993 and October 1994 (collectively, the
"Sony-IT Agreement"). Pursuant to the original terms of the Sony-IT
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Agreement, Sony was obligated, among other things, to develop, produce, market,
distribute and exhibit three interactive motion pictures ("Cinematic Games").
Subsequently, at Sony's request, the Sony-IT Agreement was amended so that
Sony's commitment to produce Cinematic Games was reduced to two Cinematic Games
in exchange for, among other things, an increased financial marketing
commitment by Sony. The first Sony-financed Cinematic Game was initially slated
for release in the first half of 1994, which release was delayed until February
1995. Among other things, IT alleges that the delay in the opening of the first
Cinematic Game, which delay IT alleges was primarily a result of Sony's failure
to abide by the terms of the Sony-IT Agreement, seriously harmed IT. Under the
terms of the amended Sony-IT Agreement, Sony was obligated to begin principal
photography of the next Sony-financed Cinematic Game by May 15, 1995. Because
Sony advised IT that Sony had no intention of producing, distributing and
marketing additional Sony-financed Cinematic Games, litigation was initiated in
May 1995 in the State of California by IT against Sony. In July 1995, a motion
to dismiss or stay the action on grounds of Forum Non Conveniens, arguing that
New York rather than California was the appropriate venue for the action, was
filed by Sony. Following a ruling in favor of the Sony motion, IT elected to
not pursue an appeal of the California court's ruling, and instead engaged
counsel in New York to file the lawsuit and pursue its claims in New York.
The Company is involved in various other claims and litigations arising
in the normal course of business, primarily actions commenced against the
Company prior to the Merger. Management believes that the outcome of such
claims and litigation will not have a material adverse effect on the Company's
financial position and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board of Directors approved, and a total of eight stockholders
representing 2,278,148 shares (approximately 52.64%) of the 4,327,500 shares
outstanding of the Common Stock as of the record date of June 21, 1996,
consented in writing to, the Charter Amendment. Such approval and consent were
sufficient under Section 228 of the Delaware General Corporation Law and the
Company's By-Laws to approve the Charter Amendment. Accordingly, the Charter
Amendment was not submitted to the other stockholders of the Company for a vote
and an Information Statement was furnished to stockholders to provide them with
certain information concerning the Charter Amendment in accordance with the
requirements of the Securities Exchange Act of 1934, as amended and the
regulations promulgated thereunder (the "Exchange Act"), including Regulation
14C.
The Charter Amendment (1) increased the total number of shares of Common
Stock which the Company has authority to issue from 10,000,000 to 25,000,000;
(2) effected a 1-for-10 reverse split of the Common Stock; and (3) changed the
name of the Company from Interfilm, Inc. to Palatin Technologies, Inc. The
Charter Amendment was filed on July 19, 1996 with the Delaware Secretary of
State and was effective upon filing.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Common Stock has been quoted on the OTC Electronic Bulletin Board
(the "Bulletin Board") since October 1, 1995. Currently, the Common Stock
trades under the symbol "PLTN." Prior to
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July 22, 1996, the Common Stock traded under the symbol "IFLM." The Common
Stock began trading publicly on the NASDAQ National Market System ("NMS")
effective October 28, 1993 under the symbol "IFLM." Prior to October 28, 1993,
there was no public market for the Common Stock. On September 30, 1995, the
Common Stock was delisted from the NMS for failure to maintain certain net
tangible assets requirements. The Common Stock is traded sporadically and no
established liquid trading market currently exists therefor.
The table below presents the high and low sales prices on the Bulletin
Board for the Common Stock from June 26, 1996, the date subsequent to the date
of the Merger, through June 30, 1996, the last day of the Company's fiscal
period covered by this report. Such quotations reflect inter-dealer prices or
transactions solely between market-makers without retail mark-up, mark-down or
commissions, and may not necessarily represent actual transactions.
PERIOD HIGH LOW
------ ---- ---
June 26 through June 30, 1996 $ 5.00 $ 4.00
The above prices have been adjusted to give retroactive effect to the 1-for-10
reverse split of the outstanding Common Stock which became effective upon the
filing of the Charter Amendment on July 19, 1996.
On September 24, 1996, the approximate number of holders of record of
Common Stock was 255 and the closing sales price of the Common Stock was $2.50
per share.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings for use in its business
and therefore does not anticipate paying cash dividends in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of the
Company's Board of Directors after taking into account various factors,
including the Company's financial condition, operating results, current and
anticipated cash needs and plans for expansion.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto filed as part of this
Form 10-KSB.
Prior to May 10, 1995, Interfilm had been primarily engaged in the
business of exploiting the rights related to its interactive motion picture
process, including the production and distribution of interactive motion
pictures for initial exhibition in theaters and subsequently in enhanced
versions for distribution to the home market. On May 10, 1995, the Board of
Directors of Interfilm decided to substantially curtail the operations of
Interfilm and its subsidiaries. As a result of the Merger, which became
effective on June 25, 1996, RhoMed became a wholly-owned subsidiary of the
Company, with the holders of RhoMed preferred stock and RhoMed common stock
(including the holders of options pursuant to RhoMed's qualified and
nonqualified stock option plans and RhoMed common stock warrants) receiving
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an aggregate of an approximately 96% interest in the equity securities of the
Company on a fully-diluted basis. Since the former stockholders of RhoMed
retained more than a 50% controlling interest in the Company, the Merger was
treated as a reverse acquisition for accounting purposes. The historical
financial statements of the Company presented prior to the Merger are those of
RhoMed and the business of RhoMed represents the on-going business of the
Company.
RESULTS OF OPERATIONS
Ten Month Period Ended June 30, 1996 Compared to Ten Month Period Ended
June 30, 1995. License fees and royalties were zero for the ten months ended
June 30, 1996, compared to $64,296 in the prior ten month period. The decrease
in license fees and royalties is primarily attributable to the timing of when
these fees are received. Sales of RhoChek, the sole product sold by the
Company, decreased $6,090 to $24,457 in the current ten month period from
$30,546 in the prior ten month period. Due to insufficient sales, the Company
expects to discontinue the manufacture and sale of its RhoChek product in
fiscal 1997. The Company expects sales to decrease in fiscal 1997 as product
sales for RhoChek are discontinued.
Research and development expenses increased by $391,983 to $869,896 for
the ten months ended June 30, 1996, from $477,913 in the ten months ended June
30, 1995. The majority of the increase is attributable to the Company's
Leu-Tech project, including increased consulting, clinical trial and
manufacturing scale-up expenses.
General and administrative expenses increased to $1,250,343 in the
current ten month period from $598,560 for the ten months ended June 30, 1995.
The majority of the increase is due to the hiring of a Chairman and CEO; Vice
President of Finance and CFO; the leasing of general and administrative offices
in New Jersey; and increased travel and consulting expenses.
Other expenses increased to $1,802,097 for the ten months ended June 30,
1996 from $305,615 for the ten months ended June 30, 1995. The increase is
attributable primarily to increased interest expense, commission and fees paid
in connection with the Company's debt offerings ($168,970), costs and fees
associated with the Merger ($475,000), costs and expenses associated with the
relocation of the Company's research and general and administrative offices
($450,000), including primarily severance costs, facility closing expenses and
recruiting fees, and the write down of certain patents not currently used in
development projects ($259,334).
Net loss increased to $3,897,879 in the ten months ended June 30, 1996,
compared to $1,287,246 in the prior ten month period.
Fiscal Year Ended August 31, 1995 Compared to Fiscal Year Ended August
31, 1994. Total revenues decreased by $49,946 to $97,902 for the fiscal year
ended August 31, 1995, from $147,848 in the previous fiscal year. The decrease
is attributable to no grant revenue during fiscal year 1995 compared to $50,289
for the previous fiscal year.
Research and development expenses were $619,354 for the fiscal year ended
August 31, 1995 compared to $584,941 for the previous fiscal year.
General and administrative expenses decreased to $776,291 for the fiscal
year ended August 31, 1995 from $939,155 in the previous fiscal year. Such
decrease was primarily attributable to decreased offering expenses.
Page 19
<PAGE>
Other expenses increased to $341,121 for the fiscal year ended August 31,
1995 from $168,707 in the previous fiscal year. The increase is attributable to
higher interest expense due to a higher average debt balance outstanding
throughout the 1995 fiscal year.
Net loss for the fiscal year ended August 31, 1995 increased to
$1,638,864 from $1,544,955 in the previous fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has incurred net operating losses and,
as of June 30, 1996, had an accumulated deficit of approximately $8,100,000.
The Company has financed its net operating losses through June 30, 1996 by a
series of debt and equity financings. At June 30, 1996, the Company's cash
position amounted to $6,791,300.
For the ten months ended June 30, 1996, the net increase in cash amounted
to $6,317,282. Cash provided by financing activities was $9,053,350, mainly
comprised of net proceeds from common stock offerings of $9,143,303, which was
offset by net cash used for operating activities of $2,709,491 and net cash
used for investing activities of $26,577.
The Company has $1,000,000 face amount senior bridge notes which mature,
with accrued interest, in August and September of 1996. The current portion of
long-term debt maturing in fiscal year 1997 totals $311,695.
The Company's current cash position is sufficient to meet its debt
obligations in fiscal year 1997, and fund its operations, at their current
level, through fiscal year 1997.
The Company has incurred negative cash flows from operations since its
inception. The Company has expended, and will continue to expend in the future,
if available, substantial funds to continue its research and development
programs, including pre-clinical studies and clinical trials, to seek
regulatory approval of its products and to develop manufacturing and
distribution capabilities. Further, the Company has a significant portion of
short-term debt coming due during the fiscal year ending June 30, 1997. The
Company anticipates, based on projected expenditure levels, that its existing
capital resources will be adequate to make scheduled debt payments and to fund
its operations through fiscal year 1997. The Company's future capital
requirements depend on numerous factors which cannot be quantified, including
continued progress in its research and development activities, progress with
pre-clinical studies and clinical trials, prosecuting and enforcing patent
claims, technological and market developments, the ability of the Company to
establish product development arrangements, the cost of manufacturing scale-up
and effective marketing activities and arrangements. The Company will seek to
obtain additional funds through equity or debt financing, collaborative or
other arrangements with corporate partners and others, and from other sources.
No assurance can be given that additional financing will be available when
needed or on terms acceptable to the Company. If adequate additional funds are
not available, the Company may be required to delay, scale back or eliminate
certain of its research, drug discovery or development activities or certain
other aspects of its business. If adequate funds are not available, the
Company's business will be materially and adversely affected.
The Company intends to relocate its research and development facility
from Albuquerque, New Mexico to the Princeton, New Jersey area during fiscal
year 1997. The Company may incur significant costs to build and equip research
and development laboratory space, although an estimate of expenditure and lease
costs for a new facility cannot be determined at this time.
Page 20
<PAGE>
The Company anticipates incurring additional losses over at least the
next several years, and such losses are expected to increase as the Company
expands its research and development activities relating to its metallopeptide
technology and its radiolabeling technology. To achieve profitability, the
Company, alone or with others, must successfully develop and commercialize its
technologies and products, conduct pre-clinical studies and clinical trials,
obtain required regulatory approvals and successfully manufacture, introduce
and market such technologies and products. The time required to reach
profitability is highly uncertain, and there can be no assurance that the
Company will be able to achieve profitability on a sustained basis, if at all.
ITEM 7. FINANCIAL STATEMENTS.
The Company's consolidated financial statements appear following Item 13
of this Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
As of July 9, 1996, in connection with the Merger, Deloitte & Touche LLP,
the Company's independent accountant which was engaged as the principal
accountant to audit the Company's financial statements, was dismissed. The
Company, after consultation with Arthur Andersen LLP, engaged Arthur Andersen
LLP as of July 9, 1996 as the principal accountant to audit the Company's
consolidated financial statements. Arthur Andersen LLP also serves as RhoMed's
independent accountant.
RhoMed, prior to the Merger, consulted Arthur Andersen LLP regarding the
application of accounting principles to the proposed Merger. The primary issue
that was the subject of such consultations was the characterization of the
proposed Merger for accounting purposes. RhoMed was orally advised by Arthur
Andersen LLP that the Merger would be treated as a recapitalization of RhoMed
with RhoMed as the acquirer (reverse acquisition), and that the proposed Merger
would not constitute a business combination. The Company's former accountant,
Deloitte & Touche LLP, was not consulted by the Company regarding such issue.
The Company's decision to change accountants was recommended and approved
by the Company's Board of Directors subsequent to the Merger based upon the
Company's need for one independent accountant to be responsible for the
consolidated financial statements of the Company following the Merger. During
Interfilm's fiscal years ended December 31, 1995 and 1994, there were no
disagreements between the Company and Deloitte & Touche LLP, the Company's
former independent accountant, on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
Further, during Interfilm's fiscal years ended December 31, 1995 and 1994,
respectively, Deloitte & Touche LLP's opinion with respect to the Company's
financial statements was qualified as to the Company's ability to continue as a
going concern.
Page 21
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
The names, ages and offices of the Company's current directors and
executive officers are as follows:
<TABLE>
<CAPTION>
NAME(1)(2) AGE OFFICE
- -------------------- --- ------------------
<S> <C> <C>
Edward J. Quilty 45 Chairman, President, and Chief Executive Officer
Michael S. Weiss 30 Director
Carl Spana 34 Executive Vice President and Director
James T. O'Brien 57 Director
Richard J. Murphy 65 Director
John K.A. Prendergast 41 Director
John J. McDonough 32 Vice President and Chief Financial Officer
Charles Putnam 43 Executive Vice President
</TABLE>
- ---------------------------------------
(1) Prior to the Merger, the Board of Directors consisted of Bob Bejan,
William I. Franzblau, Lawrence L. Kuppin, Robert G. Rehme and Myron A.
Hyman (collectively, the "Pre-Merger Board"). Effective upon and pursuant
to the Merger, the Pre-Merger Board resigned and was replaced by the
Board of Directors of RhoMed, consisting of Edward J. Quilty, Buck A.
Rhodes, Carl Spana and Michael S. Weiss. Buck A. Rhodes resigned as a
director effective June 30, 1996. The Board of Directors subsequently
elected James T. O'Brien, Richard J. Murphy and John K.A. Prendergast as
directors of the Company.
(2) Prior to the Merger, the executive officers consisted of William I.
Franzblau, Executive Vice President and Chief Executive Officer, and
Brian T. Cooper, Vice President of Finance. Effective upon the Merger,
both resigned as executive officers, and the Board of Directors appointed
new officers of the Company.
Directors of the Company hold office until the next annual meeting of the
stockholders and until their successors have been duly elected and qualified.
Messrs. Quilty, Rhodes, Spana and Weiss were elected as a condition of the
Merger. Election of Edward J. Quilty as a director of RhoMed is a condition of
RhoMed's employment agreement with Mr. Quilty (see Item 10, Executive
Compensation). Otherwise, there are no arrangements or understandings between
any directors and any other person pursuant to which any director was elected
as a director of the Company. Executive officers do not serve a term of years
but serve at the pleasure of the Board of Directors, except that Mr. Quilty
holds his office pursuant to an employment agreement (see Item 10, Executive
Compensation).
Page 22
<PAGE>
EDWARD J. QUILTY has been Chairman, President, Chief Executive Officer
and a director of the Company since June 25, 1996, the effective date of the
Merger, and has been Chief Executive Officer and a director of RhoMed since
November 1995. From July 1994 through November 1995, Mr. Quilty was President,
Chief Executive Officer and a director of MedChem Products, Inc., a publicly
traded medical device company, which in September 1995 was merged into C.R.
Bard, Inc. From March 1992 through July 1994, Mr. Quilty served as President
and Chief Executive Officer of Life Medical Sciences, Inc., a publicly traded
medical device company. From January 1987 through October 1991, Mr. Quilty
served as Executive Vice President of McGaw Inc., a pharmaceutical company. Mr.
Quilty is also Chairman of the Board and a director of Derma Sciences, Inc., a
publicly traded medical device company. Mr. Quilty received his M.B.A. from
Ohio University, and a B.S. from Southwest Missouri State University.
MICHAEL S. WEISS, has been a director of the Company since June 25, 1996,
the effective date of the Merger, and has been a director of RhoMed since July
1995. Since November 1993, Mr. Weiss has been Associate General Counsel and
then General Counsel of The Castle Group, LLC, and a Vice President and Senior
Managing Director of Paramount Capital, Inc. From 1991 to 1993, Mr. Weiss was
an attorney with Cravath, Swaine & Moore. Mr. Weiss serves on the Board of
Directors of Xytronyx, Inc., Avax Technologies, Inc., and as Secretary of
Atlantic Pharmaceuticals, Inc., all publicly traded medical technology
companies. Mr. Weiss received his J.D. from Columbia University School of Law
and a B.S. in Finance from The State University of New York at Albany.
CARL SPANA, Ph.D., has been a director of the Company since June 25,
1996, the effective date of the Merger, and has been a director of RhoMed since
July 1995. Since June 1996, he has served as Executive Vice President and Chief
Technology Officer of the Company and RhoMed. Dr. Spana was Vice President of
The Castle Group, LLC from June 1993 to July 1996, and was most recently a Vice
President of Paramount Capital Investments, LLC, where he was responsible for
discovering, evaluating, and commercializing new biotechnologies. Through his
work at The Castle Group, LLC, Dr. Spana was a co-founder of several private
biotechnology firms. Prior to working at The Castle Group, LLC, Dr. Spana was a
Research Associate at Bristol-Myers Squibb where he was involved in scientific
research in the field of immunology. Dr. Spana is a director and was Interim
President of Avax Technologies, Inc., a publicly traded medical technology
company. Dr. Spana received his Ph.D. in Molecular Biology from The Johns
Hopkins University and a B.S. in Biochemistry from Rutgers University.
JAMES T. O'BRIEN has been a director of the Company since August 1, 1996.
Since September 1991, Mr. O'Brien has been Chairman of the Board of Access
Corporation, a provider of employment software and information. He is also
President/CEO of O'Brien Marketing and Communications. Mr. O'Brien was President
and Chief Operating Officer of Elan Corporation, PLC, a pharmaceutical company,
from 1989 to 1991. From 1986 to 1989, he was President and Chief Executive
Officer of O'Brien Pharmaceuticals, Inc. Prior to this, he held various
management positions with Revlon Health Care Group, most notably President of
USV Laboratories and the Armour Pharmaceutical Company; Lederle Laboratories;
and Sandoz Pharmaceuticals, Inc. Mr. O'Brien is a director of Carrington
Laboratories, Inc., a publicly traded pharmaceutical and medical devices
company, and Theratech Inc., a publicly traded drug delivery company.
RICHARD J. MURPHY has been a director of the Company since August 1,
1996. Mr. Murphy was, until his retirement in January, 1993, a Senior Vice
President and director of Hoffmann LaRoche Inc., a pharmaceutical company,
where he was responsible for two operating divisions, Roche
Page 23
<PAGE>
Diagnostics and Roche Vitamin and Fine Chemicals. Mr. Murphy had held various
marketing and administrative positions with Hoffmann LaRoche Inc. since 1964.
Mr. Murphy is a director of I.D. Biomedical Corp., a publicly traded Canadian
biotechnology firm.
JOHN K.A. PRENDERGAST, Ph.D. has been a director of the Company since
August 28, 1996. Dr. Prendergast has served as a Managing Director of The
Castle Group, Ltd. ("Castle"), a medical technology venture capital firm, since
1991. Dr. Prendergast is a co-founder and director of Avigen, Inc., a medical
technology company, and, from December 1992 to March 1996, served as a Vice
President and the Treasurer of Avigen, Inc. Dr. Prendergast is a co-founder and
director of Xenometrix, Inc., Avax Technologies, Inc., and Atlantic
Pharmaceuticals, Inc., all publicly traded medical technology companies. Dr.
Prendergast received M.Sc. and Ph.D. degrees from the University of New South
Wales, Sydney, Australia and a C.S.S. in Administration and Management from
Harvard University.
JOHN J. McDONOUGH has been Vice President and Chief Financial Officer of
the Company since June 25, 1996, the effective date of the Merger, and has been
Vice President and Chief Financial Officer of RhoMed since December 1995. From
January 1992 through December 1995, Mr. McDonough was employed by MedChem
Products, Inc., a publicly traded medical device company, which in September
1995 was merged into C.R. Bard, Inc., in various positions, his final position
being Vice President and Chief Financial Officer. Previously, Mr. McDonough was
a manager with KPMG Peat Marwick.
CHARLES PUTNAM has been Executive Vice President of the Company since
June 25, 1996, the effective date of the Merger, and is responsible for
operations and product development. From July 1994 to May 1996, Mr. Putnam was
Executive Vice President, R & D of MedChem Products, Inc., a publicly traded
medical device company, which in September 1995 was merged into C.R. Bard, Inc.
At MedChem, Mr. Putnam was responsible for product development, regulatory
affairs, clinical research and quality control. From March 1993 to July 1994,
Mr. Putnam was Vice President of Operations and Research and Development of
Life Medical Sciences, Inc., a publicly traded medical device company, where he
was responsible for all aspects of manufacturing, research and regulatory
affairs for the company's only commercial product line. From March 1983 to
March 1993, Mr. Putnam was employed by American Cyanamid Corporation, where he
served as a project engineer (1983 to 1989), Director of Automation (February
1989 to March 1992), Director of Needle Development (R&D) (March 1992 to
January 1993) and Director of Device Development (R&D) for the Davis and Geck
division, where he was responsible for the design and development of surgical
devices (December 1992 to March 1993). Mr. Putnam had previously worked in
product development and engineering for Ford Motor Company, Raytheon
Corporation and Burndy Corporation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company under Rule 16a-3(d) of the Exchange Act during its
most recent fiscal year and Forms 5 and amendments thereto furnished to the
Company with respect to the ten month period ended June 30, 1996, the following
persons failed to file on a timely basis the required reports indicated:
William I. Franzblau, former Executive Vice President and Chief Executive
Officer of Interfilm, and Lawrence L. Kuppin, a former director of Interfilm,
each failed to report transactions on Form 4 for the month of June 1996. In
both cases, the transactions to be reported were the acquisition of shares of
RhoMed common stock and common stock purchase warrants in connection with the
Merger. Mr. Franzblau and Mr. Kuppin each subsequently reported the June 1996
transactions on timely filed Forms 5. The Company knows of no failure to file a
required Form.
Page 24
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth annual and long-term compensation paid to
the Company's Chief Executive Officer and Interfilm's former Chief Executive
Officer for the last three fiscal years (see note (1) below concerning the
change in fiscal year end). Other than Edward J. Quilty, no officer of the
Company or Interfilm received salary and bonus totalling over $100,000 during
the ten month period ended June 30, 1996. With respect to the persons and
periods covered in the following table, the Company and Interfilm made no
restricted stock awards and had no long-term incentive plan payouts.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------------------------- -------------
Other
Annual Securities All other
Compen- Underlying Compen-
Name and Salary Bonus sation Options/ sation
Principal Position Year(1) ($) ($) ($) SARs (#)(2) ($)
- ----------------------- -------- ---------- ------- --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Edward J. Quilty, 1996 $ 184,794 -- -- 712,297 --
Chief Executive
Officer(3) 1995 N/A N/A N/A N/A N/A
1994 N/A N/A N/A N/A N/A
Buck A. Rhodes, 1996 $ 52,041 -- -- 46,083 $71,523(5)
Chief Executive
Officer(4) 1995 $ 60,445 -- -- 737 --
1994 $ 60,445 $ 1,060(6) -- -- --
William I. Franz- 1996 -- -- -- 50,691(8) $ 9,494(8)
blau, Chief Exec-
utive Officer(7) 1995 $ 105,000 -- -- 0 --
1994 $ 160,000 -- $ 3,400(9) 0 --
</TABLE>
- ---------------
(1) Due to the change in the Company's fiscal year end, fiscal year 1996
covers the ten-month period ended June 30, 1996. Mr. Franzblau's
compensation for 1995 and 1994 is reported for the fiscal years ended
December 31, 1995 and 1994, Interfilm's former fiscal year end. Mr.
Franzblau's compensation for 1996 therefore includes only amounts paid
after December 31, 1995.
Page 25
<PAGE>
(2) Underlying security amounts are stated in terms of Common Stock. See the
text accompanying the following table, entitled "Option/SAR Grants in the
Ten Month Period Ended June 30, 1996," for specification of the class of
those securities at the end of the ten month period ended June 30, 1996.
(3) Mr. Quilty was employed as Chief Executive Officer of RhoMed beginning on
November 16, 1995 and was employed as Chief Executive Officer of the
Company beginning on June 25, 1996. The compensation paid and/or issued
to Mr. Quilty, as reflected in this table, includes compensation paid
and/or issued by both RhoMed and the Company.
(4) Dr. Rhodes was employed as the Chief Executive Officer of RhoMed from
January 28, 1986 through November 15, 1995.
(5) Consists of $51,023 in salary accrued from 1990 to 1994 and paid on June
28, 1996, and $20,500 paid to Dr. Rhodes under a consulting agreement
with RhoMed.
(6) Stock bonus, originally issued as RhoMed common stock and shown here as
converted to Common Stock, consisting of 279 shares of Common Stock
valued at $3.80 per share.
(7) Mr. Franzblau became Chief Executive Officer of Interfilm on August 9,
1995. During 1994 and up to August 9, 1995, he was Chief Operating
Officer of Interfilm. He received no annual compensation after October
1995. He resigned as Chief Executive Officer effective upon the
consummation of the Merger on June 25, 1996.
(8) In connection with the Merger, Mr. Franzblau received 7,000 shares of
Common Stock valued at $9,494 for services rendered to Interfilm, and
Class C Warrants to purchase 50,691 shares of Common Stock at an exercise
price of $2.17 per share.
(9) 1994 Other Annual Compensation is a contribution made by Interfilm to Mr.
Franzblau's account under Interfilm's 401(k) Plan.
OPTION/SAR GRANTS IN THE TEN MONTH PERIOD ENDED JUNE 30, 1996
Except as noted below, options and warrants shown in the following table
were originally exercisable for shares of RhoMed common stock. As a result of
the Merger, at the end of the ten month period ended June 30, 1996, they were
exercisable for shares of the Company's Series B Preferred Stock and became
exercisable for shares of Common Stock on July 19, 1996, following the filing
of the Charter Amendment. The number of shares and exercise prices are stated
as if the options and warrants had been exercisable for shares of Common Stock
at the end of the ten month period, and also give effect to the 1-for-10
reverse split of the Common Stock effected by the Charter Amendment.
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees or Base
Name Granted (#) in Fiscal Year Price ($/Sh) Expiration Date
---- ------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Edward J. Quilty 431,266(1) 26.0% $0.05 12/4/05(2)
281,031(3) 16.9% $0.05 6/21/06(2)
</TABLE>
Page 26
<PAGE>
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees or Base
Name Granted (#) in Fiscal Year Price ($/Sh) Expiration Date
---- ------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Buck A. Rhodes 46,083(4) 2.8% $1.36 4/16/06(5)
William I. Franzblau 50,691(6) 3.1% $2.17 6/24/00
</TABLE>
(1) Employee Incentive Stock Option. After the date of grant (December 4,
1995), during the employment period, options vest in 36 equal increments
on the 16th of each month.
(2) The expiration date shown is the latest expiration date. The option also
provides for expiration 90 days after termination of employment.
(3) Originally granted prior to the Merger as an Employee Incentive Stock
Option and Nonqualified Stock Option under plans adopted by RhoMed, and
subsequent to June 30, 1996, restated by the Company as anti-dilution
options pursuant to the employment agreement between the Company and Mr.
Quilty (see "Employment Agreements" in this Item 10). Commencing June 21,
1996, options vest in 36 equal increments on the 16th of each month
during the employment period.
(4) Nonqualified Stock Option. After the date of grant (April 16, 1996),
during the period when Dr. Rhodes is serving as a consultant to RhoMed or
the Company, options vest in two equal increments on August 1 of each
year.
(5) The expiration date shown is the latest expiration date. The option also
provides for expiration 90 days after termination of consulting services.
(6) Class C Warrant. Exercisable upon issuance on June 24, 1996.
AGGREGATED OPTION/SAR EXERCISES IN TEN MONTH PERIOD ENDED JUNE 30, 1996
AND FY-END OPTION/SAR VALUES
No options were exercised during the ten month period ended June 30,
1996. The Company has no outstanding stock appreciation rights ("SARs"). Except
for an option granted to William I. Franzblau for 9,500 shares of Common Stock,
all options and warrants shown in the following table were originally
exercisable for shares of RhoMed common stock. As a result of the Merger, at
June 30, 1996, the options and warrants had become exercisable for shares of
the Company's Series B Preferred Stock. Upon the filing of the Charter
Amendment on July 19, 1996, the options and warrants became exercisable for
shares of Common Stock. Numbers of shares and values are stated as if the
options and warrants had been exercisable for Common Stock (giving effect to
the Charter Amendment) at the end of the ten month period ended June 30, 1996.
Values are based on a last reported sale price for the
Page 27
<PAGE>
Common Stock, as reported on the Bulletin Board on June 28, 1996 (the last
trading day of the ten month period ended June 30, 1996) of $5.00 per share
giving effect to the reverse split.
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Ten-Month Period End (#) Ten-Month Period End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------------------- -------------------------
<S> <C> <C>
Edward J. Quilty 83,857/628,440 $415,092/$3,110,777
Buck A. Rhodes 737/46,083 $3,648/$167,742
William I. Franzblau 56,391/3,800 $143,456/$0
</TABLE>
COMPENSATION OF DIRECTORS
Under the Company's 1996 Stock Option Plan, which the Board of Directors
adopted on August 28, 1996 (subject to stockholder approval), each director of
the Company who is not an employee of the Company or of a parent or subsidiary
of the Company (a "Non-Employee Director") will be granted, at the first
meeting of the Board of Directors of the Company following each annual meeting
of the stockholders of the Company, an option to purchase 10,000 shares of
Common Stock at a per share exercise price equal to the fair market value of a
share of Common Stock on the date of grant, which vests as to 25% per year
starting one year after the date of grant (a "Non-Employee Director's Formula
Option"). Any Non-Employee Director who is elected to the Board of Directors
after August 28, 1996 and before the annual stockholders' meeting in any year
will also receive a Non- Employee Director's Formula Option for that portion of
10,000 shares equal to the portion of a year (measured in full calendar months)
remaining until the next scheduled annual stockholders' meeting. All
Non-Employee Directors serving on the date the Board of Directors adopted the
1996 Stock Option Plan (August 28, 1996) received initial Non-Employee
Director's Formula Options for 20,000 shares, with the same exercise price and
vesting conditions as regular Non-Employee Director's Formula Options.
The four Non-Employee Directors serving on August 28, 1996, each of whom
received an initial Non-Employee Director's Formula Option for 20,000 shares at
an exercise price subsequently set at $1.36 per share, were Richard J. Murphy,
James T. O'Brien, John K.A. Prendergast and Michael S. Weiss.
Effective August 28, 1996, non-employee directors will be paid $12,000 per
year, plus expenses, for services as a director. The Company paid no
compensation to any director for services as a director during the ten month
period ended June 30, 1996. Employee directors are not separately compensated
for services as a director, but are reimbursed for expenses. Service as a
director is a condition of Edward J. Quilty's employment agreement (see
"Employment Agreements" in this Item 10), but such service is not separately
compensated.
Page 28
<PAGE>
In July 1996, the Company paid $36,000 to Buck A. Rhodes, a former
director of the Company and RhoMed, as severance compensation for resigning
from the board of RhoMed effective June 30, 1996. The resignation and severance
pay were pursuant to the terms of a consulting agreement dated March 7, 1996,
between RhoMed and Dr. Rhodes.
EMPLOYMENT AGREEMENTS
On November 16, 1995, RhoMed entered into an employment agreement with
Edward J. Quilty pursuant to which Mr. Quilty is serving as President and Chief
Executive Officer of RhoMed, which employment agreement the Company agreed to
adopt, with amendments as required, subsequent to the Merger. The initial term
of the agreement is one year and it is automatically renewed for successive
twelve-month periods unless either party gives written notice to the contrary,
or unless the agreement is otherwise terminated. Mr. Quilty's minimum base
salary is $300,000 per year. The Company has agreed to reimburse Mr. Quilty for
premiums and other payments to maintain a $1,000,000 term life insurance policy
issued in 1992 for the benefit of Mr. Quilty and his designees. Mr. Quilty may
also participate in any benefit plans available to other senior executives of
the Company, and in any directors' and officers' liability insurance which the
Company maintains. Pursuant to the agreement, RhoMed issued to Mr. Quilty an
option to purchase common stock equal to a 10% fully diluted equity interest in
RhoMed as of November 16, 1995, at a price of $0.01 per share, to vest in 36
equal increments monthly during the term of the agreement. That option has, by
operation of the Merger and the Charter Amendment, become an option for 431,266
shares of Common Stock at an exercise price of $0.05 per share (rounded to the
nearest cent). The agreement also provides for anti-dilution protections which,
among other things, require the Company to issue additional options with the
same exercise price as the original option, so that Mr. Quilty shall, at all
times, have options in the aggregate to purchase the number of shares of the
Company's Common Stock equal to not less than 3.75% of the Company's
outstanding Common Stock on a fully diluted basis. For a period of five years
after the first anniversary of the Company's initial post-Merger public
offering, Mr. Quilty has piggy-back registration rights as to all Common Stock
which he owns. If the Company terminates the employment agreement for "cause,"
or if Mr. Quilty terminates the agreement without "good reason," then the
Company's payment obligation is limited to amounts earned through the
termination date, and the option will be exercisable only to the extent vested.
If Mr. Quilty elects to terminate the agreement following a change in control
of the Company, then the Company's payment obligation is limited to amounts
earned through the termination date, but the option will immediately become
exercisable in full. If the Company terminates the agreement without cause, or
in the event of Mr. Quilty's death or disability, or if Mr. Quilty terminates
the agreement with good reason, then in addition to amounts earned through the
termination date, the Company must pay Mr. Quilty one year's base salary.
"Cause," as defined in the agreement, consists of fraud, felony conviction,
refusal to carry out instructions of the Board of Directors, or governmental
disqualification (all as defined in the agreement). "Good reason," as defined
in the agreement, consists of breach by the Company of its obligations under
the agreement. The agreement also includes non-competition, confidentiality and
indemnification covenants.
Until March 18, 1996, Interfilm had employed William I. Franzblau, former
Chief Executive Officer of Interfilm, pursuant to an employment agreement dated
October 28, 1993. Interfilm made no payments to Mr. Franzblau under the
agreement after October 1995, due to Interfilm's financial condition at that
time. As of March 18, 1996, Mr. Franzblau and Interfilm entered into a
Settlement of Employment Agreement, which replaced the employment agreement.
The settlement agreement fixed the amount due to Mr. Franzblau under the
employment agreement at $280,200, and provided that
Page 29
<PAGE>
payment would be made only out of the proceeds of settlement or judgment in
Interfilm's litigation against Sony Corporation of America, a cause of action
which Interfilm assigned to an unaffiliated limited liability partnership,
pursuant to the Merger. Mr. Franzblau released Interfilm from any further
liability under the employment agreement, and continued to serve without pay as
Interfilm's Chief Executive Officer until June 25, 1996, the date of the
consummation of the Merger. As a condition of the Merger, Mr. Franzblau
resigned as a director and officer of Interfilm effective on the closing of the
Merger. Pursuant to the Merger, Mr. Franzblau received (i) shares of RhoMed
common stock valued at $9,494 which, upon the filing of the Charter Amendment
on July 19, 1996, were converted into 7,000 shares of Common Stock, and (ii)
Class C Warrants to purchase RhoMed common stock, which, upon the filing of the
Charter Amendment on July 19, 1996, were converted into warrants to purchase
50,691 shares of Common Stock at an exercise price of $2.17 per share.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Common Stock is the Company's only outstanding class of voting
securities. The following table sets forth beneficial ownership of Common Stock
as of September 24,1996, by (i) each person known by the Company to be the
beneficial owner of more than five percent of the Common Stock, (ii) each
director of the Company, (iii) each of the executive officers included in the
Summary Compensation Table (see Item 10, Executive Compensation) and (iv) all
directors and officers of the Company as a group. Except as noted below, each
person has sole voting and investment power with respect to the shares listed.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Edward J. Quilty 182,787(1) 1.6%
c/o Palatin Technologies, Inc.
214 Carnegie Center, Suite 100
Princeton, NJ 08540
Buck A. Rhodes, Ph.D. 560,657(2) 4.8%
c/o Palatin Technologies, Inc.
4261 Balloon Park Road, NE
Albuquerque, NM 87109
Michael S. Weiss 98,055(3) *
c/o Paramount Capital, Inc.
375 Park Avenue, Suite 1501
New York, NY 10152
Carl Spana, Ph.D. 46,695 *
c/o Palatin Technologies, Inc.
214 Carnegie Center, Suite 100
Princeton, NJ 08540
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<PAGE>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- --------------------------------------------------------------------------------------------------------------
James T. O'Brien 0 -
c/o Palatin Technologies, Inc.
214 Carnegie Center, Suite 100
Princeton, NJ 08540
Richard J. Murphy 0 -
c/o Palatin Technologies, Inc.
214 Carnegie Center, Suite 100
Princeton, NJ 08540
John K.A. Prendergast 46,695 *
The Castle Group, Ltd.
375 Park Avenue, Suite 1501
New York, NY 10152
Lindsay A. Rosenwald, M.D. 3,416,549(4) 28.5%
375 Park Avenue, Suite 1501
New York, NY 10152
RAQ, LLC 1,657,070(5) 14.4%
c/o Lindsay A. Rosenwald, M.D.
375 Park Avenue, Suite 1501
New York, NY 10152
The Aries Trust 1,050,997(6) 9.0%
c/o Aries Financial Services
375 Park Avenue, Suite 1501
New York, NY 10152
Lawrence L. Kuppin 495,378(7) 4.2%
9615 Brighton Way, Ste. 300
Beverly Hills, CA 90210
Bob Bejan 47,161(8) *
4015 South Court Street
Seattle, WA 98144
William I. Franzblau 178,585(9) 1.5%
The Soho Building
110 Greene St., Ste. 601
New York, NY 10012
Robert G. Rehme 113,434(10) *
12651 Promontory Road
Los Angeles, CA 90049
Page 31
<PAGE>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- --------------------------------------------------------------------------------------------------------------
Brian T. Cooper 11,290(11) *
15 West 11th Street, Apt. 9E
New York, NY 10011
Myron A. Hyman(12) 0 -
501 Madison Avenue, 19th Floor
New York, NY 10022
All directors and officers as a 374,232 3.2%
group (eight persons)
</TABLE>
- ------------------
*Less than one percent.
(1) Consists of 182,787 shares which Mr. Quilty has options to purchase
pursuant to RhoMed's 1995 Employee Incentive Stock Option Plan and
anti-dilution options granted by the Company, of which 143,215 shares
are currently purchasable and 39,572 shares will become purchasable
within 60 days from the date of this report.
(2) Includes 23,778 shares which Dr. Rhodes has options to purchase
pursuant to RhoMed's 1995 Nonqualified Stock Option Plan. Also
includes 983 shares owned by Dr. Rhodes' wife. Dr. Rhodes resigned
as a director effective June 30, 1996.
(3) Includes 46,353 shares which Mr. Weiss has warrants to purchase.
(4) Includes 265,983 shares which Dr. Rosenwald has warrants to
purchase. Also includes 1,657,070 shares owned by RAQ, LLC, of which
Dr. Rosenwald is President. Also includes an aggregate of 1,290,696
shares of Common Stock owned by Aries Domestic Fund, L.P. and The
Aries Trust, and an aggregate of 202,800 shares which Aries Domestic
Fund, L.P. and The Aries Trust have warrants to purchase. Dr.
Rosenwald is the President of Aries Financial Services, Inc., which
is the General Partner of Aries Domestic Fund, L.P. and the
Investment Manager of The Aries Trust, and as such may be deemed to
be the beneficial owner of such shares, although he disclaims
beneficial ownership except to the extent of his pecuniary interest,
if any. Does not include any shares owned by employees of Paramount
Capital, Inc., of which Dr. Rosenwald is the Chairman.
(5) All of the shares owned or purchasable by RAQ, LLC are also included
in the beneficial ownership of Lindsay A. Rosenwald, M.D., as
explained in note (4) above.
(6) Includes 129,058 shares which The Aries Trust has warrants to
purchase. All of the shares owned or purchasable by The Aries Trust
are also included in the beneficial ownership of Lindsay A.
Rosenwald, M.D., as explained in note (4) above.
(7) Includes 343,304 shares owned by Vivaldi Ltd. and 152,074 shares
which Vivaldi Ltd. has warrants to purchase. Mr. Kuppin is the
general partner of Vivaldi, Ltd. Pursuant to the Merger, Mr. Kuppin
resigned as a director of Interfilm effective June 24, 1996.
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<PAGE>
(8) Includes 7,600 shares which Mr. Bejan has an option to purchase
pursuant to Interfilm's 1993 Equity Incentive Plan, of which 5,700
shares are currently purchasable and 1,900 shares will become
purchasable within 60 days from the date of this report. Mr. Bejan
resigned as an officer of Interfilm on August 9, 1995. Pursuant to
the Merger, Mr. Bejan resigned as a director of Interfilm effective
June 21, 1996.
(9) Includes 7,600 shares which Mr. Franzblau has an option to purchase
pursuant to Interfilm's 1993 Equity Incentive Plan, of which 5,700
shares are currently purchasable and 1,900 shares will become
purchasable within 60 days from the date of this report. Also
includes 50,691 shares which Mr. Franzblau has warrants to purchase.
Also includes 73,733 shares owned by Mr. Franzblau's wife. Pursuant
to the Merger, Mr. Franzblau resigned as an officer and director of
Interfilm effective June 25, 1996.
(10) Includes 73,733 shares owned by Cinco De Mayo Ltd. and 18,433
shares which Cinco De Mayo Ltd. has warrants to purchase. Mr. Rehme
is the President of Cinco De Mayo Ltd. Pursuant to the Merger, Mr.
Rehme resigned as a director of Interfilm effective June 24, 1996.
(11) Includes 1,900 shares which Mr. Cooper has an option to purchase
pursuant to Interfilm's 1993 Equity Incentive Plan, of which 1,425
shares are currently purchasable and 475 shares will become
purchasable within 60 days from the date of this report. Mr. Cooper
resigned as an officer of Interfilm effective June 24, 1996.
(12) Pursuant to the Merger, Mr. Hyman resigned as a director of
Interfilm effective June 24, 1996.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the fiscal year ended August 31, 1995, RhoMed encountered serious
liquidity and working capital deficiencies. As a result, effective April 1995,
RhoMed entered into a letter of intent with The Castle Group Ltd. ("Castle")
under which (i) Castle agreed to arrange for a line of credit of up to $300,000
to finance ongoing operations; (ii) Castle agreed to arrange for future
financings; and (iii) RhoMed agreed to sell to Castle or its designees, for
nominal consideration, 4,000,000 shares of RhoMed Series A Preferred Stock.
This resulted, at the time of the investment, in Castle and affiliates of
Castle obtaining majority ownership and control of RhoMed. Pursuant to the
letter of intent, Castle provided a $300,000 line of credit to RhoMed, under
which RhoMed borrowed up to the maximum amount, and paid off the line of credit
in September 1995. The average interest rate for the line of credit was 10.90%
and the total interest paid was $8,005.
Castle is owned by Lindsay A. Rosenwald, M.D. ("Rosenwald"), and is under
common control with Paramount Capital, Inc. ("Paramount"), which served as
placement agent for RhoMed as set forth below. On July 24, 1995, Michael S.
Weiss and Carl Spana (the "Interested Directors"), employees of Castle and
Paramount or affiliates, were appointed to the Board of Directors of RhoMed.
Mr. Weiss is an officer of Paramount and Castle and Dr. Spana was an employee
of Castle at the time of his appointment to RhoMed's Board of Directors. On
July 28, 1995, RhoMed's Board of Directors approved an offering of Senior
Bridge Notes and Class A Warrants (the "Class A Offering"), for which Paramount
served as placement agent. Because the Interested Directors could be deemed to
have a direct or indirect interest in a transaction involving a potential
conflict of interest with RhoMed (a "Conflict Of Interest
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<PAGE>
Transaction") contemplated under certain terms of the Class A Offering, the
transaction was ratified by disinterested stockholders of RhoMed on August 15,
1995.
On November 27, 1995, RhoMed's Board of Directors approved an offering of
Senior Bridge Notes and Class B Warrants (the "Class B Offering"), for which
Paramount served as placement agent. Because certain terms of the Class B
Offering could also be deemed to be a Conflict of Interest Transaction, the
Interested Directors recused themselves from voting on the matter, and the
Class B Offering was approved by disinterested directors.
On March 4, 1996, RhoMed's Board of Directors approved an offering of
shares of RhoMed common stock (the "RhoMed Common Stock Offering"), and
authorized an offering committee of RhoMed's Board of Directors, consisting of
disinterested directors, to determine the placement agent for the RhoMed Common
Stock Offering. The offering committee selected Paramount as placement agent
for the RhoMed Common Stock Offering. On May 14, 1996, disinterested members of
RhoMed's Board of Directors approved an increase in the RhoMed Common Stock
Offering.
In the Class A Offering, the Class B Offering and the RhoMed Common Stock
Offering, RhoMed paid commissions and expenses to Paramount, and agreed to
issue placement agent warrants to Paramount and/or its designees. The
Interested Directors may have benefited, directly or indirectly, from the
payment of commissions and expenses, and the issuance of warrants, to Paramount
and affiliates of Paramount. In the Class A Offering, the Class B Offering and
the RhoMed Common Stock Offering, RhoMed paid Paramount commissions and fees of
$90,000, $110,500 and $1,253,902, respectively, and agreed to issue warrants to
Paramount to purchase 82,949 shares of Common Stock at $0.05 per share; 7,834
shares of Common Stock at $1.63 per share; and 711,184 shares of Common Stock
at $1.63 per share, respectively.
The holders of warrants issued in connection with the Series A Offering
and Series B Offering will, upon exercise of such warrants, have a one-time
demand right to have their restricted shares of Common Stock registered, except
that if, at such time, the Company is eligible to use a Registration Statement
on Form S-3 to register its Common Stock, holders will have the right to demand
up to two registrations per year until all of their restricted Common Stock is
registered or otherwise freely tradable. Holders also have piggy-back
registration rights on any Company registrations other than the Company's
initial registered public offering or registrations on Forms S-4 or S-8 or
other forms which do not include substantially the same information as would be
required in a form for the general registration of securities. The piggy-back
registration rights are subject to cutbacks in the discretion of the Company's
underwriter. All registration rights under the warrants commence on the earlier
of (a) one year after the Company's initial registered public offering, or (b)
the first date on which the Common Stock trades on a national securities
exchange or on NASDAQ, and end five years after they commence. All
registrations pursuant to these rights will be at the Company's expense.
With respect to warrants issued in connection with the RhoMed Common
Stock Offering, the Company has an obligation to register, at the Company's
expense, Common Stock issued or issuable upon exercise of the warrants prior to
January 20, 1997 (subject to a delay of up to 60 days under certain
circumstances). The Company intends to seek a waiver of such obligation from
the holders of such warrants, but there can be no assurance that such an
agreement can be entered into on acceptable terms, if at all.
Page 34
<PAGE>
As a result of the offerings described above, Lindsay A. Rosenwald,
Michael S. Weiss, and Carl Spana received equity securities of the Company in
the following amounts (stated in terms of Common Stock, giving effect to the
Merger and Charter Amendment): RAQ, LLC, a company controlled by Dr. Rosenwald,
received 1,657,070 shares of Common Stock (converted from RhoMed Series A
Preferred Stock); Mr. Weiss received 51,702 shares of Common Stock (converted
from RhoMed Series A Preferred Stock); Dr. Spana received 46,695 shares of
Common Stock (converted from RhoMed Series A Preferred Stock); Dr. Rosenwald
received warrants to purchase 60,319 shares of Common Stock at $0.05 per share
(from the Class A Offering), warrants to purchase 2,477 shares of Common Stock
at $1.63 per share (from the Class B Offering), and warrants to purchase
203,187 shares of Common Stock at $1.63 per share (from the RhoMed Common Stock
Offering); and Mr. Weiss received warrants to purchase 5,858 shares of Common
Stock at $0.05 per share (from the Class A Offering), warrants to purchase 475
shares of Common Stock at $1.63 per share (from the Class B Offering), and
warrants to purchase 40,020 shares of Common Stock at $1.63 per share (from the
RhoMed Common Stock Offering).
Dr. Rosenwald may be deemed to be the beneficial owner of equity
securities purchased by or assigned to The Aries Trust and Aries Domestic Fund,
L.P. (together, the "Aries Entities") in the RhoMed offerings described above.
Dr. Rosenwald is the president and sole shareholder of Aries Financial
Services, Inc., the general partner of Aries Domestic Fund, L.P. and investment
manager of The Aries Trust. Dr. Rosenwald disclaims beneficial ownership of
these securities, except to the extent of his pecuniary interest, if any. The
Aries Entities taken together purchased the following equity securities (stated
in terms of Common Stock, giving effect to the Merger and Charter Amendment):
warrants to purchase 55,299 shares of Common Stock at $0.05 per share (in the
Class A Offering), warrants to purchase 18,433 shares of Common Stock at $0.68
per share (in the Class B Offering), and 1,290,696 shares of Common Stock (in
the RhoMed Common Stock Offering). As placement agent, Paramount earned
commissions, fees and placement agent warrants on sales to the Aries Entities.
Following the RhoMed Common Stock Offering, Paramount assigned to the Aries
Entities those portions of Paramount's placement agent warrants attributable to
the Common Stock purchases of the Aries Entities, namely warrants to purchase
129,068 shares of Common Stock at $1.63 per share.
Buck A. Rhodes, Ph.D., was a director of RhoMed from inception until June
30, 1996, was President of RhoMed from inception until March 7, 1996, and was a
director of the Company from June 25, 1996 through June 30, 1996. Under a
consulting agreement dated March 7, 1996 between Dr. Rhodes and RhoMed, Dr.
Rhodes was paid $51,023 in accrued salary and $36,000 as severance compensation
for resigning from the board of RhoMed, and is being paid $6,833 per month from
April 1996 through March 1998 for consulting services.
Carl Spana and Charles Putnam each entered into employment agreements with
the Company dated September 27, 1996, pursuant to which each is serving as an
Executive Vice President of the Company for a three-year period commencing June
21, 1996. The base salary for each is $150,000 per year. Each agreement allows
either the Company or the employee to terminate the agreement on thirty days'
notice, and contains other provisions for termination by the Company for
"cause," or by the employee for "good reason" after a "change in control" (all
as these terms are defined in the agreements). Early termination may, in some
circumstances, result in accelerated vesting of stock options and/or severance
pay for a nine-month period at the rate of base salary, cash bonus and benefits
then in effect. Each agreement contains non-competition and confidentiality
covenants.
Page 35
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
(A)(1) FINANCIAL STATEMENTS
The following financial statements of the Company are filed as part of
this report:
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants, Arthur Andersen LLP................................................ F-1
Consolidated Balance Sheets as of June 30, 1996 and August 31, 1995.......................................... F-3
Consolidated Statements of Operations for the period from inception (January 28, 1986)
through June 30, 1996 and for the ten months ended June 30, 1996 and
the years ended August 31, 1995 and 1994................................................................... F-5
Consolidated Statements of Stockholders' Equity (Deficit) for the period from inception
(January 28, 1986) through June 30, 1996................................................................... F-6
Consolidated Statements of Cash Flows for the period from inception (January 28, 1986)
through June 30, 1996 and for the ten months ended June 30, 1996 and
the years ended August 31, 1995 and 1994................................................................... F-8
Notes to Consolidated Financial Statements................................................................... F-10
</TABLE>
(A)(2) EXHIBITS
The following exhibits are filed as part of this report:
2.1 Agreement and Plan of Reorganization dated as of April 12,
1996 by and between Interfilm, Inc., Interfilm Acquisition
Corp. and RhoMed Incorporated. (a)
2.2 Waiver and Consent dated as of June 24, 1996, between
Interfilm, Inc., Interfilm Acquisition Corp. and RhoMed
Incorporated. (b)
3.1 Restated Certificate of Incorporation of the Company, as
filed with the Delaware Secretary of State on November 3,
1993. (c)
3.2 Amendment to the Restated Certificate of Incorporation of the
Company, as filed with the Delaware Secretary of State on
July 19, 1996. (d)
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<PAGE>
3.3 Bylaws of the Company. (e)
3.4 Amended Certificate of Designation of Series A Preferred
Stock of the Company, filed on June 24, 1996. (f)
3.5 Amended Certificate of Designation of Series B Preferred
Stock of the Company, filed on June 24, 1996. (g)
4.1 Specimen Certificate for Common Stock. (h)
4.2 Patent Assignment and License Agreement dated as of July 15,
1993, between RhoMed Incorporated and Aberlyn Capital
Management Limited Partnership. (b)
4.3 Master Lease Agreement dated November 16, 1994, between
RhoMed Incorporated and Aberlyn Capital Management Limited
Partnership. (b)
4.4 Letter Agreement, dated as of April 28, 1995, between Aberlyn
Capital Management Limited Partnership and RhoMed
Incorporated. (b)
4.5 Stock Purchase and Modification Agreement, dated as of June
24, 1996, between Aberlyn Capital Management Limited
Partnership, Aberlyn Holding Company, Inc. and RhoMed
Incorporated. (b)
10.01 Lease between Charles C. and Ellen C. France Revocable Trust
and RhoMed Incorpo rated dated December 18, 1992. (b)
10.02 Amendment, dated November 1, 1993, to Lease between Charles
C. and Ellen C. France Revocable Trust and RhoMed
Incorporated. (b)
10.03 Second Amendment, dated July 5, 1996, to Lease between
Charles C. and Ellen C. France Revocable Trust and RhoMed
Incorporated. (b)
10.04 RhoMed Incorporated 1995 Employee Incentive Stock Option
Plan. (b)(i)
10.05 RhoMed Incorporated 1995 Nonqualified Stock Option Plan.
(b)(i)
10.06 1996 Stock Option Plan of the Company. (b)(i)
10.07 Employment Agreement dated as of November 16, 1995, between
RhoMed Incorporated and Edward J. Quilty. (b)(i)
10.08 Employment Agreement dated as of September 27, 1996, between
Palatin Technology, Inc. and Carl Spana. (b)(i)
10.09 Employment Agreement dated as of September 27, 1996, between
Palatin Technology, Inc. and Charles Putnam. (b)(i)
10.10 Class C Warrant for the Purchase of Shares of Common Stock
issued to William I. Franzblau June 24, 1996. (b)(i)
10.11 License Agreement between Rougier Bio-Tech Limited and RhoMed
Incorporated dated May 1, 1992. (b)
10.12 License Agreement between Sterling Winthrop Inc. and RhoMed
Incorporated dated November 2, 1992. (b)
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<PAGE>
10.13 Assignment and Assumption dated January 21, 1994, between
Sterling Winthrop, Inc. and Burroughs Wellcome Co. (b)
10.14 Option Agreement between RhoMed Incorporated and The Wistar
Institute of Anatomy and Biology dated August 22, 1996. (b)
10.15 Consulting Agreement dated as of March 7, 1995, between
RhoMed Incorporated and Buck A. Rhodes. (b)
10.16 Form of Class A Warrant. (b)
10.17 Form of Placement Agent Warrant for the Class A Offering. (b)
10.18 Form of Unit Purchase Agreement for the Class A Offering,
including registration rights referred to in the Form of
Class A Warrant and Form of Placement Agent Warrant for the
Class A Offering. (b)
10.19 Form of Class B Warrant. (b)
10.20 Form of Placement Agent Warrant for the Class B Offering. (b)
10.21 Form of Unit Purchase Agreement for the Class B Offering,
including registration rights referred to in the Form of
Class B Warrant and Form of Placement Agent Warrant for the
Class B Offering. (b)
10.22 Form of Placement Agent Warrant for the RhoMed Common Stock
Offering. (b)
10.23 Form of Common Stock Purchase Agreement for the RhoMed Common
Stock Offering, including registration rights referred to in
the Form of Placement Agent Warrant for the RhoMed Common
Stock Offering. (b)
16.1 Letter dated July 19, 1996 from Deloitte & Touche LLP. (j)
21.1 Current list of subsidiaries of the registrant. (b)
23.1 Consent of Arthur Andersen LLP. (b)
27.1 Financial Data Schedule. (b)
99.1 Certificate of Limited Partnership of "The Interfilm
Stockholders Limited Partnership," as filed with the Delaware
Secretary of State on June 17, 1996. (b)
99.2 Agreement of Limited Partnership of The Interfilm
Stockholders Limited Partnership, dated June 11, 1996. (b)
99.3 The Interfilm Stockholders Trust, established by Interfilm,
Inc. and Interfilm Technologies, Inc. on June 11, 1996. (b)
99.4 General Bill of Sale, Assignment and Assumption Agreement
among, on the one hand, Interfilm, Inc. and Interfilm
Technologies, Inc. and on the other hand, The Interfilm
Stockholders Limited Partnership, dated June 25, 1996. (b)
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<PAGE>
NOTES TO EXHIBITS
(a) Incorporated by reference to Exhibit 2.1 of the registrant's Form 8-K
dated June 25, 1996, filed with the Commission on July, 10, 1996.
(b) Filed as an exhibit to this Form 10-KSB Annual Report for the period
ended June 30, 1996.
(c) Incorporated by reference to Exhibit 3.1 of the registrant's Form 8-K
dated July 19, 1996, filed with the Commission on August 9, 1996.
(d) Incorporated by reference to Exhibit 3.2 of the registrant's Form 8-K
dated July 19, 1996, filed with the Commission on August 9, 1996.
(e) Incorporated by reference to Exhibit 3.2 of the registrant's
Registration Statement.
(f) Incorporated by reference to Exhibit 3.3 of the registrant's Form 8-K
dated July 19, 1996, filed with the Commission on August 9, 1996.
(g) Incorporated by reference to Exhibit 3.4 of the registrant's Form 8-K
dated July 19, 1996, filed with the Commission on August 9, 1996.
(h) Incorporated by reference to Exhibit 4.1 of the registrant's Form 8-K
dated July 19, 1996, filed with the Commission on August 9, 1996.
(i) A management contract or compensatory plan or arrangement.
(j) Incorporated by reference to Exhibit 16.1 of the registrant's
Form 8-K/A dated June 25, 1996, filed with the Commission on
July 23, 1996.
(B) REPORTS ON FORM 8-K
No Current Reports on Form 8-K were filed by the Company during the three
months ended June 30, 1996.
Page 39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PALATIN TECHNOLOGIES, INC.
Date: September 27, 1996
By: /s/ Edward J. Quilty
------------------------------------
Edward J. Quilty
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLES DATE
--------- ------ ----
<S> <C> <C>
/s/ Edward J. Quilty Chairman of the Board, President and Chief September 27, 1996
- -------------------------------------------- Executive Officer
Edward J. Quilty
/s/ Carl Spana Executive Vice President and Director September 27, 1996
- --------------------------------------------
Carl Spana
/s/ John J. McDonough Vice President and Chief Financial Officer September 27, 1996
- -------------------------------------------- (Principal Financial and Accounting Officer)
John J. McDonough
/s/ Michael S. Weiss Director September 27, 1996
- --------------------------------------------
Michael S. Weiss
/s/ James T. O'Brien Director September 27, 1996
- --------------------------------------------
James T. O'Brien
/s/ Richard J. Murphy Director September 27, 1996
- --------------------------------------------
Richard J. Murphy
/s/ John K.A. Prendergast Director September 27, 1996
- --------------------------------------------
John K.A. Prendergast
</TABLE>
Page 40
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Palatin Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of PALATIN
TECHNOLOGIES, INC. (a Delaware corporation in the development stage) AND
SUBSIDIARIES as of June 30, 1996 (post-Merger, see Note 1) and August 31, 1995
(pre-Merger), and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the period from September 1,
1995 through June 30, 1996 (post-Merger, consisting of the statement of
operations and cash flows of RhoMed Incorporated, predecessor corporation in
the continuing business of Palatin Technologies, Inc. and subsidiaries for the
period from September 1, 1995 through June 25, 1996 (pre-Merger), audited by us,
and the statements of operations and cash flows of Palatin Technologies, Inc.
and subsidiaries for the period from June 26, 1996 through June 30, 1996
(post-Merger), also audited by us, and for the years ended August 31, 1995 and
1994 (pre- Merger). We have also audited the consolidated statements of
operations and cash flows of Palatin Technologies, Inc. and subsidiaries for
the period from inception (January 28, 1986) through June 30, 1996
(post-Merger, consisting of the statements of operations and cash flows of
RhoMed Incorporated and Palatin Technologies, Inc. and subsidiaries as
described above). 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 audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
F-1
<PAGE>
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Palatin Technologies, Inc. and
subsidiaries as of June 30, 1996, and August 31, 1995, and the results of their
operations and their cash flows for each of the periods indicated above in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
---------------------------
ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
July 31, 1996
F-2
<PAGE>
PALATIN TECHNOLOGIES, INC.
(RhoMed Incorporated prior to June 25, 1996 Reverse Merger)
(A Development Stage Enterprise)
Consolidated Balance Sheets
June 30, 1996 and August 31, 1995
<TABLE>
<CAPTION>
June 30, 1996 August 31, 1995
--------------------- ---------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 6,791,300 $ 474,018
Accounts receivable, including employee receivables of $113 and
$1,121 as of June 30, 1996 and August 31, 1995, respectively 4,574 5,626
Prepaid expenses and other 66,430 19,752
-------------- ----------
Total current assets 6,862,304 499,396
Equipment, net (Notes 2 and 4) 96,354 134,368
Intangibles, net of accumulated amortization of $91,336 and
$68,938 as of June 30, 1996 and August 31, 1995, respectively
(Notes 5 and 6) 82,547 319,965
-------------- ----------
$ 7,041,205 $ 953,729
============== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-3
<PAGE>
PALATIN TECHNOLOGIES, INC.
(RhoMed Incorporated prior to June 25, 1996 Reverse Merger)
(A Development Stage Enterprise)
Consolidated Balance Sheets
June 30, 1996 and August 31, 1995
- Continued -
<TABLE>
<CAPTION>
June 30, 1996 August 31, 1995
--------------------- ---------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable, including related party payables of $34,234 as of
June 30, 1996 $ 214,424 $ 305,857
Accrued compensation owed to employees (Note 3) 78,084 171,290
Accrued expenses (Note 1) 655,197 112,747
Notes payable, related party (Note 3) -- 23,286
Current portion of long-term financing, including accrued interest
of $38,912 (Note 6) 311,695 105,000
Senior bridge notes, including related party transaction of $110,000
and $100,000 as of June 30, 1996 and August 31, 1995, respectively (Note 7) 1,100,000 1,000,000
------------ ------------
Total current liabilities 2,359,400 1,718,180
Long-term financing, including accrued interest of $273,339
and $285,614 as of June 30, 1996 and August 31, 1995, respectively
(Note 6) 1,727,619 1,972,677
Notes payable to stockholders, including accrued interest of
$35,979 and $29,312 as of June 30, 1996 and August 31, 1995,
respectively (Note 8) 115,979 109,312
------------ ------------
4,202,998 3,800,169
------------ ------------
Commitments and contingencies (Note 9)
Stockholders' equity (deficit) (Notes 1, 3, 6, 7, 8, 9 and 10):
Preferred stock, $.01 and zero par value, and 2,000,000 and 10,000,000
shares authorized, as of June 30, 1996 and August 31, 1995, respectively;
no shares issued as of June 30, 1996 and August 31, 1995; 4,000,000
subscribed as of August 31, 1995 -- --
Preferred stock subscribed -- 4,000
Preferred stock receivable -- (4,000)
Common stock, $.01 and zero par value, and 25,000,000 and 40,000,000
shares authorized, as of June 30, 1996 and August 31, 1995, respectively;
11,538,777 and 6,922,069 issued as of June 30, 1996 and
August 31, 1995, respectively 115,388 1,177,786
Additional paid-in capital 10,804,394 --
Common stock earned but not issued 53,030 110,833
Paid-in capital from common stock warrants -- 100,000
Treasury stock, 1,229 shares (1,667) --
Deficit accumulated during development stage (8,132,938) (4,235,059)
------------ ------------
2,838,207 (2,846,440)
------------ ------------
$ 7,041,205 $ 953,729
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
F-4
<PAGE>
PALATIN TECHNOLOGIES, INC.
(RhoMed Incorporated prior to June 25, 1996 Reverse Merger)
(A Development Stage Enterprise)
Consolidated Statements of Operations
for the Period from Inception (January 28, 1986)
through June 30, 1996 and for the Ten Months Ended June 30, 1996
and the Years Ended August 31, 1995 and 1994
<TABLE>
<CAPTION>
Inception Fiscal Year Ended
(January 28, 1986) Ten Months August 31,
through Ended ----------------------------------
June 30, 1996 June 30, 1996 1995 1994
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
REVENUES:
Grants and contracts (Note 11) $ 2,860,512 $ - $ - $ 50,289
License fees and royalties (Note 12) 334,296 - 64,296 50,000
Sales 296,733 24,457 33,606 47,559
----------------- ---------------- ---------------- ----------------
Total revenues 3,491,541 24,457 97,902 147,848
----------------- ---------------- ---------------- ----------------
EXPENSES:
Research and development 4,396,408 869,896 619,354 584,941
General and administrative 4,902,961 1,250,343 776,291 939,155
----------------- ---------------- ---------------- ----------------
Total expenses 9,299,369 2,120,239 1,395,645 1,524,096
----------------- ---------------- ---------------- ----------------
OTHER INCOME (EXPENSES):
Other income 71,380 10,515 2,744 16,561
Interest expense (1,043,186) (459,308) (343,865) (185,268)
Placement agent commissions and
fees on debt offering (168,970) (168,970) - -
Merger costs (475,000) (475,000) - -
Restructuring charge (Note 9) (450,000) (450,000) - -
Net intangibles write down (259,334) (259,334) - -
----------------- ---------------- ---------------- ----------------
Total other income (expenses) (2,325,110) (1,802,097) (341,121) (168,707)
----------------- ---------------- ---------------- ----------------
NET LOSS $ (8,132,938) $ (3,897,879) $ (1,638,864) $ (1,544,955)
================= ================ ================ ================
Weighted average number of common
shares outstanding 1,173,525 2,144,131 1,238,192 1,205,617
================= ================ ================ ================
Net loss per common share $ (6.93) $ (1.82) $ (1.32) $ (1.28)
================= ================ ================ ================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-5
<PAGE>
PALATIN TECHNOLOGIES, INC.
(RhoMed Incorporated prior to June 25, 1996 Reverse Merger)
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity (Deficit)
for the Period from Inception (January 28, 1986)
Through June 30, 1996
<TABLE>
<CAPTION>
Preferred Stock
------------------------------------------------------------------------------
Shares Amount Subscriptions Receivable
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Balance at inception -- $ -- $ -- $ --
Issuance of shares from inception -- -- -- --
Net loss from inception -- -- -- --
------------------ ------------------ ------------------ ------------------
Balance, August 31, 1994 -- -- -- --
Issuance of shares -- -- -- --
Shares earned but not issued -- -- -- --
Issuance of options -- -- -- --
Paid-in capital from common
stock warrants -- -- -- --
Preferred stock subscriptions -- -- 4,000 (4,000)
Net loss -- -- -- --
------------------ ------------------ ------------------ ------------------
Balance, August 31, 1995 -- -- 4,000 (4,000)
Preferred stock subscriptions -- -- (4,000) 4,000
Issuance of preferred shares 4,000,000 4,000 -- --
Issuance of common shares on
$10,395,400 private placement -- -- -- --
Shares earned but not issued -- -- -- --
Issuance of common shares -- -- -- --
Net loss -- -- -- --
------------------ ------------------ ------------------ ------------------
Balance, June 25, 1996 4,000,000 4,000 -- --
Conversion to Palatin Technologies, Inc. (4,000,000) (4,000) -- --
------------------ ------------------ ------------------ ------------------
Adjusted balance, June 25, 1996 -- -- -- --
Shares outstanding of Palatin
Technologies, Inc. -- -- -- --
Issuance of common shares -- -- -- --
Purchase of treasury stock -- -- -- --
------------------ ------------------ ------------------ ------------------
Balance, June 30, 1996 -- $ -- $ -- $ --
================== ================== ================== ==================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-6
<PAGE>
PALATIN TECHNOLOGIES, INC.
(RhoMed Incorporated prior to June 25, 1996 Reverse Merger)
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity (Deficit)
for the Period from Inception (January 28, 1986)
Through June 30, 1996
- Continued -
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------------------------------------------
Paid-in
Additional Earned but Capital from
Shares Amount Paid-in Capital not Issued Warrants
------------ ------------ --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at inception -- $ -- $ -- $ -- $ --
Issuance of shares from inception 6,562,467 1,158,883 -- -- --
Net loss from inception -- -- -- -- --
------------ ------------ --------------- ------------ -------------
Balance, August 31, 1994 6,562,467 1,158,883 -- -- --
Issuance of shares 359,602 10,203 -- -- --
Shares earned but not issued -- -- -- 110,833 --
Issuance of options -- 8,700 -- -- --
Paid-in capital from common
stock warrants -- -- -- -- 100,000
Preferred stock subscriptions -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ --------------- ------------ -------------
Balance, August 31, 1995 6,922,069 1,177,786 -- 110,833 100,000
Preferred stock subscriptions -- -- -- -- --
Issuance of preferred shares -- -- -- -- --
Issuance of common shares on
$10,395,400 private placement 41,581,600 9,139,303 -- -- --
Shares earned but not issued -- -- -- 266,743 --
Issuance of common shares 1,054,548 458,977 -- (324,546) (100,000)
Net loss -- -- -- -- --
------------ ------------ --------------- ------------ -------------
Balance, June 25, 1996 49,558,217 10,776,066 -- 53,030 --
Conversion to Palatin Technologies, Inc. (38,555,207) (10,666,035) 10,670,035 -- --
------------ ------------ --------------- ------------ -------------
Adjusted balance, June 25, 1996 11,003,010 110,031 10,670,035 53,030 --
Shares outstanding of Palatin
Technologies, Inc. 432,750 4,327 (4,327) -- --
Issuance of common shares 103,017 1,030 138,686 -- --
Purchase of treasury stock -- -- -- -- --
------------ ------------ --------------- ------------ -------------
Balance, June 30, 1996 11,538,777 $ 115,388 $ 10,804,394 $ 53,030 $ --
============ ============ =============== ============ =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Deficit
Accumulated
During
Treasury Development
Stock Stage Total
------------ --------------- --------------
<S> <C> <C> <C>
Balance at inception $ -- $ -- $ --
Issuance of shares from inception -- -- 1,158,883
Net loss from inception -- (2,596,195) (2,596,195)
------------ --------------- --------------
Balance, August 31, 1994 -- (2,596,195) (1,437,312)
Issuance of shares -- -- 10,203
Shares earned but not issued -- -- 110,833
Issuance of options -- -- 8,700
Paid-in capital from common
stock warrants -- -- 100,000
Preferred stock subscriptions -- -- --
Net loss -- (1,638,864) (1,638,864)
------------ --------------- --------------
Balance, August 31, 1995 -- (4,235,059) (2,846,440)
Preferred stock subscriptions -- -- --
Issuance of preferred shares -- -- 4,000
Issuance of common shares on
$10,395,400 private placement -- -- 9,139,303
Shares earned but not issued -- -- 266,743
Issuance of common shares -- -- 34,431
Net loss -- (3,897,879) (3,897,879)
------------ --------------- --------------
Balance, June 25, 1996 -- (8,132,938) 2,700,158
Conversion to Palatin Technologies, Inc. -- -- --
------------ --------------- --------------
Adjusted balance, June 25, 1996 -- (8,132,938) 2,700,158
Shares outstanding of Palatin
Technologies, Inc. -- -- --
Issuance of common shares -- -- 139,716
Purchase of treasury stock (1,667) -- (1,667)
------------ --------------- --------------
Balance, June 30, 1996 $ (1,667) $ (8,132,938) $ 2,838,207
============ =============== ==============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
PALATIN TECHNOLOGIES, INC.
(RhoMed Incorporated prior to June 25, 1996 Reverse Merger)
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
for the Period from Inception (January 28, 1986)
through June 30, 1996 and for the Ten Months Ended June 30, 1996
and the Years Ended August 31, 1995 and 1994
Inception Fiscal Year Ended
(January 28, 1986) Ten Months August 31,
through Ended ----------------------------
June 30, 1996 June 30, 1996 1995 1994
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,132,938) $ (3,897,879) $ (1,638,864) $ (1,544,955)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 308,574 68,005 85,947 80,523
Interest expense on related-party debt 53,387 6,667 8,000 8,000
Accrued interest on long-term financing 796,038 293,380 320,709 169,438
Accrued interest on short-term financing 107,936 100,000 7,936 --
Intangibles and equipment write down 278,318 278,318 -- --
Equity and notes payable issued for expenses 296,047 174,147 10,350 15,450
Settlement with consultant (28,731) -- -- --
Changes in certain operating assets and liabilities:
Accounts receivable (4,574) 1,052 2,557 (1,198)
Prepaid expenses and other (66,430) (46,678) (5,206) 13,257
Intangibles (427,337) (44,314) (66,152) (73,383)
Accounts payable 213,524 (91,433) 164,744 67,269
Accrued compensation owed to employees 94,632 (93,206) 10,551 (4,444)
Accrued expenses 683,928 542,450 39,961 9,825
------------- ------------- ------------ ------------
Net cash used for operating activities (5,827,626) (2,709,491) (1,059,467) (1,260,218)
------------- ------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (335,229) (26,577) (4,294) (133,714)
------------- ------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable, related party 302,000 -- 302,000 --
Payments on notes payable, related party (309,936) (23,286) (286,650) --
Proceeds from senior bridge notes payable 1,850,000 850,000 1,000,000 --
Payments on senior bridge notes (850,000) (850,000) -- --
Proceeds from notes payable and
long-term financing 1,951,327 -- 292,063 500,000
Payments on notes payable and
long-term financing (190,061) (65,000) (92,384) (15,477)
Proceeds from paid-in capital from common
stock warrants 100,000 -- 100,000 --
Proceeds from common stock, stock option
issuances and preferred stock, net 10,102,492 9,143,303 345 191,812
Purchase of treasury stock (1,667) (1,667) -- --
------------- ------------- ------------ ------------
Net cash provided by financing activities 12,954,155 9,053,350 1,315,374 676,335
------------- ------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH 6,791,300 6,317,282 251,613 (717,597)
CASH, beginning of period -- 474,018 222,405 940,002
------------- ------------- ------------ ------------
CASH, end of period $ 6,791,300 $ 6,791,300 $ 474,018 $ 222,405
============= ============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-8
<PAGE>
<TABLE>
<CAPTION>
PALATIN TECHNOLOGIES, INC.
(RhoMed Incorporated prior to June 25, 1996 Reverse Merger)
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
for the Period from Inception (January 28, 1986)
through June 30, 1996 and for the Ten Months Ended June 30, 1996
and the Years Ended August 31, 1995 and 1994
- Continued -
Inception Fiscal Year Ended
(January 28, 1986) Ten Months August 31,
through Ended ---------------------------
June 30, 1996 June 30, 1996 1995 1994
---------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 77,523 $ 49,494 $ 28,029 $ -
================ ================ ============= ============
NON-CASH TRANSACTION:
Settlement of accounts payable with
equipment $ 900 $ - $ - $ 900
================ ================ ============= ============
NON-CASH STOCK ACTIVITY:
Conversion of loans from employees to
common stock $ 74,187 $ - $ - $ -
================ ================ ============= ============
Conversion of note payable to common stock $ 16,000 $ - $ - $ -
================ ================ ============= ============
Common stock issued for equipment $ 2,327 $ - $ - $ -
================ ================ ============= ============
Common stock issued for expenses
(included above) $285,332 $174,147 $ 10,350 $ 15,450
================ ================ ============= ============
Common stock issued for accrued salaries
and bonuses $ 16,548 $ - $ 9,858 $ 3,390
================ ================ ============= ============
Accrued interest payable in common stock $375,926 $266,743 $109,183 $ -
================ ================ ============= ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-9
<PAGE>
PALATIN TECHNOLOGIES, INC.
(RhoMed Incorporated prior to June 25, 1996 Reverse Merger)
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
for the Period from Inception (January 28, 1986)
through June 30, 1996 and for the Ten Months Ended
June 30, 1996 and the Years Ended August 31, 1995 and 1994
(1) ORGANIZATION ACTIVITIES:
Corporate Structure -- Palatin Technologies, Inc. ("Palatin"),
formerly Interfilm, Inc., was incorporated under the laws of the State of
Delaware on November 21, 1986. Since November 4, 1993, when Palatin acquired
Interfilm Technologies, Inc., a New York corporation, it had been primarily
engaged in the business of exploiting the rights related to its interactive
motion picture process, including the production and distribution of
interactive motion pictures for initial exhibition in theaters and
subsequently in enhanced versions for distribution to the home market.
Palatin's initial public offering was consummated on October 28, 1993. On May
10, 1995, the Board of Directors of Palatin decided to substantially curtail
the operations of Palatin and its subsidiaries.
Merger -- On June 25, 1996, a newly formed, wholly-owned subsidiary of
Palatin, Interfilm Acquisition Corporation ("InSub"), a New Mexico
corporation, merged with and into RhoMed Incorporated ("RhoMed"), a New Mexico
corporation, with all outstanding shares of RhoMed equity securities
ultimately being exchanged for Palatin's common stock (the "Merger"). As a
result of the Merger, RhoMed became a wholly-owned subsidiary of Palatin, with
the holders of RhoMed preferred stock and RhoMed common stock (including the
holders of "RhoMed Derivative Securities" as hereafter defined) receiving an
aggregate of approximately 96% interest in the equity securities of Palatin on
a fully-diluted basis. Additionally, all warrants and options to purchase
common stock of RhoMed outstanding immediately prior to the Merger (the
"RhoMed Derivative Securities"), including without limitation, any rights
underlying RhoMed's qualified or nonqualified stock option plans, were
automatically converted into rights upon exercise to receive Palatin's common
stock in the same manner in which the shares of RhoMed common stock were
converted. Since the former stockholders of RhoMed retained more than a 50%
controlling interest in the surviving company (Palatin), the Merger was
accounted for as a reverse merger. Certain assets and liabilities of Palatin
and a subsidiary existing prior to the Merger, consisting principally of
certain intellectual property and litigation claims against Sony Corporation
of America and related entities, were transferred to an unaffiliated limited
liability partnership for the benefit of Palatin stockholders of record as of
June 21, 1996, immediately prior to the Merger. Pro forma combined operating
results of the merged companies are not presented since the reverse merger is
not a business combination for accounting purposes. The historical financial
statements prior to June 25, 1996, are those of RhoMed, except that the net
loss per common share has been stated on an as if converted basis. In
addition, the Merger costs of $450,000 have been charged to operations for the
ten months ended June 30, 1996, and accrued expenses include $231,635 of this
amount as of June 30, 1996.
On July 19, 1996, an amendment to the Certificate of Incorporation of
Palatin (the "Amendment") was filed, which (a) effected the change of name
from Interfilm, Inc. to Palatin Technologies, Inc., (b) increased the total
number of authorized shares of Palatin's common stock, par value $.01 per
share (the "Common Stock"), from 10,000,000 to 25,000,000, and (c) effected a
1-for-10 reverse split of Common Stock. Upon the filing of the Amendment, each
share of RhoMed preferred stock was
F-10
<PAGE>
converted into .46695404349 shares of Common Stock, and each share of RhoMed
common stock was converted into .184332593 shares of Common Stock. The
consolidated financial statements have been adjusted to reflect the Amendment
as if it had been filed on June 30, 1996.
Nature of Business -- Palatin, through its wholly-owned subsidiary,
RhoMed, is a development stage enterprise dedicated to developing and
commercializing products and technologies for diagnostic imaging, cancer
therapy and ethical drug development based upon its proprietary monoclonal
antibody, radiolabeling and enabling peptide platform technologies. Palatin
had, prior to June 25, 1996, conducted no on-going business activities since
May 10, 1995. The business of RhoMed, conducted by Palatin since June 25,
1996, when the Merger became effective, represents the on-going business of
Palatin.
Since its inception, RhoMed has devoted substantially all of its
efforts and resources to the research and development of its technology.
RhoMed has experienced operating losses in each year since its inception and,
as of June 30, 1996, Palatin, including its wholly-owned subsidiary RhoMed,
had a deficit accumulated during the development stage of $8,132,938. Palatin
expects to incur additional operating losses over the next several years and
expects cumulative losses to increase as Palatin's research and development
and clinical testing efforts continue and expand. The ultimate completion of
Palatin's development projects is contingent upon a number of factors,
including the successful completion of technology and product development,
obtaining required regulatory approvals and additional financing and,
ultimately, achieving profitable operations.
Change in Fiscal Year -- Effective June 30, 1996, Palatin and RhoMed
each changed its fiscal year end to June 30. The fiscal year ends of Palatin
and RhoMed prior to the Merger were December 31 and August 31, respectively.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation -- The consolidated financial statements
include the accounts of Palatin and its wholly owned subsidiary, RhoMed. The
remaining subsidiaries of Palatin - Interfilm Technologies, Inc., Ediflex
Digital Systems, Inc. and Production Equipment Leasing Corp. LP - are
inactive. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Accounting Basis -- The financial books and records of Palatin are
maintained on the accrual basis of accounting. As a development stage
enterprise, cumulative results of operations from inception are presented.
Cash -- For purposes of presenting cash flows, Palatin considers cash
as amounts on hand, on deposit in financial institutions and highly liquid
investments purchased with an original maturity of three months or less.
Equipment -- Equipment and office furniture are stated at cost, net of
accumulated depreciation. Depreciation is recognized using an accelerated
method over the estimated useful lives of 5 years for equipment, 7 years for
office furniture and over the term of the lease for leasehold improvements.
Maintenance and repairs are expensed as incurred while expenditures that
extend the useful life of an asset are capitalized.
Patents -- Patents represent the costs capitalized to successfully
obtain a patent registration. Internal costs to obtain and develop the patents
have been expensed. Patents are included as intangible assets in the
accompanying consolidated financial statements and are stated at cost, net of
accumulated amortization. Amortization is recognized using the straight-line
method over the estimated patent lives
F-11
<PAGE>
ranging up to 17 years. Unsuccessful patent costs and patents with no
demonstrated future value are expensed when so determined by management.
Research and Development Costs -- The costs of research and
development activities are expensed as incurred.
Stock Options and Warrants -- Warrants and most common stock options
have been issued at exercise prices greater than, or equal to, their fair
market value at the date granted. Accordingly, no value has been assigned to
these instruments. However, certain stock options were issued in the fiscal
years ended August 31, 1995 and 1994 under a nonqualified stock option plan at
an exercise price below market value. The difference between the exercise
price and the market value of these securities has been included in general
and administrative expense in the fiscal years ended August 31, 1995 and 1994,
and as an addition to equity.
Income Taxes -- Palatin and its subsidiaries intend to file
consolidated federal and combined state income tax returns. Palatin accounts
for income taxes in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes." SFAS 109
requires, among other things, the use of the liability method in computing
deferred income taxes.
Palatin provides for deferred income taxes relating to timing
differences in the recognition of income and expense items (primarily relating
to depreciation, amortization and certain leases) for financial and tax
reporting purposes. Such amounts are measured using current tax laws and
regulations in accordance with the provisions of SFAS 109.
In accordance with SFAS 109, Palatin has recorded valuation allowances
against the realization of its deferred tax assets. The valuation allowance is
based on management's estimates and analysis, which includes tax laws which
may limit Palatin's ability to utilize its tax loss carryforwards.
Net Loss per Common Share -- Net loss per common share is calculated
based upon the weighted average number of shares of Common Stock, on an as if
converted basis, outstanding during each period. All options and warrants were
excluded in the calculation of weighted average shares outstanding since their
inclusion would have had an anti-dilutive effect.
Financial Statement Presentation -- Certain amounts in the
accompanying consolidated financial statements and notes have been
reclassified to conform to the 1996 presentation.
Use of Estimates -- The preparation of consolidated financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
New Pronouncements -- The Financial Accounting Standards Board has
issued Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation." SFAS 123 recommends changes in
accounting for employee stock-based compensation plans, and requires certain
disclosures with respect to these plans. The dislcosures of SFAS 123 will be
adopted by Palatin effective July 1, 1996.
Fair Value of Financial Instruments -- Statement of Financial
Accounting Standards No. 107 (SFAS 107), "Disclosures about Fair Value of
Financial Instruments," requires disclosures of fair value information about
financial instruments, whether or not recognized in the balance sheet, for
which it is
F-12
<PAGE>
practicable to estimate the value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. These techniques are significantly affected by the
assumptions used, including discount rate and estimates of future cash flows.
In that regard, the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. SFAS 107 excludes certain financial
instruments and all non-financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of Palatin.
The following methods and assumptions were used by Palatin in
estimating its fair value disclosures for financial instruments: the carrying
amount reported on the balance sheet approximates the fair value for cash,
short-term borrowings and current maturities of long-term debt; and the fair
value for Palatin's fixed rate long-term debt is estimated based on the
current rates offered to Palatin for debt of the same remaining maturities.
Based on the above, the amount reported on the balance sheet approximates the
fair value.
(3) RELATED PARTY TRANSACTIONS:
Castle Transaction -- During the fiscal year ended August 31, 1995,
RhoMed encountered serious liquidity and working capital deficiencies. As a
result, effective April 1995, RhoMed entered into a letter of intent with The
Castle Group Ltd. ("Castle"), a company controlled by Lindsay A. Rosenwald,
M.D. ("Dr. Rosenwald"), under which Castle agreed to arrange for a line of
credit of up to $300,000 to finance ongoing operations; agreed to arrange for
future financings; and RhoMed agreed to sell to Castle or its designees, for
nominal consideration, 4,000,000 shares of RhoMed Series A Preferred Stock
(equivalent to 1,867,809 shares of Common Stock). The issuance of RhoMed
Series A Preferred Stock to designees of Castle was consummated on October 25,
1995. This resulted in Dr. Rosenwald and his designees obtaining majority
ownership and control of RhoMed. Pursuant to the letter of intent, Castle
provided a $300,000 line of credit. RhoMed borrowed up to the maximum under
the line of credit and, at August 31, 1995, had $23,286 outstanding
thereunder, which was paid in September, 1995. The average interest rate for
the line of credit was 10.90%, and the average balance outstanding was
$191,549.
Dr. Rosenwald is the Chairman of Paramount Capital, Inc.
("Paramount"), which served as placement agent for RhoMed as set forth below.
Commencing July 24, 1995, two of the then three members of the Board of
Directors of RhoMed were employees of entities controlled by Dr. Rosenwald
(the "Interested Directors"). These Interested Directors may have benefited,
directly or indirectly, from the payment of commissions and expenses, and the
issuance of warrants, to Paramount and affiliates. On July 28, 1995, RhoMed's
Board of Directors approved an offering of Senior Bridge Notes and Class A
Warrants (the "Class A Offering") (see Note 7), for which Paramount served as
placement agent. Because the Interested Directors could be deemed to have a
direct or indirect interest in a transaction involving a potential conflict of
interest with RhoMed (a "Conflict Of Interest Transaction") contemplated under
certain terms of the Class A Offering, the transaction was ratified by
disinterested stockholders on August 15, 1995. In the Class A Offering,
investment funds managed by a company of which Dr. Rosenwald is president
purchased Senior Bridge Notes with a face value of $100,000, and Class A
Warrants to purchase 300,000 shares of RhoMed common stock at $.01 per share
(equivalent to 55,299 shares of Common Stock at $.05 per share).
On November 27, 1995, RhoMed's Board of Directors approved an offering
of Senior Bridge Notes and Class B Warrants (the "Class B Offering") (see Note
7), for which Paramount served as placement agent. Because certain terms of
the Class B Offering could also be deemed to be a Conflict
F-13
<PAGE>
of Interest Transaction, the Interested Directors recused themselves from
voting on the matter, and the Class B Offering was approved by the two
disinterested directors. In the Class B Offering, investment funds managed by
a company of which Dr. Rosenwald is president purchased Senior Bridge Notes
with a face value of $100,000, and Class B Warrants to purchase 100,000 shares
of RhoMed common stock at an adjusted exercise price of $.125 per share
(equivalent to 18,433 shares of Common Stock at $.68 per share).
On March 4, 1996, the Board of Directors approved an offering of
common stock (the "Common Stock Offering") (see Note 10), and authorized an
offering committee of the Board of Directors, consisting of the two
disinterested directors, to determine the placement agent for the Common Stock
Offering. The selection of Paramount as placement agent was approved by the
disinterested directors. On May 14, 1996, the Board of Directors approved an
increase in the Common Stock Offering, on which the Interested Directors
recused themselves, and which was approved by the two disinterested directors.
In the Common Stock Offering, investment funds managed by a company of which
Dr. Rosenwald is president purchased 7,002,000 shares of RhoMed common stock
at $.25 per share (equivalent to 1,290,696 shares of Common Stock at $1.36 per
share).
Accrued Compensation -- At June 30, 1996 and August 31, 1995, RhoMed
owed employees approximately $78,000 and $171,000, respectively, for accrued
and unpaid compensation and related benefits. These amounts do not accrue
interest and are included in accrued compensation in the accompanying
consolidated financial statements. All such amounts are expected to be paid in
fiscal year 1997.
Other Transactions -- There have been certain transactions between
Palatin and certain related parties which have resulted in the exchange of
assets or services for equity securities (see Note 10).
Management of Palatin believes that the terms of the transactions and
the agreements described above are on terms at least as favorable as those
which it could otherwise have obtained from unrelated parties.
(4) EQUIPMENT:
Equipment consists of the following at June 30, 1996 and August 31,
1995:
June 30, August 31,
1996 1995
------------- ------------
Office equipment $ 202,960 $ 183,322
Laboratory equipment 76,929 69,989
Leasehold improvements - 57,668
------------- ------------
Equipment at cost 279,889 310,979
Less: Accumulated depreciation 183,535 176,611
------------- ------------
$ 96,354 $ 134,368
============= ============
(5) INTANGIBLES:
Palatin has obtained 11 United States (U.S.) patents and corresponding
international applications have been issued or are pending in selected
countries on a majority of issued U.S. patents. Palatin has
F-14
<PAGE>
applications pending for 17 additional U.S. patents, the majority of which
have pending international counterparts in selected countries. Palatin has
received Notices of Allowance, and has paid issue fees, on certain pending
U.S. patent applications.
Palatin has assigned its interest in several patents to secure
long-term financing (see Note 6).
(6) LONG-TERM FINANCING:
Palatin has a long-term financing agreement with Aberlyn Holding Co.,
Inc., and its affiliates (collectively "Aberlyn"). Aberlyn has, in a series of
transactions, loaned to Palatin approximately $1,800,000, secured by certain
of Palatin's patents, intellectual property and equipment. Certain fees and
costs related to the borrowings have been deferred as intangible assets and
are being amortized over the remaining terms of the arrangement using the
effective interest method. The agreement requires the accrual of certain
interest as payable before it is earned; therefore, at any time before the
scheduled payoff, the recorded long-term liability will be less than the total
amount payable to settle the obligation.
Palatin is obligated, at June 30, 1996, to make monthly payments to
Aberlyn of $20,000 from June 1, 1996 through May 1, 1997, and payments of
$91,695 from June 1, 1997 through May 1, 1999. Payments through May 1, 1997
will be applied to principal only; interest will be accrued during this period
at an annual effective rate of 15% and paid in Palatin's Common Stock. On June
24, 1996, RhoMed issued 930,023 shares of RhoMed common stock (equivalent to
171,433 shares of Common Stock) in payment of accrued interest of $324,546
through April 30, 1996. In addition, certain warrants held by Aberlyn were
terminated, and RhoMed agreed that Common Stock paid as interest through May
1, 1997, would contain certain registration rights, and would be valued at the
rate of 75% of the per share offering price for RhoMed's common stock in any
offering commencing after the consummation of the Common Stock Offering, in
which the total offering proceeds exceeds $5,000,000, or in the event no such
offering is completed before April 30, 1997, at the rate of 75% of the average
per share closing price for the twenty trading days immediately preceding
April 30, 1997.
Scheduled principal payments on the long-term financing through fiscal
year 1999 at June 30, 1996, are as follows:
Years ending June 30,
---------------------
1997 $ 272,783
1998 697,317
1999 756,963
-------------
Total principal payments 1,727,063
Accrued interest 312,251
-------------
$ 2,039,314
=============
F-15
<PAGE>
(7) SENIOR BRIDGE NOTES:
The warrants set forth below were initially exercisable for RhoMed
common stock and are so described. At Note 10 all outstanding warrants,
including all RhoMed warrants, are shown as converted to Common Stock.
Class A Offering -- On July 28, 1995, the Board of Directors of RhoMed
authorized an offering of up to 40 units at $25,000 per unit, with each unit
consisting of a $25,000 face amount Senior Bridge Note and a Class A Warrant
to purchase 75,000 shares of RhoMed common stock at an exercise price of $.01
per share (the "Class A Offering") (see Note 3). The nominal exercise price
for the warrants reflected the seriously troubled financial condition of
RhoMed on the date of the transaction. The Senior Bridge Notes sold in the
Class A Offering bear interest at 1% per month, and are payable, with accrued
interest, one year from the date of issuance. Class A Warrants are exercisable
at any time, terminate ten years from the date of issuance, have certain
registration rights, and are subject to adjustment in certain circumstances,
including a stock split of, stock dividend on, or a subdivision, combination
or recapitalization of, the Common Stock.
All Class A Offering units were purchased, with net proceeds to RhoMed
of approximately $907,000 after payment of the placement agent's commissions
and expenses ($90,000) and offering expenses (approximately $3,000). Paramount
(see Note 3), served as placement agent for the offering and received (i) a
cash commission equal to 6% of the gross proceeds from the sale of the units,
(ii) a non-accountable expense allowance equal to 3% of gross proceeds and
(iii) placement agent's warrants ("Class A Placement Agent Warrants"), on the
same terms as the Class A Warrants, equal to 15% of the Common Stock
underlying the Class A Warrants issued in the Class A Offering.
Class B Offering -- On November 27, 1995, the Board of Directors of
RhoMed authorized an offering of up to 7.5 units at $100,000 per unit, with
each unit consisting of a $100,000 face amount Senior Bridge Note and a Class
B Warrant to purchase 100,000 shares of RhoMed common stock at an exercise
price of the lesser of (a) $.25 per share and (b) 50% of the price per share
of common stock in a subsequent equity offering of RhoMed common stock in
which gross proceeds exceed $2,500,000 (the "Class B Offering"). On January
25, 1996, the Board of Directors increased the Class B Offering from 7.5 units
to 8.5 units. The Senior Bridge Notes sold in the Class B Offering bore
interest at 1% per month, and were payable, with accrued interest, at the
earlier of (a) 5 days following the closing of an equity offering of RhoMed's
securities in which gross proceeds exceeded $2,500,000 and (b) 12 months from
the date of issuance. The Class B Warrants are exercisable at any time,
terminate 5 years from the date of issuance, have certain registration rights,
contain a call provision and are subject to adjustment in certain
circumstances, including a stock split of, stock dividend on, or a
subdivision, combination or recapitalization of, the Common Stock.
On February 15, 1996, the purchase of units was completed. Net
proceeds to RhoMed were $739,500 after payment of the placement agent's
commissions and expenses ($110,500). Paramount (see Note 3), served as
placement agent for the Class B Offering and received (i) a cash commission
equal to 9% of the gross proceeds from the sale of the units, (ii) a
non-accountable expense allowance equal to 4% of gross proceeds and (iii)
placement agent's warrants ("Class B Placement Agent Warrants"), at an
exercise price of $.30 per share but otherwise on the same terms as the Class
B Warrants, equal to 5% of the Common Stock underlying the Class B Warrants
issued in the Class B Offering. On June 28, 1996, the Class B Offering Senior
Bridge Notes with accrued interest were paid in full.
F-16
<PAGE>
(8) NOTES PAYABLE TO STOCKHOLDERS:
At June 30, 1996 and August 31, 1995, notes payable to stockholders
consisted of four ten year notes totaling $80,000 plus interest accrued
thereon. These notes were issued as part of a combined stock and debt offering
during the fiscal year ended August 31, 1992 (see Note 10). Each note is a
promissory note from RhoMed to the purchaser in the face amount of $20,000,
bearing interest at 10% per year, accruing annually. Principal and interest on
the notes becomes due and payable on the earlier of (i) July 31, 2002, or (ii)
30 days after RhoMed, or its successor, receives net proceeds from a public
offering of its common stock of at least $5,000,000 or (iii) 30 days after the
end of a fiscal year in which, as reflected on the audited financial
statements of RhoMed or its successor, RhoMed or its successor has net assets
of at least $5,000,000 or net income of at least $5,000,000. The notes had a
provision providing for conversion into common stock on the basis of one share
of stock for each $1.50 of principal and accrued interest. As a result of the
Merger, there is no longer a right to convert.
(9) COMMITMENTS AND CONTINGENCIES:
Leases -- Palatin leases certain of its facilities and equipment under
noncancellable operating leases. The lease on the facility in Albuquerque, New
Mexico expires on December 31, 1996. Minimum future annual lease payments at
June 30, 1996, are approximately $55,000 in fiscal year 1997, and
approximately $12,000 to $21,000 per year thereafter until fiscal year 2001.
Certain leases have been personally guaranteed by one or more former officers
of RhoMed.
Product Liability -- The testing, marketing and sale of human health
care products entails an inherent risk of allegations of product liability.
Palatin does not currently have product liability insurance coverage.
Restructuring Charge -- In conjunction with Palatin's decision to
consolidate and relocate its research and development facilities and executive
offices in the New Jersey area, Palatin established a restructuring charge of
$450,000. The restructuring charge represents mainly severance costs, facility
closing expenses and recruiting fees. Included in accrued expenses at June 30,
1996, is $257,152 of this restructuring charge.
Commitments -- On November 27, 1995, the Board of Directors of RhoMed
ratified an employment agreement (the "Employment Agreement") with Edward J.
Quilty ("Mr. Quilty") to serve as President and Chief Executive Officer of
RhoMed. Pursuant to the Agreement, RhoMed agreed to grant Mr. Quilty an option
to acquire such number of shares of common stock as equal a 10% fully diluted
equity interest in RhoMed at an exercise price of $.01 per share, which option
vests in 36 equal increments on each of the first 36 monthly anniversaries of
the commencement of Mr. Quilty's employment with RhoMed, and may be
accelerated or terminated in part on the happening of certain events (the
"Initial Option"). The Agreement further provides for anti-dilutive options,
pursuant to which Mr. Quilty will be issued options to acquire the number of
shares that, when aggregated with the shares issuable pursuant to the Initial
Option, equal not less than 3.75% of the shares of common stock of RhoMed. The
Agreement is for an initial period of one year, with automatic one year
extensions, and provides that, on certain termination events, the portion of
the options that would otherwise have terminated without vesting, vest and are
exercisable upon termination, and also provides for specified termination pay.
Palatin is obligated under two consulting agreements to make payments
of $157,000 in fiscal year 1997 and $76,500 in fiscal year 1998.
F-17
<PAGE>
Legal Proceedings -- Palatin is subject to various claims and
litigation in the ordinary course of its business, including patent
proceedings. Management believes that the outcome of such legal proceedings
will not have a material adverse effect on Palatin's financial position or
future results of operation.
(10) STOCKHOLDERS' EQUITY (DEFICIT):
Palatin Authorized Shares -- The authorized capital stock of Palatin
at the time of the Merger consisted of 10,000,000 Common Stock shares and
2,000,000 shares of preferred stock, $.01 par value per share. On July 19,
1996, Palatin's Certificate of Incorporation was amended to, among other
things, increase the number of shares of authorized Common Stock to 25,000,000
and to effect a 1-for-10 reverse split of the Common Stock. The consolidated
financial statements have been adjusted to reflect the amendment to the
Certificate of Incorporation.
RhoMed Authorized Shares -- By Articles of Amendment approved by
RhoMed's stockholders on April 4, 1996 and filed April 10, 1996, RhoMed
amended its Articles of Incorporation to increase its authorized common stock
from 40,000,000 to 60,000,000 shares with no par value. By Articles of
Amendment approved by RhoMed's stockholders on May 24, 1996 and filed June 7,
1996, RhoMed amended its Articles of Incorporation to increase its authorized
common stock from 60,000,000 to 90,000,000 shares with no par value. RhoMed
has 10,000,000 shares of authorized preferred stock, no par value.
Stock Transactions -- On March 4, 1996, the Board of Directors of
RhoMed authorized an offering of up to 40 units at $100,000 per unit, with
each unit consisting of 400,000 shares of RhoMed common stock at a purchase
price of $.25 per share (the "Common Stock Offering") (equivalent to 73,733
shares per unit at a purchase price of $1.36 per Palatin Common Stock share).
On May 14, 1996, the Board of Directors authorized an increase in the Common
Stock Offering of up to 100 units. Paramount served as placement agent for the
Common Stock Offering and received (i) a cash commission equal to 9% of the
gross proceeds from the sale of the units, (ii) a non-accountable expense
allowance equal to 4% of gross proceeds and (iii) placement agent's warrants
("Stock Offering Placement Agent Warrant"), equal to 10% of the common stock
issued in the Common Stock Offering, at an exercise price of $.30 per RhoMed
common stock share (equivalent to $1.63 per Palatin Common Stock share), which
are freely exercisable and terminate ten years from the date of issuance, have
certain registration rights, and are subject to adjustment in certain
circumstances. On June 24, 1996, RhoMed terminated the Common Stock Offering.
RhoMed sold 96.454 units, realizing net proceeds of approximately $8,391,000,
and issued 38,581,600 shares of RhoMed common stock (equivalent to 7,111,846
shares of Common Stock).
On June 24, 1996, and pursuant to the Merger, certain stockholders of
Interfilm prior to the Merger and third parties purchased 3,000,000 shares of
RhoMed common stock at a purchase price of $.25 per share, with net proceeds
to RhoMed of approximately $748,000 (equivalent to 552,997 shares of Common
Stock at a purchase price of $1.36). Also, and pursuant to the Merger,
warrants to purchase 1,500,000 shares of RhoMed common stock at an exercise
price of $.40 were issued to certain stockholders of Interfilm prior to the
Merger and third parties ("Merger Warrants") (equivalent to 276,499 shares of
Common Stock at an exercise price of $2.17). The Merger Warrants are
exercisable at any time, terminate four years from the date of issuance, have
certain registration rights, contain a call provision and are subject to
adjustment in certain circumstances.
F-18
<PAGE>
In the ten months ended June 30, 1996, RhoMed issued 124,525 shares of
RhoMed common stock (equivalent to 22,954 shares of Common Stock) in exchange
for services, and Palatin issued 103,017 shares of Common Stock in exchange
for services. In addition, RhoMed has issued stock for accrued interest, and
Palatin is obligated to issue additional stock in payment of accrued interest
(see Note 6).
RhoMed commenced a private offering of preferred stock in fiscal year
1994, and a private offering of units consisting of RhoMed common stock and
common stock warrants in fiscal year 1995, both of which were terminated
without having raised the minimum required for closing. Stock issuance costs
incurred in connection with both offerings were expensed to operations in the
fiscal year in which such costs were incurred.
In February 1993, RhoMed issued a private offering memorandum for the
sale of securities, consisting of units of 10,000 shares of RhoMed common
stock for $10,000 per unit ($1.00 per share). RhoMed sold 58.4 units,
realizing net proceeds of approximately $577,000.
In September 1992, RhoMed issued a private offering memorandum for the
sale of securities, consisting of units of 33,333 shares of RhoMed common
stock for $25,000 per unit ($.75 per share). RhoMed sold 8 units, realizing
net proceeds of approximately $191,000.
In December 1991, RhoMed issued a private offering memorandum for the
sale of units consisting of 26,289 shares of RhoMed common stock and a $20,000
note (see Note 8). Four units were sold for $25,000 per unit.
Outstanding Stock Purchase Warrants -- At June 30, 1996, Palatin had
the following warrants outstanding, all of which are currently exercisable
except 11,111 warrants included in "Other Warrants." Each warrant is restated
as Common Stock:
<TABLE>
<CAPTION>
Palatin Common Exercise Price Latest
Warrant Stock Shares per Share Termination Date
- -------------------------- -------------- -------------- ----------------
<S> <C> <C> <C>
Class A Offering 552,997 $ .05 9/13/05
Class A Placement Agent 82,949 .05 9/13/05
Class B Offering 156,683 .68 2/15/01
Class B Placement Agent 7,834 1.63 2/15/06
Stock Offering Placement Agent 711,184 1.63 6/25/06
Merger Warrants 276,499 2.17 6/24/00
Other Warrants 31,967 $2.71 - $70.50 10/20/99
---------- -------------- --------
Total 1,820,113 $ .05 - $70.50 6/25/06
========== ============== ========
</TABLE>
The Class B Offering and Merger Warrants contain provisions providing for
termination of the warrant if not exercised following notice of specified per
share trading prices.
Palatin Stock Option Plans -- Palatin had, prior to the Merger,
adopted its 1993 Equity Incentive Plan, pursuant to which options for 26,750
Common Stock shares, calculated on a post-reverse stock
F-19
<PAGE>
split basis, were granted and outstanding at June 30, 1996. Palatin does not
intend to issue any new options under the 1993 Equity Incentive Plan.
RhoMed Stock Option Plans -- RhoMed has 4 stock option plans, with
options granted thereunder constituting RhoMed Derivative Securities which,
pursuant to the Merger, were automatically converted into rights upon exercise
to receive Common Stock in the same manner in which the shares of RhoMed
common stock were converted.
Two RhoMed stock option plans are qualified "incentive stock option"
plans under the Internal Revenue Code, for which 8,250,000 shares of RhoMed
common stock were reserved. The other plans are nonqualified stock option
plans, for which 3,250,000 shares of RhoMed common stock were reserved.
Palatin does not intend to issue any new options under the RhoMed stock option
plans.
The table below presents options in RhoMed common stock, with
conversion to Common Stock shown as "Restated to Palatin Options." The
"Outstanding" and "Exercisable" as of June 30, 1996, are stated as Common
Stock. Information related to stock option activity under these plans for the
period from inception to June 30, 1996 is as follows:
<TABLE>
<CAPTION>
Incentive Stock Options Nonqualified Stock Options
--------------------------------- -------------------------------
Number Number
of Shares Price per Share of Shares Price per Share
------------- --------------- --------- ---------------
<S> <C> <C> <C> <C>
Balance at inception - $ - - $ -
Granted 628,750 .50 - 1.00 1,053,179 .425 - 1.00
Terminated 37,000 1.00 2,500 1.00
------------- ------------- ---------- ------------
Outstanding, August 31, 1994 591,750 .50 - 1.00 1,050,679 .425 - 1.00
Granted 99,000 .35 196,400 .30 - 1.00
Terminated 36,000 1.00 - -
------------- ------------- ---------- ------------
Outstanding, August 31, 1995 654,750 .35 - 1.00 1,247,079 .30 - 1.00
Granted 7,601,204 .01 - .25 1,718,123 .01 - .25
Terminated 193,750 .25 - 1.00 57,000 1.00
------------- ------------- ---------- ------------
Outstanding, June 25, 1996 8,062,204 .01 - 1.00 2,908,202 .01 - 1.00
Conversion to Palatin Options (6,576,078) (2,372,126)
------------- ----------
Restated to Palatin Options 1,486,126 .05 - 5.42 536,076 .05 - 5.42
Palatin Options Outstanding, June 25, 1996 26,750 76.50 - 90.00 - -
------------- ------------- ----------- ------------
Outstanding, June 30, 1996 1,512,876 $.05 - $90.00 536,076 $.05 - $5.42
============= ============= ========== ============
Exercisable, June 30, 1996 214,472 $.05 - $90.00 225,453 $.05 - $5.42
============= ============= ========== ============
</TABLE>
No options have been exercised since inception.
F-20
<PAGE>
(11) GRANTS, CONTRACTS AND ROYALTIES:
Pursuant to contract with the New Mexico Research and Development
Institute to develop products for medical research and diagnostic imaging, for
which all work has now been completed, the State of New Mexico earns (i) a 2%
royalty on gross revenues for products developed under the contract and
manufactured in New Mexico and (ii) a 5% royalty on products manufactured
outside New Mexico, subject to maximum repayment limits over specified time
frames.
RhoMed applies for and has received grants and contracts under the
Small Business Innovative Research (SBIR) program and other federally funded
grant and contract programs. Since inception, approximately $2,526,000 of
RhoMed's revenues have been derived from federally or state funded grants and
contracts. Under federal grants and contracts, there are no royalties or other
forms of repayment; however, in certain limited circumstances the government
can acquire rights to technology which is not being commercially exploited.
Most contract costs, including indirect costs, are subject to audit and
adjustment by negotiation with government representatives.
RhoMed also engages in contract development work with private sector
companies, both foreign and domestic. From inception to August 31, 1995,
RhoMed's contract revenues from such private sector companies are
approximately $335,000.
RhoMed has solicited and performed cooperative research and
development agreements with various national laboratories of the Department of
Energy.
(12) LICENSING AGREEMENTS:
RhoMed entered into a license agreement, effective November 2, 1992,
with Sterling Winthrop, Inc., a major pharmaceutical company ("Sterling"),
under which RhoMed granted to Sterling (i) a non-exclusive license to certain
patented radiolabeling technology for imaging uses and (ii) an option to
acquire a license on similar terms for therapeutic uses. The license agreement
is renewable annually and provides for certain license fee payments to RhoMed
together with milestone payments on product development and percentage of
sales production royalties. During the fiscal years ended August 31, 1995 and
1994, RhoMed received $50,000 in royalties and option payments under the
license agreement. During the fiscal year ended August 31, 1994, the license
agreement was assigned by Sterling to Burroughs Wellcome Co., a major
pharmaceutical company, in conjunction with the purchase of certain assets of
Sterling by Burroughs Wellcome Co. Concurrently with entering into the license
agreement, RhoMed entered into a development agreement, which expired December
31, 1993, with Sterling, under which RhoMed performed specified product
development services for $125,000, of which $25,000 is included in grant and
contract revenue for the fiscal year ended August 31, 1994.
RhoMed entered into a license agreement, effective May 1, 1992, with
Rougier Bio-Tech Limited, a foreign biotechnology concern ("Rougier"), under
which RhoMed granted Rougier an exclusive license to certain patented
radiolabeling technology for a defined field-of-use. The agreement, which is
for the life of the patents and is renewable annually, provides for license
fee payments to RhoMed and percentage of sales production royalties with a
minimum annual royalty. Under this agreement, $7,500 of royalties and fees
were paid to RhoMed in the fiscal year ended August 31, 1995.
(13) INCOME TAXES:
Effective September 1, 1993, RhoMed adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Prior
to 1993, RhoMed accounted for income taxes following the provisions of
Accounting Principles Board Opinion No. 11.
F-21
<PAGE>
RhoMed has had no income tax expense or benefit since inception
because of operating losses. Deferred tax assets and liabilities are
determined based on the estimated future tax effect of differences between the
financial statements and tax reporting basis of assets and liabilities, given
the provisions of the tax laws. A valuation allowance for the net deferred tax
assets has been recorded at June 30, 1996, based on the weight of evidence
that the deferred tax assets exceed the likely reversal of deferred tax
liabilities and likely taxable income. The difference between the expected
benefit of the federal tax rate of 34% and the actual benefit of zero is due
to this valuation allowance. Significant components of deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
June 30, 1996 August 31, 1995
--------------- ----------------
<S> <C> <C>
Deferred tax assets:
Payroll compensation accruals $ 39,887 $ 84,088
Restructuring accrual 55,484 -
Net operating losses 2,793,025 1,596,736
Other 43,710 32,766
----------- ------------
Total gross deferred tax assets 2,932,106 1,713,584
Less: Valuation allowance (2,915,557) (1,603,744)
----------- ------------
Deferred tax assets, net 16,549 109,840
----------- ------------
Deferred tax liabilities:
Basis difference in intellectual and
proprietary property (12,516) (109,291)
Other (4,033) (549)
----------- ------------
Total gross deferred tax liabilities (16,549) (109,840)
----------- ------------
Deferred tax assets (liabilities), net $ - $ -
=========== =============
</TABLE>
The Tax Reform Act of 1986 imposes limitations on the use of net
operating loss carryforwards if certain stock ownership changes occur. As a
result of the change in majority ownership relating to the Castle transaction
(see Note 3), the Common Stock Offering (see Note 10) and the Merger (see Note
1), under Internal Revenue Code Section 382, RhoMed most likely will not be
able to utilize its net operating loss carryforwards after the dates of
ownership change. Thus, Palatin most likely will not be able to realize the
benefit of any or all of RhoMed's net operating loss carryforwards in the
future.
Furthermore, due to the Merger, Palatin applied to the Internal
Revenue Service to change its year end to June 30 from December 31. Internal
Revenue Service approval of this change is still pending.
Income tax returns for RhoMed for the years ended August 31, 1995 and
1994 have not been filed; however, management believes that since there is no
tax liability, there will be no material adverse effect on Palatin.
(14) COMPARISON WITH TEN MONTHS ENDED JUNE 30, 1995:
As noted above (see Note 1), Palatin changed its fiscal year end to
June 30. Therefore, the following June 30, 1995, selected financial
information, adjusted to reflect the amendment to the
F-22
<PAGE>
Certificate of Incorporation of Palatin as if it had been filed on June 30,
1995, and as if the Merger had been consummated on June 25, 1995, is presented
for comparative purposes only (unaudited):
Ten Months Ended
June 30,
-------------------------------------
1996 1995
------------ -------------
Revenues $ 24,457 $ 94,842
Expenses 2,120,239 1,076,473
Other income (expenses) (1,802,097) (305,615)
------------ ------------
Net loss $ (3,897,879) $ (1,287,246)
============ ============
Weighted average number of
common shares outstanding 2,144,131 1,230,550
============ ============
Net loss per common share $ (1.82) $ (1.05)
============ ============
WAIVER AND CONSENT
THIS WAIVER AND CONSENT (this "Waiver") is made and entered into as of
June 24, 1996, by and among RhoMed Incorporated, a New Mexico corporation
("RhoMed"), Interfilm, Inc., a Delaware corporation ("Interfilm"), and Interfilm
Acquisition Corp., A New Mexico corporation and a wholly-owned subsidiary of
Interfilm ("InSub" and together with RhoMed and Interfilm collectively referred
to herein as the "Parties"). For the purposes of this Waiver, except where the
context otherwise requires, the term "Interfilm" shall include Interfilm and all
of Interfilm's subsididaries, taken as a whole. Any capitalized term herein not
otherwise defined shall have the meaning ascribed to such term in the Agreement
and Plan of Reorganization, dated as of April 12, 1996, by and among the Parties
(the "Agreement").
RECITALS
WHEREAS, the Parties have entered into the Agreement, pursuant to which
InSub will merge with and into RhoMed upon the Closing (as such term is defined
in the Agreement);
WHEREAS, Pursuant to Section 1.5(a) of the Agreement, InSub agreed to,
on or prior to the Closing Date, make available to each RhoMed Shareholder a
form of letter of transmittal and instructions for use in effecting the
surrender of the Certificates for conversion thereof (the "Letters of
Transmittal");
WHEREAS, pursuant to Section 1.5(b) of the Agreement, InSub agreed to
deliver to each RhoMed Shareholder who delivered his Certificate, together with
a fully executed Letter of Transmittal, a certificate for the number of shares
of Interfilm Preferred to which such holder is entitled pursuant to Section 1.4
of the Agreement;
WHEREAS, pursuant to Sections 2.1 and 2.4 of the Agreement, each of
Interfilm and InSub represented and warranted that each of Interfilm and any of
its subsididaries, including InSub, is duly organized, validly existing and in
good standing under the laws of their respective jurisdictions of incorporation
or organization and that each of Interfilm and any of its subsidiaries,
including InSub, is qualified to do business, is in good standing and has all
required licenses in each jurisdiction in which its failure to obtain or
maintain such qualification, good standing or licensing (i) would, individually
or in the aggregate, have or reasonably could be expected to have a Material
Adverse Effect on Interfilm and InSub, or (ii) would result in a material breach
of any of the other representations,
<PAGE>
warranties or covenants set forth in the Agreement;
WHEREAS, pursuant to Section 2.2 of the Agreement, Interfilm was to
issue Eighty Thousand (80,000) shares of Interfilm Common to Mr. William
Franzblau and Fifty Thousand (50,000) shares of Interfilm Common to Mr. Joseph
Merback;
WHEREAS, pursuant to Section 3.5(d) of the Agreement, RhoMed agreed not
to sell any shares of its capital stock or other securities or to become
obligated to issue any shares of its capital stock or other securities after
February 29, 1996;
WHEREAS, pursuant to Section 3.5(h) of the Agreement, RhoMed agreed not
to change or amend the Articles of Incorporation or Bylaws of RhoMed after
February 29, 1996;
WHEREAS, pursuant to Section 3.13 of the Agreement, RhoMed agreed to pay
certain finders' fees or commissions immediately following the Closing;
WHEREAS, pursuant to Section 4.11(a) of the Agreement, RhoMed agreed to
sue its best efforts to effect the Private Placement up to an aggregate amount
of Five Million Dollars ($5,000,000.00) of RhoMed Common;
WHEREAS, pursuant to Section 4.11(b) of the Agreement, the individuals
and entities set forth on Schedule 4.11 to the Agreement agreed to purchase an
aggregate of Six Hundred Thousand Dollars ($600,000.00) of RhoMed Common;
WHEREAS, pursuant to Section 4.12 of the Agreement, the holders of at
least fifty-one percent (51%) of the total outstanding shares entitled to vote
of each of RhoMed Common and the RhoMed preferred stock were to execute the
RhoMed Voting Agreement;
WHEREAS, pursuant to Section 5.12 of the Agreement, the holders of at
least fifty-one percent (51%) of the total outstanding shares of Interfilm
Common were to execute the Voting Agreement;
WHEREAS, pursuant to Sections 5.14(a) and 5.14(b) of the Agreement the
holders of the Interfilm Preferred would be entitled to cash in lieu of
fractional shares upon the conversion of Interfilm Preferred into Interfilm
Common.
WHEREAS, pursuant to Section 5.18(b) of the Agreement, Interfilm agreed
to transfer, prior to Closing, the Transferred Assets to an Irrevocable Escrow
pending the Closing;
WHEREAS, pursuant to Section 5.18(d) of the Agreement,
2
in the event that a subitable alternative to the Trust may be agreed to by the
Parties prior to Closing, such alternative vehicle was to replace the Trust;
WHEREAS, pursuant to Section 5.20 of the Agreement, the officers of
Interfilm are to resign as of the Closing;
WHEREAS, pursuant to Section 8.7 of the Agreement, each of the Parties
desires to waive certain portions of the above-referenced provisions of the
Agreement.
NOW, THEREFORE, in consideration of the foregoing, the Parties hereby
agree as follows:
1. The Parties hereby waive any objection to the failure of the Parties
to comply with Section 1.5(a) of the Agreement and hereby consent to the mailing
of such Letters of Transmittal following the Closing.
2. The Parties hereby waive any objection to the failure of the Parties
to comply with Section 1.5(b) of the Agreement.
3. RhoMed hereby waives any objection to the failure of Interfilm and
InSub to comply with Sections 2.1 and 2.4 of the Agreement solely with respect
to (a) the requirement that Interfilm be qualified as a foreign corporation in
the State of New York and (b) other than InSub and Interfilm Technologies, Inc.,
a New York corporation, the requirement that any of the subsidiaries of
Interfilm be in good standing under the laws of their respective jurisdictions
of incorporation or organization.
4. Each of the Parties hereby waive any objection to the failure to
Interfilm to comply with Section 2.2 of the Agreement solely with respect to the
issuance of Eighty Thousand (80,000) shares of Interfilm Common to Mr. William
Franzblau and Fifty Thousand (50,000) shares of Interfilm Common to Mr. Joseph
Merback immediately prior to the Closing and hereby consent to the issuance of
37,975 shares of RhoMed Common to Mr. William Franzblau, 27,125 shares of RhoMed
Common to Mr. Joseph Merback and 5,425 shares of RhoMed Common to Mr. Brian
Cooper by RhoMed immediately prior to the Closing in consideration of services
performed to RhoMed in connection with the Transaction.
5. Each of Interfilm and InSub hereby waive any objection to the failure
of RhoMed to comply with Section 3.5(d) of the Agreement solely with respect to
the Financing.
6. Each of Interfilm and InSub hereby waive any objection to the failure
of RhoMed to comply with Section 3.5(h) of the Agreement solely with respect to
amending RhoMed's
3
Articles of Incorporation to increase the authorized capital stock of RhoMed to
100,000,000 shares.
7. Each of the Parties hereby waive any objection to the failure of
RhoMed to comply with Section 3.13 of the Agreement and hereby consent to the
payment of such finders' fees by Interfilm immediately following the Closing.
8. Each of Interfilm and InSub hereby consent to the increase of the
Private Placement from Five Million Dollars ($5,000,000.00) to up to Ten Million
Dollars ($10,000,000.00) and the increase of the IF Purchaser Financing from Six
Hundred Thousand Dollars ($600,000.00) to Seven Hundred Fifty Thousand Dollars
($750,000.00) and the amount of warrants being sold to the individuals and
entities set forth on Schedule 4.11 to the Agreement to One Million Five Hundred
Thousand Dollars ($1,500,000).
9. Each of Interfilm and InSub hereby waive any objection to the failure
of RhoMed to comply with Section 4.12 of the Agreement.
10. RhoMed hereby waives any objection to the failure of Interfilm to
comply with Section 5.12 of the Agreement and hereby consents to the use of a
written consent of stockholders in lieu of the Voting Agreement.
11. The Parties hereto waive any objection to the failure of the Parties
to comply with Sections 5.14(a) and 5.14(b) solely with respect to the payment
of cash in lieu of fractional shares upon the conversion of the Interfilm
Preferred into Interfilm Common.
12. RhoMed hereby waives any objection to the failure of Interfilm to
comply with Section 5.18(b) of the Agreement solely with respect to the transfer
of the Transferred Assets to the Irrevocable Escrow pending the Closing and
hereby consents to the transfer of the Transferred Assets to the limited
partnership (the "Limited Partnership") immediataely following the Closing if,
and only if, such transfer has been approved by the Board of Directors of
Interfilm prior to the Closing and is effected by Mr. William I. Franzblau in
his capacity as Executive Vice President and Chief Operating Officer of
Interfilm immediately following the Closing.
13. The Parties hereby consent to the use of the Limited Partnership in
lieu of the Trust pursuant Section 5.18(d) of the Agreement.
14. The Parties hereby consent to the resignation of the Interfilm
officer immediately after the Closing pursuant to
4
Section 5.20 of the Agreement rather than as of the Closing.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
5
IN WITNESS WHEREOF, the parties hereto have executed this Waiver as of
the date first above written.
INTERFILM, INC.
By: /s/ William Franzblau
-----------------------------
Its: COO/EVP
-----------------------------
INTERFILM ACQUISITION CORP.
By: /s/ William Franzblau
-----------------------------
Its: President
-----------------------------
RHOMED INCORPORATED
By: /s/ John J. McDonough
-----------------------------
Its: VP & CFO
-----------------------------
1
PATENT ASSIGNMENT AND LICENSE AGREEMENT
This PATENT ASSIGNMENT AND LICENSE AGREEMENT (the "Agreement") is entered
into as of July 15, 1993 by and between Aberlyn Capital Management Limited
Partnership, a limited partnership organized under the laws of the State of
Delaware, with an office at 1000 Winter Street, Waltham, Massachusetts 02154
(hereinafter, together with its successors and assigns, the "Company"), and
RHOMED INCORPORATED, a corporation organized under the laws of the State of
NEW MEXICO and having its principal place of business at 4261 BALLOON PARK
ROAD N.E., ALBUQUERQUE, NM 87109-5802 (hereinafter, together with its
successors and assigns, the "Licensee").
RECITALS
WHEREAS the Licensee is the owner of all rights, title and interest in
and to certain issued patents that are described and enumerated in Schedule A
attached hereto;
WHEREAS the Company desires to enter into an agreement with the Licensee
whereby the Company shall purchase from the Licensee and take by purchase
assignment, grant, conveyance or otherwise all rights, title and interest in
and to the Patents (as hereinafter defined);
WHEREAS the Licensee desires to enter into an agreement whereby the
Licensee shall enjoy an exclusive license to use, make, sub license and
otherwise practice the inventions set forth in the Patents subject to the
terms and conditions set forth in this Agreement supplemented by the terms and
conditions set forth in the applicable Schedules;
WITNESSETH
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS; RULES OF INTERPRETATION.
(a) Terms shall have the meanings set forth in this Section 1 or
elsewhere in this Agreement referred to below:
"Agreement" shall mean this Patent Assignment and License Agreement,
together with all Schedules hereto, as it and they may be amended or
supplemented and in effect from time to time.
"Assignment" shall mean the assignment of Patents and related Patent
Rights by the Licensee to the Company pursuant to this Agreement.
"Base Royalty" shall mean, for each Patent, the amount of money
payable in every month as a royalty for the License of such Patent pursuant to
this Agreement, as set forth on Schedule B hereto or otherwise on any
supplemental Schedule hereto.
"Collateral Documents" shall mean all Schedules, exhibits, charts,
appendices and other documents that may be part of this Agreement or
incorporated into this Agreement by reference, or required by the terms of
this Agreement or by any competent governmental authority to be executed and
delivered by either party hereto.
"Company" shall mean the party named as the Company in the preamble
preceding the Recitals of this Agreement and its successors and assigns.
"Default" shall mean any event which, upon the passage of time or
giving of notice, or both, will become an Event of Default.
<PAGE>
2
"Effective Date" shall mean the date when the rights and obligations of
this Agreement takes effect, as as set forth on Schedule B hereto or otherwise
on any supplemental Schedule hereto.
"Event of Default" shall mean the occurrence of any of the following acts
of the Licensee or events affecting the Licensee:
(1) failure by Licensee to pay any Base Royalty, Supplemental
Royalty, or other sums when due hereunder;
(2) failure by Licensee to perform any other covenant herein and
continuation of such failure for twenty (20) days after written notice to
Licensee by the Company specifying such failure and demanding that same be
remedied;
(3) default of Licensee in the payment of any other obligation now
or hereafter owed by Licensee to the Company or any affiliate of the Company
under any other agreement or instrument;
(4) filing by Licensee of a petition in bankruptcy, or of
reorganization, or for an arrangement pursuant to the U.S. Bankruptcy Code, or
any similar federal or state or foreign law, or an adjudication by a court or
tribunal of competent jurisdiction that Licensee is bankrupt or insolvent, or
an assignment by the Licensee for the benefit of creditors, or an admission in
writing by the Licensee of its inability to pay its debts generally as they
become due, or the dissolution or the Licensee, whether voluntary or
otherwise, or the suspension by the Licensee of the payment of any of its
obligations, or any corporate action taken by the Licensee in furtherance of
any of the foregoing;
(5) a petition or answer proposing the adjudication of Licensee as a
bankrupt, or its reorganization under the U.S. Bankruptcy Code, or any similar
federal or state or foreign law, is filed in any court, and (i) Licensee shall
consent to such filing, or (ii) such petition or answer is not discharged or
denied within thirty (30) days after such filing;
(6) a receiver, trustee or liquidator (or other similar official) is
appointed for or takes possession or charge of Licensee or substantially all
of Licensee's assets;
(7) any representation or warranty made by Licensee herein or in any
document or certificate furnished by Licensee in connection herewith or
pursuant hereto shall prove to have been incorrect in any material respect at
the time made; or
(8) the occurrence of any event described in (4), (5), (6) or (7)
with respect to any guarantor or other party liable for the payment or
performance of this Agreement or the termination or adverse modification of
any instrument, agreement or document by which such guarantor or other party
is liable for the obligations of Licensee hereunder.
"License" shall have the meaning given to such term in
Section 3(a) of this Agreement.
"Licensee" shall mean the person named as the Licensee in
the preamble preceding the Recitals to this Agreement .
"Lien" shall mean any lien, right of a third party,
mortgage, deed of trust, pledge, charge, claim, security interest, or other
encumbrance of any kind.
"PTO" shall mean the United States Patent and Trademark
Office.
"Patent License Rights" shall mean any and all past, present
or future rights and interests of the Licensee pursuant to any and all past,
present and future licensing agreements in favor of the Licensee, or to which
the Licensee is or shall be a party, pertaining to any Patents used by third
parties in the past, present or future, including the right in the name of the
Licensee to enforce, sue and recover for, any past, present or future breach or
<PAGE>
3
violation of any such agreement. Such agreements shall include but not be
limited to those set forth in Schedule C hereto or in any other applicable
Schedule.
"Patent Rights" shall mean (i) any and all past, present or future
rights in, to and associated with the Patents throughout the world, whether
arising under common law or statutory law, and whether arising under federal
law, state law, foreign law, or otherwise, including but not limited to the
following: all such rights arising out of or associated with the Patents; the
right (but not the obligation) to sue or bring opposition, interference,
and/or cancellation proceedings in the name of the Company for any and all
past, present and future infringements of, or any other damages or injury to,
the Patents or the Patent Rights, and the rights to damages or profits due or
accrued arising out of or in connection with any such past, present or future
infringement, damage or injury; and (ii) the Patent License Rights.
"Patents" shall mean all of the following items:
(1) all letters patent issued by the PTO or the patent office
of any other country or any intergovernmental authority, and all registrations
and recordings thereof, that are identified in Schedule A hereto or in any
other Schedule that may be executed from time to time by the parties hereto
and identified as a Schedule to this Agreement;
(2) all reissues, continuations, divisions, continuations-in
- -part, renewals or extensions thereof; and
(3) the inventions disclosed or claimed therein, including the
right to make, use, practice, sell, license, or otherwise transfer the
inventions disclosed or claimed therein.
"Proceeds" shall mean any value received as a consequence of the
ownership, possession, use, practice or enforcement of any of the Patents or
Patent Rights, and any payment received from any insurer or other person or
entity as a result of the invalidity of any Patent or any casualty to,
destruction of, or loss, theft, misappropriation, or conversion of whatever
nature of any right, interest, asset or property which constitutes the Patents
or the Patent Rights.
"Purchase Price" shall mean, the amount of consideration set forth
in Schedule B paid in exchange for the assignment of such Patent(s) pursuant
to this Agreement.
"Royalty Payment Commencement Date" shall mean, for each Patent, the
date set forth in Schedule B on which the Licensee shall be required to pay
the Base Royalty.
"Schedules" shall include all attachments to this Agreement that are
executed and delivered by the parties hereto and that contain detailed
information concerning the Patents and, if applicable, certain supplemental
terms and conditions upon which the Patents identified on such Schedule shall
be assigned and licensed pursuant to this Agreement. Schedules may be executed
and delivered by the parties to this Agreement at any time during the term of
this Agreement.
"Supplemental Royalty" shall mean, for each Patent, all accrued but
unpaid amounts due for royalties and for other fees and charges established by
or required under this Agreement, other than Base Royalty.
"Taxes or Other Impositions" shall mean all federal, state, local
and foreign taxes, fees, withholdings, levies, imposts, duties, assessments
and charges of any kind and nature whatsoever, together with any penalties,
fines or interest thereon.
(b) UCC Terms. Unless otherwise defined herein, terms used in Article 9
of the Uniform Commercial Code as enacted and in force from time to time in
the Commonwealth of Massachusetts are used herein as therein defined.
(c) Rules Of Interpretation. All definitions (whether set forth herein or
by reference) shall apply equally to both the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include
<PAGE>
4
the corresponding masculine, feminine and neuter forms. Except where the
context otherwise requires, the words "include," "includes" and "including"
shall be deemed to be followed by the phrase "without limitation" or the
phrase "but not limited to". All references herein to Sections, Exhibits and
Schedules shall be deemed to be references to Sections of and Exhibits and
Schedules to this Agreement unless the context otherwise requires. Any
reference to a Schedule or Exhibit to this Agreement shall be deemed to refer
to other Schedules that may be executed from time to time by the parties
hereto and that provide information equivalent to the information provided in
the reference Schedules or Exhibits with respect to additional Patents.
2. ASSIGNMENT OF PATENTS.
(a) Agreement of Licensee to Assign Patents. The Licensee hereby sells,
grants, assigns, transfers and conveys to the Company the Licensee's entire
right, title and interest in and to the Patents and the Patent Rights upon the
terms and conditions set forth in this Agreement.
(b) Agreement of Company to Pay. The Company hereby agrees to pay to
Licensee in consideration for the Assignment of each of the Patents and Patent
Rights the Purchase Price provided for in Schedule A hereto or in any other
applicable Schedule. The Company agrees to pay the Purchase Price to Licensee
by delivering a bank check in such amount payable to the Licensee
simultaneously with the execution and delivery of this Agreement.
(c) Agreement of Company to Reassign Patents. Subject to earlier
termination of the License under this Agreement as provided under Section 5
hereof, the Company hereby agrees that upon the completion of the full term of
the License for each Patent granted pursuant to Section 3 of this Agreement,
and upon the payment by Licensee of the sum of One Dollar ($1.00) and other
good and valuable consideration, the receipt and sufficiency of which the
Company hereby acknowledges, the Company shall grant, assign, transfer and
convey to the Licensee the Company's entire right, title and interest in and
to the corresponding Patent and Patent Rights related thereto (subject to any
disposition of any of such Patent and Patent Rights which may have been made
by the Company pursuant to this Agreement) without the requirement of any
further demand, request or additional consideration to be paid or made by the
Licensee, provided, however, that the Company's obligation to reassign any
Patent and the Patent Rights related thereto shall automatically expire upon
the earlier of (a) the date fixed by the PTO or any similar office or agency
of any foreign country or of any intergovernmental organization for the
expiration of the exclusive rights in the Patent corresponding to said
License, or (b) the date of issuance by the highest court or tribunal of
competent jurisdiction from which no appeal or other revision may be had, of a
final judgment, order or decree of the invalidity of the Patent corresponding
to such License. Upon any such completion of the full term of the License for
any Patent, the Company shall, at the Licensee's expense, execute and deliver
to the Licensee such deeds, instruments of assignment and other documents, and
shall take such other actions as Licensee may reasonably request to evidence
or record such completion of the full term of such License, and to reassign
and reconvey to and revest in the Licensee the entire right, title and
interest in and to the corresponding Patent previously granted, assigned,
transferred and conveyed to the Company by the Licensee pursuant to this
Agreement (subject to any disposition of such Patent or related Patent Rights
which may have been made by the Company pursuant to this Agreement), as fully
as if this Agreement had not been made.
3. LICENSE-BACK OF PATENTS
(a) Agreement of Company to Grant License. As a condition to Licensee's
assignment to the Company of each Patent, the Company hereby grants to
Licensee, subject to the terms and conditions set forth herein and for as long
as there shall be no uncured and continuing Event of Default under this
Agreement, the sole and exclusive worldwide right and license under such
Patent to make, have made for it, use, sell and otherwise practice such
Patent, for Licensee's own benefit and account (the "License"); provided,
however, that the foregoing License shall be no greater in scope than, and
limited by, the rights assigned to the Company by the Licensee pursuant to
Section 2 of this Agreement. Licensee agrees not to sell, assign, transfer, or
sub license any of its rights or interests in the license granted to Licensee
in this Section 3(a) , without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Any such sub licenses granted on
or after the date hereof shall be terminable by the Company, at the option of
the Company, upon termination of the Licensee's license hereunder.
(b) Term and Commencement of License. The term of the License for each
Patent pursuant to this Agreement shall be as provided in Schedule B hereto or
in any other applicable Schedule. The commencement date
<PAGE>
5
of such License shall be the commencement date set forth in Schedule B or in
any other applicable Schedule. Unless earlier terminated pursuant to the terms
hereof, the term of the License pursuant to this Agreement shall terminate at
the termination date set forth in Schedule B or in any other applicable
Schedule; provided, however, that the term of the License for any Patent shall
in no event extend beyond (a) the date fixed by the PTO or any similar office
or agency of any foreign country or of any intergovernmental organization for
the expiration of the exclusive rights in such Patent corresponding to said
License, or (b) the date of issuance by the highest court or tribunal of
competent jurisdiction from which no appeal or other revision may be had, of a
final judgment, order or decree of the invalidity of such Patent corresponding
to such License.
(c) Agreement of Licensee to Pay Base Royalty. Licensee hereby agrees to
pay to the Company, in exchange for the exclusive License of each Patent, the
Base Royalty for such Patent as provided in Schedule B hereto or in any other
applicable Schedule; payments in the amount of the Base Royalty shall be due
and payable monthly during the term of the License of such Patent. The first
Base Royalty payment shall be due and payable on the Royalty Payment
Commencement Date as provided in Schedule B hereto or in any other applicable
Schedule; subsequent Base Royalty payments shall be due and payable each
succeeding month during the term of the License.
(d) Late Payments: Supplemental Royalty. (i.) In addition to each payment
of Base Royalty that shall become due and payable hereunder from the Licensee
to the Company, on the due date thereof Licensee shall be liable for and shall
pay to the Company Late Payments (as defined below): provided, however to the
extent such payment of Base Royalty shall be received by the Company in good
collected indefeasible funds on the due date thereof, Licensee shall be
relieved of its obligation to pay the Late Payments attributable to such Base
Royalty payment. With respect to each payment of Base Royalty, the
compensation for Late Payment shall be chargeable on the amount in arrears for
each month during the period such amount remains unpaid or an appropriate
pro-rated portion thereof. Such compensation shall be calculated by reference
to the average return generated by the transaction during the period preceding
the defaults, provided that if such compensation exceeds the highest charges
of such type permitted by Applicable Law, then the said compensation shall be
the highest such as permitted by Applicable Law. (ii) All sums due or to be
due hereunder in addition to Base Royalty, shall be payable by Licensee as
Supplemental Royalty hereunder. Supplemental Royalty shall include all sums
due or to become due hereunder in addition to the Base Royalty, including the
Purchase Price and payments constituting indemnities, reimbursements, expenses
and other charges payable pursuant to the terms thereof.
(e) The Licensee shall pay all royalties and other sums due hereunder to
the Company at the address first set forth above, or to such other person or
place as the Company may from time to time designate in writing. All payments
made hereunder shall be applied first to any charges and expenses due
hereunder, and then to any Supplemental Royalty amounts due hereunder, and the
remaining balance shall be applied to any Base Royalty amount then due.
(f) Prepayment: The Licensee may prepay at any time without penalty all
royalties and other sums due hereunder to the Company, as shown on Schedule B.
If Licensee does prepay, then the full term of the License for each Patent
will be deemed to have terminated and the Company will reassign the Patents as
provided in Section 2(c).
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE LICENSEE. The Licensee
represents and warrants to the Company, and covenants and agrees with the
Company, as follows:
(a) Ownership and Rights in Assigned and Licensed Patents.
(i) Validity and Enforceability. Except as set forth in Schedule C
hereto or any other applicable Schedule, the Patents and Patent Rights related
thereto are currently subsisting and have not been adjudged invalid or
unenforceable by any court or tribunal; all of the Patents and Patent Rights
related thereto are valid and enforceable; Licensee is not aware of any claim
by any third party that any of the Patents and Patent Rights related thereto
are invalid or unenforceable.
(ii) Title. Licensee is the sole and exclusive owner of the entire
legal and beneficial rights, title and interest in and to the Patents and
Patent Rights, free and clear of any Liens. Licensee will defend its rights,
<PAGE>
6
title and interests in and to the Patents and Patent Rights against any and
all claims of any third parties. No mortgage, deed of trust or other Lien
which now covers or affects any property of the Licensee other than the
Patents or Patent Rights or any interest of the Licensee therein, now attaches
or hereafter will attach to the Patents or Patent Rights, or in any manner
affects or will affect adversely the Company's rights, title and interest
therein.
(iii) Patent Licenses. All licenses and other agreements applicable
to the Patents are the valid and binding obligations of all of the parties
thereto and are enforceable against each of such parties in accordance with
their respective terms; provided that, with respect to any such parties other
than the Licensee and its affiliates, such representation and warranty is made
to the best of the Licensee's knowledge and belief. The Licensee has not
entered into, and will not enter into, any currently subsisting or future
license agreements with respect to any of the Patents or Patent Rights that
are conditioned on the other party's also taking unwanted licenses under other
patents or other forms of intellectual property, or that require the payment
of royalties after expiration of the Patents subject to such license
agreement, or that require or otherwise provide for the payment of patent
royalties based on the sale of unpatented products.
(iv) Exclusive Right to Use. Licensee has and shall continue to have
the exclusive right to make, sell, practice and use all the inventions set
forth in the Patents (other than uses by others pursuant to agreements set
forth in Schedule C hereto or any other applicable Schedule) throughout the
countries of issue, free and clear of any and all Liens (except as set forth
on Schedule C hereto or any other applicable Schedule), or other restrictions
on Licensee's right to protect or enforce any of its Patent Rights against any
third party.
(v) No Financing Statements, Etc. No effective financing statement,
security agreement, assignment, license or transfer or notice of any of the
foregoing or of any Lien (other than those that have been filed in favor of
the Company) covering any of the Patents is on file or record in the PTO, or
any similar office or agency of any foreign country or any intergovernmental
organization, or any other governmental or regulatory authority, agency or
recording office, and Licensee is not aware of any such filing, other than
those for which duly executed termination statements have been delivered to
the Company. So long as this Agreement shall be in effect, Licensee shall
neither execute nor permit to be on file in any such authority, office or
agency any such financing statement or other document or instrument (except
financing statements or other documents or instruments filed or to be filed in
favor of the Company).
(vi) No Claims or Proceedings. Except as set forth in Schedule C
hereto or any other applicable Schedule, no claim has been made that either
the Patents or the Licensee's use, sale or practice thereof does or may
violate the rights of any third party. Except as set forth in Schedule C
hereto or any other applicable Schedule, there has been no decision adverse to
Licensee's claim of exclusive ownership rights in the Patents or exclusive
rights to use, sell and practice the Patents in any country or to keep and
maintain the Patents in full force and effect, and no proceeding involving
said rights is threatened or pending in the PTO or any similar office or
agency of the United States, of any state or foreign country, or of any
intergovernmental organization, or in any court or tribunal.
(vii) Notice Adverse Development. Upon obtaining knowledge thereof,
the Licensee shall promptly notify the Company in writing of any event which
does or reasonably could materially adversely affect the value of any of the
Patents, the Licensee's or the Company's ability to dispose of any of the
Patents, or the rights and remedies of the Company in relation to any of the
Patents. Without limiting the generality of the foregoing, the Licensee shall
promptly notify the Company in writing of the institution of, and of any
adverse decision in, any proceeding in the PTO or any similar office or agency
of the United States, of any state or foreign country, or of any
intergovernmental organization, or in any court or other tribunal, regarding
the Licensee's claim of exclusive ownership of or rights in any of the Patents
or related Patent Rights, or regarding the Licensee's right to patent any of
the same, or to keep and maintain any such Patent.
(viii) Maintenance of Patents. Licensee shall take any and all
actions that may be necessary or appropriate to properly maintain, protect,
preserve, care for, and enforce the Patents. Without limiting the generality
of the foregoing, the Licensee shall pay when due all fees, premiums,
annuities, taxes and other expenses which shall be incurred or which shall
accrue with respect to any of the Patents and shall diligently institute,
maintain and defend against suits, proceedings or actions, whether at law, in
equity or before any administrative tribunal.
<PAGE>
7
(ix) Patent Symbols and Notices. Licensee has at all times in the past
used, and shall in the future use, all statutory and other appropriate
symbols, notices or legends of ownership of the Patents in such a manner and
to such an extent as shall be sufficient to preserve the Licensee's maximum
rights under all applicable patent laws.
(x) No Conflicting Agreement. Licensee shall not, without the prior
written consent of the Company (which consent, in the case of sublicense
agreements only, shall not be unreasonably withheld), take any actions or
enter into any agreements that are inconsistent with or that could impair in
any, way the Licensee's representations, warranties and covenants herein
contained; provided, however, that so long as no Event of Default shall have
occurred and be continuing, the Licensee may sublicense the Patents in any
lawful manner that is in the ordinary course of its business and is in
accordance with Section 3(a) hereof and otherwise not inconsistent with this
Agreement. Without limiting the generality of the foregoing, the Licensee
shall not agree to take or take any action that would permit the assignment,
sale, transfer, license, disposition, or grant of any interest in or
encumbrance of any of the Patents or the Patent Rights or that would otherwise
have the effect of creating a Lien on any of the Patents or the Patent Rights.
(xi) No Abandonment. Licensee shall not abandon or dedicate to the public
any of the Patents, or do any act of a character that tends to cause or
contribute to the abandonment or dedication to the public of any Patent or
related Patent Right or to the loss of or any other adverse effect on any
Patent or related Patent Right, or omit to do any act of a character that
tends to negate, hinder, prevent, restrain or retard such abandonment,
dedication to the public, loss, or other adverse effect.
(xii) Enforcement of Licenses. Licensee shall do all things which may be
necessary or appropriate to insure that each sublicensee of any Patent shall,
in its use of any Patents, (a) comply fully with all applicable sublicense and
other agreements, and (b) satisfy and perform all the same obligations set
forth herein (with respect to Licensee's use of the Patents) as fully as
though such obligations were set forth with respect to such sublicensee's use
of the Patents.
(xiii) No Infringement. There is at present no material infringement or
unauthorized or other improper use of the Patents or related Patent Rights
inconsistent with the Licensee's exclusive rights in the Patents except as set
forth in Schedule D hereto or any other applicable Schedule. Licensee shall
use its best efforts to detect any such infringement or unauthorized or
improper use. In the event of any such infringement or unauthorized or
improper use by any third party, the Licensee shall promptly notify the
Company of such infringement or unauthorized or improper use and shall have
the first opportunity to sue and recover judgment therefor and to retain any
and all damages so recovered or obtained. In the event that the Licensee fails
so to sue or to bring legal action, within sixty (60) days after the date of
original notice by the Licensee to the Company of such infringement or
unauthorized or improper use, the Company shall thereafter have the right (but
not the obligation) to sue and recover judgment therefor at Licensee's expense
(including the Company's reasonable attorneys' fees), and in either the
Company's or the Licensee's name (in the sole discretion of the Company), and
to retain any and all damages so recovered and obtained. Licensee shall have
the right to participate in any such action or proceeding at the Licensee's
sole expense. The Licensee shall indemnify the Company for all legal fees and
other costs and expenses that the Company may incur in connection with such
actions or proceedings.
(xiv) As long as no Event of Default shall be continuing and uncured, and
notwithstanding Section 2(a) of this Agreement, the Licensee shall have the
right and the obligation to commence and to prosecute in its own name, as the
real party in interest, for its own benefit and at its own expense, such
suits, proceedings or other actions to restrain, prevent, or recover damages
for infringement, misuse, unfair competition, or other injury as are in its
reasonable business judgment necessary or appropriate to acquire, establish,
maintain, protect and enforce the Patents and Patent Rights. The Company shall
cooperate with Licensee, at Licensee's expense, as may be reasonably necessary
or appropriate in connection with any such suit, proceeding or action,
including joining as a necessary party, so long as the Company is completely
satisfied that such joinder will not subject the Company to any risk of
liability. The Licensee shall indemnify and hold harmless the Company its
Partners, employees agents, and each person who controls the Company from and
against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, suits, costs, expenses or disbursements (including
reasonable attorneys' fees) of any kind whatsoever which may be imposed on,
incurred or suffered by or asserted against the Company in connection with or
in any way arising out of any suits, proceedings or actions.
<PAGE>
8
(b) Maintenance and Condition of Patents
(i) Maintenance of Patents. Licensee, with counsel of its own
choosing reasonably acceptable to the Company and at its own expense, shall
take all necessary and appropriate actions to preserve and maintain in full
force and effect all Patents and Patent Rights, including filing and
diligently prosecuting appropriate applications for reissues, continuations,
continuations-in-part, divisions, renewals and extensions, and paying all
maintenance fees, premiums, and annuities when due.
(ii) Certificates of Issued Patents. Upon demand by the Company at
any time, Licensee shall deliver to the Company the original or a true copy of
all current official certificates of Patents issued for any country or other
jurisdiction.
(iii) NO WARRANTIES; WAIVER OF RIGHT TO MAKE CLAIMS. THE LICENSEE
AGREES THAT THE COMPANY LICENSES AND THE LICENSEE TAKES THE PATENTS "AS IS"
AND THAT THE COMPANY HAS NOT MADE, DOES NOT MAKE AND SHALL NOT BE DEEMED TO
MAKE ANY REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE PATENTS, INCLUDING THE TITLE, VALUE, CONDITION,
ABSENCE OF ANY INFRINGEMENT OF ANY RIGHTS OF ANY THIRD PARTY, OR THE ABSENCE
OF ANY VIOLATION OR CONFLICT WITH ANY LAW, GOVERNMENTAL REGULATION, CONTRACT
OR SPECIFICATION. THE LICENSEE SPECIFICALLY WAIVES ALL RIGHTS TO MAKE CLAIM
AGAINST THE COMPANY HEREIN FOR BREACH OF ANY WARRANTY OF ANY KIND WHATSOEVER.
THE COMPANY SHALL NOT BE LIABLE TO THE LICENSEE FOR (A) ANY LOSS, DAMAGE OR
EXPENSE OF ANY KIND OR NATURE CAUSED DIRECTLY OR INDIRECTLY BY ANY PATENT OR
FOR THE FAILURE OF OPERATIONS OF ANY MACHINE, EQUIPMENT, OR DEVICE
INCORPORATING ANY PATENT, (B) ANY REPAIRS, SERVICE, OR ADJUSTMENT OF OR TO ANY
MACHINE, EQUIPMENT, OR DEVICE INCORPORATING ANY PATENT, OR (C) ANY DELAY OR
FAILURE TO PROVIDE ANY SUCH REPAIRS, SERVICE, OR ADJUSTMENTS, OR ANY
INTERRUPTION OF SERVICE PROVIDED BY, OR LOSS OF USE OF, ANY SUCH MACHINE,
EQUIPMENT, OR DEVICE, OR (D) ANY LOSS OF ANY BUSINESS TO ANY PERSON OR ANY
OTHER DAMAGE WHATSOEVER AND HOWSOEVER CAUSED. NO DEFECT OR OTHER LACK OF
FITNESS OF THE PATENTS (OTHER THAN INVALIDITY OF ANY PATENT) OR OF ANY
MACHINE, EQUIPMENT OR DEVICE INCORPORATING THE PATENTS SHALL RELIEVE THE
LICENSEE OF THE OBLIGATION TO PAY THE BASE ROYALTY WITH RESPECT TO SUCH
PATENT, OR TO SATISFY ANY OTHER OBLIGATION TO THE COMPANY UNDER THIS
AGREEMENT.
(c) General
(i) Power and Authority; Non-Contravention. The Licensee is duly
organized and validly existing in good standing under the laws of the state of
its jurisdiction of its organization. The Licensee has full power and
authority to execute and deliver this Agreement and all Collateral Documents,
to perform its obligations hereunder, and to subject the Patents and the
Patent Rights to the terms hereof. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary action on the part
of the Licensee and do not and will not conflict with or contravene any
contractual provision binding on the Company with respect to the Patents
(including but not limited to any license agreement relating to the Patents or
any of them) and do not and will not contravene any valid statute, law,
regulation, governmental rule or other order binding on the Licensee or
contravene the articles of incorporation, by-laws, partnership certificate or
agreement, or other constituting documents of the Licensee or contravene the
provisions of, or constitute a Default under, or result in the creation of any
Lien or other encumbrance upon the property of the Licensee under, any
indenture, mortgage, contract or other agreement to which the Licensee is a
party or by which it or any of its property may be bound. Neither the
execution and delivery by the Licensee of this Agreement nor the consummation
by the Licensee of any of the transactions contemplated hereby require the
consent or approval of, the giving of notice to, the registration with, or the
taking of any other action in respect of, any governmental authority or
agency. This Agreement and all Collateral Documents have been duly executed
and delivered by the Licensee and constitute legal, valid and binding
obligations of the Licensee enforceable against the Licensee in accordance
with their terms.
(ii) No Suits Affecting Patents, Business; Financial
Information. There are no pending or threatened actions or proceedings before
any court, governmental authority, administrative body or tribunal which, if
adjudicated against the Licensee, would materially adversely affect the
Patent(s), The Patents Rights, the business
<PAGE>
9
operations or financial condition of the Licensee or the ability of the
Licensee to perform its obligations hereunder. Any information including
financial information furnished to the Company or its assignees by the
Licensee in connection herewith is or shall be true and correct as of the date
on which such information is or shall be furnished and any balance sheet or
statement of income of the Licensee furnished to the Company by the Licensee
in connection herewith shall fairly present the financial position of the
Licensee as at the date of such balance sheet and the results of operations of
the Licensee for the period covered by such statement of income, all in
accordance with generally accepted accounting principles applied on a
consistent basis.
(iii) Records. Licensee has kept and will diligently keep
complete and accurate records respecting the Patents and Patent Rights
(including accounting records with respect to the Patents and Patent Rights
and further including a record of all payments and Proceeds received) and will
at all times keep at least one set of such records at its address first set
forth above or at such other address as the Licensee may from time to time
notify the Company in writing. Licensee shall, upon reasonable prior notice by
the Company and at reasonable times, permit the Company (or the Company's
designee) from time to time to review, inspect, examine, and make and remove
from the Licensee's premises extracts and copies of such records.
(iv) Filings for Perfection of Interest. Except for the
filings of financing statements with the Secretaries of State of the several
states pursuant to the Uniform Commercial Code as enacted and in effect in
such states, and except for filings with the PTO pursuant to the United States
Patent Act with respect to the Patents, no authorization, approval or other
action by, or notice to, or filing with, any governmental or regulatory
authority, agency or office is or shall be required for (a) the grant by the
Licensee or the effectiveness of the Assignments granted by this Agreement,
(b) the execution, delivery and performance of this Agreement by the Licensee,
or (c) the perfection of or the exercise by the Company of its rights and
remedies under this Agreement; provided, however, that the foregoing
representation and warranty shall not apply to foreign Patents or foreign
Patent Rights. The Licensee acknowledges that the Company shall, within three
(3) months of the date first above written, file and record a copy of this
Agreement (or instruments executed and delivered pursuant hereto) with the PTO
with respect to the Patents issued by the PTO.
(v) Disclosure Complete and Accurate. All information with
respect to the Patents and Patent Rights set forth herein or in any schedule,
certificate or other writing at any time heretofore or hereafter furnished by
the Licensee to the Company, is and will be true, correct and complete in all
material respects as of the date furnished.
(vi) Risk of Unenforceability or Invalidity. Licensee
assumes and bears all risk that any of the Patents may be declared invalid or
unenforceable by any court, tribunal or governmental office or agency for any
reason or that the enforcement of any Patent may constitute or contribute to a
violation of law in any country or other jurisdiction, or that the value of
the License or any Patent to the Licensee may be adversely affected for any
reason. No such adverse affect shall relieve the Licensee of its obligations
under this Agreement, including the obligation to make all payments to the
Company when due as required by this Agreement.
5. CONSEQUENCES OF AND REMEDIES UPON LICENSEE'S DEFAULT.
(a) Termination of License. If an Event of Default shall have occurred
and be continuing, then, forthwith upon notice by the Company to the Licensee,
and in addition to all other rights and remedies of the Company, whether under
law or otherwise, the Company's rights and remedies with respect to the
Patents shall include but not be limited to the following, without payment of
royalty or compensation of any kind to the Licensee except as expressly
provided otherwise herein:
(i) All accrued but unpaid Base Royalty amounts, including for the
month in which such notice is given to the Licensee, together with all accrued
but unpaid Supplemental Royalty amounts, shall become immediately due and
payable.
(ii) The Company may proceed by appropriate action, either at law or
in equity, to enforce performance by the Licensee of the applicable covenants
of this Agreement or to recover damages for breach thereof.
(iii) Licensee's License with respect to each Patent shall terminate,
and Licensee shall
<PAGE>
10
immediately cease and desist from the practice, manufacture, use and sale (or
license or other transfer) of each such Patent.
(iv) The Company's obligation to reassign the Patents and Patent
Rights to the Licensee shall immediately terminate, and the Licensee shall
have no right to seek or to demand reassignment of any of the Patents or
Patent Rights.
(v) The Company may, to the same extent that the Licensee had the
right to do so immediately prior to notice of the occurrence and continuation
of an Event of Default, license or sublicense any of the Patents anywhere in
the world on an exclusive basis or otherwise or a general or special basis or
otherwise, for such term or terms, on such conditions, and in such manner, as
the Company shall in its sole discretion determine.
(vi) The Company may (at its sole option and without assuming any
obligations or liability thereunder), at any time, enforce (and shall have the
exclusive right but not the obligation to enforce) against any licensor,
licensee or sublicensee all Patents and Patent Rights of Licensee.
(vii) The Company may, at any such time or times as the Company
deems reasonable, either with or without legal process, and either with or
without any previous notice or demand for performance, take possession of all
tangible manifestations or embodiments of the Patents and Patent Rights and
documentation relating thereto and of all business records, documents and
files with respect to the Patents and Patent Rights, and may, without
liability for trespass to enter any premises where such tangible
manifestations or embodiments, business records, documents and files with
respect to the Patents and Patent Rights may be located for the purpose of
taking possession of or removing such tangible manifestations or embodiments,
business records, documents and files, provided, however, that the Company
shall use reasonable efforts to mitigate the Licensee's damages, such as by
attempting to sell or relicense (the choice being reserved to the Company's
reasonable discretion) the Patents in a public or private transaction at which
the Company may be the purchaser. Notwithstanding any other provision of this
Agreement, if notice of such sale or other disposition is required by law,
such notice in writing given not less than ten (10) days prior to the date
thereof shall constitute reasonable notice to the Licensee thereof. The
proceeds of such sale or license, if any, shall be applied first:
(a) To all of the Company's costs, charges and expenses
incurred in taking, removing, holding, selling or licensing the Patents or
Patent Rights; then
(b) to the extent not previously paid by the Licensee, to pay
the Company any amounts or damages then remaining unpaid hereunder; then
(c) to reimburse the Licensee any such sums previously paid by
Licensee to Company as damages hereunder; and then
(d) any surplus shall be retained by the Company.
(viii) Licensee shall, upon written demand of the Company, deliver
to the Company (or the Company's designee) all unused, unsold or undelivered
goods incorporating, including, using or produced or manufactured under any of
the Patents.
(ix) Without limiting the generality of the foregoing
provisions, the Company may, with or without legal process and with or without
previous notice or demand for performance, all of which the Licensee hereby
expressly waives, but subject nonetheless to the requirements of current law
or the requirements specified below, assign, sell, license, sublicense, or
otherwise transfer or dispose of any of the Patents or Patent Rights, either
with or without special or other conditions or stipulations, with power to
purchase any of the Patents or Patent Rights, in one or more portions at
public or private sale, at any of the Company's offices or elsewhere, at such
time or times and at such price or prices and upon such other terms as the
Company may deem commercially reasonable, irrespective of the impact of any
such sales on the market price of any of the Patents or Patent Rights. Each
purchaser at any such sale shall, as appropriate hold absolute title to the
Patents or (to the extent that the Patent Rights may be separately assigned,
sold, or otherwise conveyed) the related Patent Rights sold, free from any
claim or right on the
<PAGE>
11
part of the Licensee or any party claiming by or through the Licensee, and the
Licensee hereby waives (to the extent permitted by law) all rights of
redemption, stay and/or appraisal, which it now has or may have at any time in
the future under any rule of law or statute now existing or hereafter enacted.
Licensee agrees that, to the extent that notice of sale shall be required by
law, at least ten (10) days notice to Licensee of the time and place of any
public sale or of the time after which any private sale is to be made shall
constitute reasonable notification. At any sale of the Patents or related
Patent Rights, the Company may, to the fullest extent permitted by law, bid
for the purchase of the Patents or related Patent Rights or any portion
thereof for the account of the Company. The Company shall not be obligated to
make any sale of the Patents or related Patent Rights regardless of notice of
sale having been given. The Company may adjourn any public or private sale
from time to time by announcement of the time and place fixed therefor, and
such sale may be made without further notice at the time and place to which it
was adjourned. Licensee acknowledges that the Company may elect in its sole
discretion to sell all or part of the Patents or related Patent Rights to one
or more purchasers in privately negotiated transactions. Licensee hereby
waives any and all claims against the Company arising by reason of the fact
that the price at which any Patents or related Patent Rights may have been
sold at such a private sale was less than the price which might have been
obtained at a public sale, even if the Company accepts the first offer
received and does not offer such Patents or related Patent Rights to more than
one offeree. The Company shall also have the power to execute assurances and
do all other acts and things that the Company, in its sole discretion, deems
necessary in order to complete the assignment, sale, license, sublicense,
transfer or disposition.
(x) In case any sale of all or any of the Patents or Patent Rights
is made on credit or for future delivery, the Patents or Patent Rights so sold
may be retained by the Company until the sale price is paid by the purchaser
or purchasers thereof, but the Company shall not incur any liability in case
any such purchaser or purchasers shall fail to take up and pay for the Patents
or Patent Rights so sold and, in case of any such failure, such Patents may be
sold again upon like notice to Licensee. At any public sale made pursuant to
this Section 5, the Company may bid for or purchase, free from any right of
redemption, stay, valuation or appraisal on the part of the Licensee (all said
rights being hereby waived and released to the fullest extent permitted by
law), the Patents or Patent Rights then offered for sale and may make payment
on account thereof by using any claim then due and payable to the Company from
the Licensee as a credit against the purchase price for such Patents or Patent
Rights, and the Company may, upon compliance with the terms of sale, hold,
retain and dispose of such Patents or related Patent Rights without further
accountability therefor to the Licensee. For purposes hereof, a written
agreement to purchase any Patents or Patent Rights, or any portion thereof,
shall be treated as a sale thereof; the Company shall be free to carry out
such sale pursuant to such agreement, and the Licensee shall not be entitled
to the return of any of the Patents or Patent Rights subject to such
agreement, notwithstanding the fact that after the Company shall have entered
into such an agreement all Events of Default shall have been remedied. As an
alternative to exercising the power of sale herein conferred upon it, the
Company may proceed by a suit or suits at law or in equity to foreclose this
Agreement and to sell, assign, convey, or otherwise dispose of the Patents or
related Patent Rights or any of them pursuant to a judgment or decree of any
court having competent jurisdiction or acting pursuant to a proceeding
instituted by a court-appointed receiver.
(xi) In order to implement the assignment, sale, license,
sublicense, transfer or other disposition of any of the Patents or Patent
Rights pursuant to this Section 5(a), the Company may, pursuant to the
authority granted in the power of attorney provided in Section 8 hereof,
execute and deliver on behalf of the Licensee one or more instruments of
assignment or other transfer of the Patents or Patent Rights in form suitable
for filing, recording or registration in any jurisdiction or country.
(xii) In the event of any license, assignment, sale, transfer or
other disposition of any of the Patents or Patent Rights by the Company in
accordance with the provisions of this Section 5(a) hereof, the Licensee shall
supply to the Company or the Company's designee the Licensee's know-how and
expertise relating to the products and services sold and provided which use or
practice or incorporate any of the Patents or Patent Rights, and other records
relating to the Patents or Patent Rights and to the production, marketing,
delivery, sale and transfer of said products and services. Without limiting
the generality of the foregoing, within five (5) business days of written
notice thereof from the Company, Licensee shall make available to
the Company, to the extent that it is within Licensee's power and authority to
do so, such personnel in Licensee's employ on the date of the Event of Default
as the Company may reasonably designate by name, title or job responsibility,
to permit the Company (or if the Company so elects, the Company's designee) to
continue, directly or indirectly, to manufacture, produce, supply, advertise,
provide, license, sell and deliver such products or services, such persons to
be available to
<PAGE>
12
perform their prior functions on the Company's behalf and, if the Company so
elects to utilize their services, to be compensated by the Company on a per
diem, pro rata basis consistent with the wage and salary structure applicable to
each as of the date of such Event of Default.
(b) Enforcement of Rights.
(i) If an Event of Default shall have occurred and be continuing,
the Company shall have the right, but not the obligation, to commence or
maintain any suit, proceedings or action, in the name of either the Licensee
or the Company (in the sole discretion of the Company), to protect, maintain,
or enforce any of the Company's rights or interests in, to or under the
Patents or Patent Rights, in which event the Licensee shall, at the request of
the Company and at the Licensee's sole expense, do any and all lawful acts and
things and execute any and all documents and instruments requested by the
Company in furtherance of such protection, maintenance or enforcement of the
Company's rights or interests in, to or under the Patents or Patent Rights or
any part thereof; and the Licensee shall promptly upon demand, and
notwithstanding any other section of this Agreement, indemnify and reimburse
the Company for all liabilities, obligations, costs, expenses or disbursements
imposed on, incurred or suffered by or asserted against the Company in the
exercise of its rights under this Section 5 (b) ( i) . In the event that the
Company shall elect not to bring any suit, proceeding or action or protect,
maintain or enforce any such rights or interests of the Company in the Patents
or Patent Rights or any part thereof, the Licensee shall use all reasonable
measures, whether by action, suit, proceeding or otherwise, to protect,
maintain, and enforce the Company's and the Licensee's rights and interests
in, to or under the Patents and Patent Rights, and for that purpose the
Licensee shall diligently maintain any such action, suit or proceeding that it
believes, in the exercise of its reasonable business judgment, to be necessary
or appropriate for such protection, maintenance or enforcement.
(ii) Upon the occurrence of an Event of Default hereunder, the
Licensee shall pay to the Company all costs and expenses (including reasonable
attorneys' fees) incurred by the Company in connection with collecting any
amounts due hereunder or enforcing any right or remedy of the Company
hereunder.
(c) Other Rights Upon Termination.
(i) If any Event of Default shall have occurred and be continuing,
the Company shall have the right, as the Licensee's true and lawful agent with
power of substitution for the Licensee and in the Licensee's name, the
Company's name or otherwise (in the sole discretion of the Company), and for
the use and benefit of the Company, (a) to notify all sublicensees of the
Patents, and all parties to any other agreements with respect to any of the
Patents or Patent Rights, of such Event of Default and of the rights of the
Company as the Licensee's designee under this Section 5; (b) upon notice from
the Company to all sublicensees, obligors, vendors, clients and customers of
the Licensee with respect to the Patents or related Patent Rights, to receive,
endorse, assign and/or deliver any and all notices, acceptances, checks,
drafts, money orders or other evidences of payment relating to the Patents or
Patent Rights or any part thereof; (c) for its own use and account to demand,
collect, sue for and receive payment of, and give receipt for and give
discharges and releases of, all or any of the Patents and Patent Rights and
all amounts due or to become due in respect of the Patents and Patent Rights;
(d) to sign the Licensee's name on any invoice relating to any of the Patents
or Patent Rights; (e) to commence and prosecute any and all suits, actions or
proceedings at law or in equity in any court or tribunal of competent
jurisdiction to collect or otherwise realize on all or any of the Patents or
Patent Rights or to enforce any rights or remedies in respect of any Patents
or Patent Rights; (f) to settle, compromise, compound, adjust or defend any
actions, suits or proceedings relating to or pertaining to all or any of the
Patents or Patent Rights; (g) to license, or to the extent permitted by any
applicable law, sublicense, whether generally, specially or otherwise, and
whether on an exclusive or non-exclusive basis, any of the Patents or Patent
Rights throughout the world for such term or terms, and on such conditions,
and in such manner, as the Company shall determine (other than in violation of
any then existing licensing arrangements to the extent that waivers or other
adequate provision cannot be secured therefor); and (h) generally to make,
use, practice, sell, assign, transfer, pledge, make any agreement with respect
to or otherwise deal with all or any of the Patents or Patent Rights, and to
do all other acts and things necessary to carry out the purposes of this
Agreement and the Collateral Documents, as the absolute owner of the Patents
and Patent Rights for all purposes; provided, however, that except as provided
by the Uniform Commercial Code as in effect from time to time in the
Commonwealth of Massachusetts, or by its equivalent in other jurisdictions, or
by any other law, nothing herein contained shall be construed in such a way as
to require or oblige the Company to make any commitment or to make any inquiry
with respect to the nature or sufficiency of any payment or other
consideration received by the Company, or to present or
<PAGE>
13
file any claim or notice, or to take any action with respect to the Patents
or Patent Rights or any part thereof, or the moneys due or to become due in
respect thereof, or any property covered thereby, and no action taken by the
Company or omitted to be taken with respect to the Patents or Patent Rights or
any part thereof shall give rise to any defense, counterclaim or offset in
favor of the Licensee or to any claim or action against the Company. Whether
or not the Company shall have so notified any sublicensees, obligors, vendors,
clients and customers of the Licensee with respect to the Patents or related
Patent Rights, the Licensee shall at its expense cooperate with the Company
and render all reasonable assistance to the Company in enforcing claims
against such sublicensees, obligors, vendors, clients and customers of the
Licensee with respect to the Patents or related Patent Rights. It is
understood and agreed that the appointment of the Company or its designee as
the Licensee's agent for the purposes set forth above in this Section 5(c) is
coupled with an interest and is irrevocable. This Section 5(c)(i) shall in no
event relieve the Licensee of any of its obligations hereunder or any other
related agreement with respect to the Patents or Patent Rights or any part
thereof or impose any obligation on the Company to proceed in any particular
manner with respect to any of the Patents or Patent Rights, or in any way
limit the exercise by the Company of any other or further rights which it may
have on the date of this Agreement or hereafter, whether pursuant to this
Agreement, or by law, or otherwise.
(ii) Except as otherwise provided in this Section 5, the Licensee
shall continue to collect, at its own expense, all amounts due or to become
due to the Licensee in respect of the Patents or Patent Rights or any part
thereof.
(iii) The Licensee hereby ratifies any and all actions which the
Company or the Company's designee may lawfully take to enforce the Company's
rights hereunder.
(d) No Obligation of the Company. Nothing herein contained shall be
construed in such a way as to require the Company to take any of the foregoing
actions at any time.
(e) Costs and Application of Proceeds. (i) the Licensee agrees to pay
when due all reasonable costs incurred in any license, assignment, sale,
transfer or other disposition of any of the Patents or Patent Rights to or by
the Company, including any taxes or other impositions, fees, and reasonable
attorneys' fees. The Company may apply the proceeds actually received from any
such license, assignment, sale, transfer or other disposition, and may apply
the proceeds from any other collection or realization, to the reasonable
out-of-pocket costs and expenses thereof, including without limitation all
reasonable attorneys' fees and all reasonable legal, travel and other expenses
which may be incurred or paid by the Company in protecting or enforcing its
rights upon or under this Agreement.
(f) Remedies Cumulative; Delay No Waiver. All rights and remedies of the
Company provided for under this Section 5 are cumulative, not exclusive, and
are enforceable and may be exercised alternatively, successively or
concurrently and without notice to or consent by the Licensee except as and to
the extent expressly provided otherwise herein. The exercise of one remedy
shall not be deemed to be an exclusive election of such remedy or to preclude
the exercise of any other remedy. No failure or delay on the part of the
Company in exercising any right or remedy provided hereunder shall operate as
a waiver thereof. Waiver of Default shall not be a waiver of any other or
subsequent Default. The Licensee shall pay any deficiency remaining after
application of Sections 5(a), 5(b) and 5(c) hereof to the Company within ten
(10) days of written request for such payment. The Company's remedies provided
for this Section 5 shall be in addition to any and all other remedies
provided, existing or available in its favor under any other agreement or
under any statute or other law. The Licensee waives demand of performance and
notice of sale or license. The Licensee waives notice of place of sale or
license and manner and place of any advertising.
6. FURTHER ASSURANCES.
(a) Consents of Third Parties. Upon the request of the Company, the
Licensee will use its best efforts to obtain any necessary consents of third
parties to the grant to and perfection of the Company's interest in the
Patents and Patent Rights, and/or to the grant or effectiveness of the
Assignment, as provided for herein.
(b) Further Instruments and Acts. The Licensee shall from time to time as
necessary, and at its sole expense make, execute, acknowledge and deliver, and
file and record with all appropriate governmental or regulatory authorities,
agencies or offices such agreements, assignments, documents and instruments,
and do such other and further acts and things as the Company may request or as
may be necessary or appropriate in order to implement
<PAGE>
14
and effect fully the intent of the parties hereto and the purposes and
provisions of this Agreement, or to assure and confirm to the Company the
right to the complete enjoyment and exercise of the Company's rights
hereunder.
(c) Company's Right To Perform Licensee's Obligations. If the Licensee
shall fail to make any payment or perform any act or obligation required of
the Licensee under this Agreement, the Company, in its own name or that of the
Licensee (in the sole discretion of the Company), may, (but need not) at any
time thereafter make such payment, perform such act, or remedy such breach (or
cause such act to be done or such breach to be remedied). Any cost or expense
incurred by the Company in so doing shall constitute a Supplemental Royalty
due hereunder and shall be payable by the Licensee to the Company on demand.
Such demand shall not be deemed to be a cure or waiver of any Default of the
Licensee under this Agreement. Licensee shall cooperate with the Company in
any such act or remedy.
(d) NO ABATEMENT. THE LICENSEE SHALL NOT BE ENTITLED TO ANY ABATEMENT OF
BASE ROYALTY OR SUPPLEMENTAL ROYALTY OR OTHER PAYMENTS DUE HEREUNDER OR ANY
REDUCTION THEREOF UNDER ANY CIRCUMSTANCES OR FOR ANY REASON WHATSOEVER. THE
LICENSEE HEREBY WAIVES ANY AND ALL EXISTING AND FUTURE CLAIMS FOR OFFSETS
AGAINST ANY BASE ROYALTY OR SUPPLEMENTAL ROYALTY AMOUNT OR OTHER PAYMENTS DUE
HEREUNDER AND AGREES TO PAY THE BASE ROYALTY AMOUNT AND OTHER AMOUNTS DUE
HEREUNDER AS AND WHEN DUE REGARDLESS OF ANY OFFSET OR CLAIM WHICH MAY BE
ASSERTED BY THE LICENSEE OR ON THE LICENSEE'S BEHALF. THIS AGREEMENT SHALL NOT
TERMINATE, NOR SHALL THE RESPECTIVE OBLIGATIONS OF THE COMPANY OR THE LICENSEE
BE OTHERWISE AFFECTED, NOR SHALL THE COMPANY HAVE ANY LIABILITY WHATSOEVER TO
THE LICENSEE, BY REASON OF ANY CHALLENGE TO THE VALIDITY OF OR ANY OTHER EVENT
HAVING AN ADVERSE EFFECT UPON THE PATENTS OR ANY OF THEM, OR BY REASON OF ANY
FAILURE OR DELAY IN DELIVERY OF ANY MACHINE, DEVICE OR OTHER EQUIPMENT OR ITEM
INCORPORATING OR USING THE PATENTS OR ANY OF THEM, ANY DEFECT IN, DAMAGE TO,
OR LOSS OR DESTRUCTION FROM WHATEVER CAUSE OF ANY MACHINE, DEVICE OR OTHER
EQUIPMENT OR ITEM INCORPORATING OR USING THE PATENTS OR ANY OF THEM, THE
PROHIBITION OR DENIAL BY ANY COURT, TRIBUNAL, OR OTHER GOVERNMENT AS AGENCY OR
AUTHORITY OR OWING TO ANY ACT OF GOD OR OF PUBLIC ENEMY OF THE EXCLUSIVE RIGHT
TO USE ANY OF THE PATENTS, THE INTERFERENCE WITH SUCH USE BY ANY GOVERNMENTAL
AUTHORITY, PERSON OR CORPORATION, THE INVALIDITY OR UNENFORCEABILITY, LACK OF
DUE AUTHORIZATION OR OTHER INFIRMITY OF THIS AGREEMENT, ANY WANT OF RIGHT,
POWER OR AUTHORITY OF EITHER THE COMPANY OR THE LICENSEE TO ENTER INTO THIS
AGREEMENT, OR ANY OTHER CAUSE WHETHER SIMILAR OR DISSIMILAR TO THE FOREGOING.
(e) Financial Statements. The Licensee will, within one-hundred twenty
(120) days of the close of each fiscal year of the Company, deliver to the
Company the Licensee's and each guarantor's balance sheet and statement of
income certified by a recognized firm of certified public accountants and by
the chief financial officer of the Licensee or such guarantor, as appropriate.
Upon request, the Licensee will deliver to the Company, within forty-five (45)
days of the end of each quarter, copies of the Licensee's and each guarantor's
financial reports for such quarter certified by the chief financial officer of
the Licensee or such guarantor, as appropriate.
(f) Collateral Documents; Further Assurances. The Licensee further agrees
to execute or to use its best efforts to obtain and deliver to the Company, at
the Company's request, such Collateral Documents as the Company may reasonably
deem necessary to protect the Company's interest in the Patents or Patent
Rights or any of them or in this Agreement, including, without limitation,
financial statements, mortgagee's waivers, and releases from security
interests or other Liens. The Licensee shall pay to the Company upon demand as
a Supplemental Royalty any filing fees or expenses incurred in connection with
such Collateral Documents. The execution or filing of financial statements
shall be for information purposes only and shall not be construed in such a
way as to reflect or provide evidence of an intention by the parties that any
of the Patents is being sold, granted, transferred, conveyed, assigned, or
otherwise conveyed under this Agreement.
7. LIABILITIES, INDEMNITY AND COSTS.
(a) Liability for Uses of Patents. Licensee shall be liable for any and
all uses or misuses of the Patents and Patent Rights and for the practice,
use, making or sale of products incorporating the inventions (or other
transfer or disposition) of any of the Patents and Patent Rights by the
Licensee and its affiliates and for any failure to take reasonable measures to
avoid and prevent the improper use, practice, making or sale of products
incorporating
<PAGE>
15
the inventions, (or other transfer or disposition) of the Patents or Patent
Rights by any other party, any failure to use, practice, make or transfer the
Patents or Patent Rights in accordance with this Agreement, or any other
claim, suit, loss, damage, expense or liability of any kind or nature (except
those resulting from the gross negligence or willful misconduct of the
Company) arising out of or in connection with either the Patents or Patent
Rights or the production, marketing, delivery, sale, license or other transfer
or disposition of the goods and services provided under or in connection with
or which use, practice or incorporate any of the Patents or Patent Rights.
Licensee shall be liable also for any claim, suit, loss, damage, expense or
liability arising out of or in connection with the Licensee's fault,
negligence, acts or omissions.
(b) License Agreement Obligations. Nothing in this Agreement shall
relieve the Licensee from any performance of any covenant, agreement or
obligation of Licensee under any license agreement now or hereafter in effect
licensing any part of the Patents or Patent Rights, or from any liability to
any (sub)licensee under any such license agreement or to any other party, or
shall impose any liability on the Company for any act or omission of Licensee
in connection with any such license agreement.
(c) Indemnification. Notwithstanding any other section of this
Agreement, the Licensee shall indemnify and hold harmless the Company and its
partners, employees, agents, incorporators, stockholders, employees, officers,
directors, and the heirs, successors and assigns of each of them, from and
against, and shall on demand of the Company reimburse the Company or such
persons for, any and all claims, actions, suits, judgments, penalties, losses,
damages, costs, disbursements, expenses, obligations or liabilities of any
kind or nature (except those resulting from the Company's gross negligence, or
willful misconduct), including actions brought under any legal theories
(including negligence and other torts, strict liability, infringement of
intellectual property rights, violation of antitrust law, or breach of
contract or warranty) , and arising in any way out of or in connection with
this Agreement, the Patents, the Patent Rights, the custody, preservation,
use, practice, operation, sale, of the products incorporating inventions or
license (or other transfer or disposition) of the Patents or the Patent Rights
or any machine, equipment, or device using or incorporating any of the Patents
or Patent Rights, any alleged infringement of the intellectual property rights
of any third party, the production, marketing, provision, delivery and sale of
goods and services provided under or in connection with or using or practicing
any of the Patents or Patent Rights, the sale of, collection from, or other
realization upon any of the Patents or Patent Rights, the Licensee's failure
to perform or observe any of the provisions hereof, or matters relating to any
of the foregoing. Licensee shall also indemnify and hold harmless the Company
and its incorporators, stockholders, employees, officers, directors, and the
heirs, successors and assigns of each of them, from and against any and all
claims, actions, suits, judgments, penalties, losses, damages, costs,
disbursements, expenses, obligations or liabilities arising out of or in
connection with any fault, negligence act or omission of the Licensee. The
Licensee shall make no claim against the Company for or in connection with the
exercise or enforcement by the Company of any right or remedy granted to it
hereunder, or any action taken or omitted to be taken by the Company hereunder
(except for the gross negligence or willful misconduct of the Company).
(d) General Tax Indemnity. Licensee agrees to pay, and indemnify and hold
the Company harmless on an after-tax basis from, any and all Taxes or Other
Impositions howsoever imposed, whether levied or imposed upon or asserted
against the Company, the Licensee, the Patents, or any part thereof, by any
federal, state or local government or taxing authority in the United States,
or by any taxing authority or governmental subdivision of a foreign country,
upon or with respect to (i) the Proceeds, and all other earnings, receipts,
and revenue arising from the Patents and Patent Rights, (ii) this Agreement,
any Schedules hereto, the Base Royalty and Supplemental Royalty, and other
payments paid or payable by Licensee hereunder, or (iii) any of the Collateral
Documents, and any payment made pursuant thereto or pursuant to or in
connection with any other transaction contemplated herein or therein;
provided, however, that the foregoing indemnity shall not apply to any Taxes
or Other Impositions based upon or measured solely by the Company's net
income, and which are imposed or levied by any federal, state or local taxing
authority in the United States or any taxing authority of a foreign country.
The Company shall furnish Licensee with copies of any requests for information
received by the Company from any taxing authority relating to any Tax or Other
Imposition with respect to which the Licensee is required to indemnify
hereunder, and if claim is made against the Company for any such Taxes or
Other Impositions, with respect to which the Licensee is liable for payment or
indemnity hereunder, the Company shall give notice in writing of such claim to
the Licensee. Licensee may, at its sole cost and expense, either in its own
name or in the name of the Company, contest the validity, applicability or
amount of any such Tax or Other Imposition by (i) resisting payment thereof if
practicable and lawful, (ii) not paying the same except under protest, if
protest is necessary or advisable and proper, or (iii) if the payment is made
by Licensee,
<PAGE>
16
using reasonable efforts to obtain a refund thereof in appropriate
administrative and judicial proceedings; provided, however, that such contest
shall be permitted only if no Event of Default has occurred and is continuing,
and only if and to the extent that such contest is being conducted in good
faith, is being diligently prosecuted by Licensee by means of appropriate
legal proceedings, and the Company shall have determined in its sole judgment
that the action to be taken in connection with such contest will not result in
the sale, forfeiture or loss of, or the creation of a Lien on the title to any
of the Patents or Patent Rights or on any interest of the Company therein. If
the Company shall obtain a refund of any amount paid by Licensee pursuant to
this Section 7(d), the Company shall pay to Licensee the amount of such
refund, together with the amount of any interest actually received by the
Company on account of such refund. Licensee will promptly notify the Company
of all reports or returns required to be made with respect to any Tax or Other
Imposition with respect to which Licensee is required to indemnify hereunder,
and will promptly provide the Company with all information necessary for the
making and timely filing of such reports or returns by the Company. If the
Company requests that any such reports or returns be prepared and filed by
Licensee, Licensee will prepare and file the same if permitted by applicable
law to file the same, and if not so permitted, Licensee shall prepare such
reports or returns for signature by the Company (whichever is applicable), and
shall forward the same, together with immediately available funds for payment
of any Tax or Other Imposition due to the Company, at least ten (10) business
days in advance of the date such payment is to be made. Upon written request,
Licensee shall furnish the Company with copies of all paid receipts or other
appropriate evidence of payment for all Taxes or Other Impositions paid by
Licensee pursuant to this Section 7(d).
(e) Federal Tax . It is hereby agreed between Licensee and the Company,
its successors and assigns that for Federal income tax purposes (i) this
Patent Assignment and Licensee Agreement is, and will be consistently treated
as, a financing transaction rather than a sale ; (ii) Licensee will be the
owner of the Patent to be delivered under this Agreement ; (iii) Licensee will
not claim any Royalty deduction for amounts paid to The Company under the
Agreement; (iv) The Company will not claim amortization or depreciation
deductions with respect to the Patent delivered under this Agreement ; (v)
neither Company nor Licensee will at any time take any action, directly or
indirectly, or file any returns or other documents inconsistent with the
foregoing; and (vi)Company and Licensee will file such returns, take such
actions and execute such documents as may be reasonable and necessary to
facilitate accomplishment of the intent expressed in subparagraphs (i) through
(v) of this section 7(e).
(f) Expenses. The Licensee shall bear responsibility for and shall pay
any and all fees, costs and expenses, of whatever kind or nature, including
but not limited to fees and disbursements of counsel and of any experts and
agents, incurred by the Company in connection with the preparation of this
Agreement, all Collateral Documents and other documents relating hereto and
the consummation of all transactions contemplated hereby, the filing or
recording of any documents in public offices, the payment or discharge of any
taxes, counsel fees, maintenance fees or encumbrances, or otherwise
protecting, maintaining or preserving the Patents, or in defending or
prosecuting any actions or proceedings arising out of or related to the
Patents or Patent Rights, or in exercising or enforcing any right or remedy
granted to the Company hereunder, and all such fees, expenses, charges, etc.
shall constitute a Supplemental Royalty due hereunder and shall be payable by
the Licensee to the Company on demand.
(g) Survival. All of the indemnities, indemnifications, obligations to
pay costs, and other obligations contained in this Section 7 shall continue in
full force and effect notwithstanding the expiration or earlier termination of
this Agreement and are expressly made for the benefit of, and shall be
enforceable by the Company. All payments made by the Licensee under this
Section 7 shall be made directly to the party entitled thereto.
8. POWER OF ATTORNEY.
(a) Grant. Licensee hereby grants to the Company and to any officer or
agent of the Company as the Company may in its sole discretion designate, an
irrevocable power of attorney coupled with an interest, thereby constituting
and appointing the Company (and the Company's designee) its true and lawful
attorney-in-law and attorney-in-fact for the following purposes and subject to
the following conditions: (i) upon any failure by Licensee to meet its
obligations pursuant to Section 6(b), or upon any exercise by the Company of
its rights pursuant to Section 6(c), the Company (and the Company's designee)
shall be authorized, empowered, and entitled, pursuant to this Power of
Attorney to execute and deliver any and all agreements, documents, instruments
of assignment, licenses or transfers of the Patents and Patent Rights, and to
do all other acts which Licensee is obligated to perform or do under any
provision of this Agreement, and to execute any and all documents, statements,
certificates or other documents necessary or advisable to effect any of the
purposes set forth herein as the Company (or the Company's
<PAGE>
17
designee) may in its sole discretion determine, and (ii) upon the occurrence
of and during the continuation of an Event of Default, the Company (and the
Company's designee) shall be authorized, empowered, and entitled pursuant to
this Power of Attorney to assign, sell, license or otherwise transfer or
dispose of all of the Licensee's right, title and interest in and to any of
the Patents and Patent Rights.
(b) Irrevocable. The foregoing power of attorney, which is coupled with
an interest, shall be irrevocable until such time as the Licensee shall have
paid
(c) Release. Licensee hereby releases the Company from any claims,
causes of action and demands at any time arising out of or in connection with
any actions taken or omitted to be taken by the Company under the power of
attorney created pursuant to this Section 8 of this Agreement (except those
arising from the gross negligence or willful misconduct of the Company).
(d) Ratification. Licensee hereby ratifies all that the Company or the
Company's designee may lawfully do or cause to be done as attorney-in-law and
attorney-in-fact by virtue of the power of attorney contained within this
Section and contained within other Sections of this Agreement.
9. SPECIFIC ENFORCEMENT.
Owing to the unique nature of the Patents and Patent Rights, and in order
to preserve their value, Licensee agrees that Licensee's agreements, duties
and obligations under this Agreement shall be subject to specific enforcement
and other appropriate equitable orders and remedies, without the necessity of
posting any bond or surety with respect thereto.
10. PROVISIONS OF GENERAL APPLICATION.
(a) Severability. In the event that any term or provision of this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
to any extent or in any respect, or otherwise determined to be of no effect in
any application, in any country, such invalidity, illegality, unenforceability
or determination shall affect only such term or provision, or part thereof, in
only such country and in only such case. The parties agree they will negotiate
in good faith to replace any provision so held invalid, illegal or
unenforceable, or so determined to be of no effect, with a valid, enforceable
and effective provision which is as similar as possible in substance and
effect to the provision which is invalid, illegal, unenforceable or of no
effect.
(b) Amendments, Etc. Except as provided in Section 5 hereof, neither this
Agreement nor any term hereof may be amended, changed, waived, discharged or
terminated except by a written instrument expressly referring to this
Agreement and to the provisions so amended, modified, waived or terminated,
and executed by Licensee and the Company.
(c) No Waivers. No course of dealing between Licensee and the Company,
and no failure to exercise, nor any delay by the Company in exercising, any
right, power or privilege hereunder shall operate as or be construed in any
way as a waiver of the Company's rights pursuant to this Agreement; nor shall
any single or partial exercise of any right, power or privilege hereunder by
either party hereto preclude any other or further exercise thereof or the
exercise of any other right, power or privilege to such party.
(d) Assignment. Licensee shall not assign this Agreement or any rights,
duties or obligations hereunder without the prior written consent of the
Company. The Company shall have the right to sell, assign or otherwise
transfer, in whole or in part, its rights and obligations under this
Agreement. This Agreement and all obligations of Licensee shall be binding
upon the successors and permitted assigns of Licensee, and shall together with
the rights and remedies of the Company hereunder inure to the benefit of the
Company and it successors and assigns.
(e) Notices. Except as otherwise expressly provided elsewhere in this
Agreement, all notices required hereunder shall be in writing and shall be
deemed to have been given (i) if mailed, when received or five (5) days after
mailing with proper postage, whichever is earlier; (ii) if delivered in hand,
when delivered, and (iii) if telecopied, when transmitted by confirmed
telecopy, addressed to the Company or the Licensee, as the case may be, at
their respective addresses as set forth herein or at such other address as
either shall from time to time designate in
<PAGE>
18
writing.
(f) Entire Agreement. This Agreement constitutes and represents the
entire agreement and understanding between the parties. All prior negotiations
between the parties, whether written or oral, are merged with and contained
within this Agreement and may not be admitted to modify, alter or disprove any
part of this Agreement. No term or provision of this Agreement may be changed,
waived amended, or terminated except by written agreement signed by the
parties.
(g) Counterparts. This Agreement, and any amendments, waivers, consents,
supplements or Collateral Documents hereto or hereunder, may be executed in
any number of counterparts and by each party on a separate counterpart, each
of which when so executed and delivered shall be an original but all of which
together shall constitute one instrument. In providing this Agreement, or any
such amendment, waiver, consent, supplement or Collateral Document, it shall
not be necessary to produce or account for more than one such counterpart
executed by the party against which enforcement is sought.
(h) Schedules Incorporated by Reference. The Schedules shall be
incorporated by reference herein, and this Agreement and all Schedules which
are or shall be annexed hereto shall constitute a single Agreement.
(i) Headings. The captions in this Agreement are for convenience of
reference only and shall not define, limit or affect the provisions hereof.
(j) Time or the Essence. Time is of the essence of this Agreement and of
all of its provisions.
(k) Governing Law. Except as otherwise required by the laws of any
country in which any of the Patents have been issued, this Agreement and all
rights and obligations hereunder, including matters of construction, validity
and performance, shall be governed by and construed and enforced in accordance
with the internal laws of the Commonwealth of Massachusetts (without reference
to its conflicts of laws rules or principles). The Licensee hereby consents to
the jurisdiction of any court of record of the Commonwealth of Massachusetts
sitting in the County of Suffolk or of the United States District Court for
the District of Massachusetts sitting in Boston, Massachusetts over the person
of the Licensee, and agrees that service of process in any action or suit
brought by the Company may be made in any action or suit brought by the
Company may be made upon the Licensee by mailing a copy or the summons to the
Licensee at its address, as set forth herein or at the last address of the
Licensee appearing in the Company's records. The Licensee also waives (i) the
right to trial by jury in any litigation to which the Company and the Licensee
are parties that is commenced with respect to this Agreement, regardless of
whether any other person is also a party thereto; (ii) any claim that the
Commonwealth of Massachusetts or the District of Massachusetts is an
inconvenient forum for the trial of any litigation to which the Company and
the Licensee are parties that is commenced with respect to or in connection
with this Agreement or the transactions contemplated hereby, regardless of
whether any other person is a party thereto; and (iii) any claim against the
Company for incidental, consequential, special, exemplary or punitive damages.
The Company and the Licensee further agree that, in the event that their
mutual rights and obligations under this Agreement shall be the subject of
litigation, neither shall contest the venue of any court of record of the
Commonwealth of Massachusetts sitting in the County of Suffolk or of the
United States District Court for the District of Massachusetts sitting in
Boston, Massachusetts in the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Licensee and the Company, each by its duly
authorized officer, have duly executed this Agreement, as an instrument under
seal, as the date first set forth above.
LICENSEE: RHOMED INCORPORATED ABERLYN CAPITAL MANAGEMENT
LIMITED PARTNERSHIP,
a Delaware Limited Partnership
By: Its General Partner
Aberlyn Capital Management Company, Inc.
By: /s/ Buck A. Rhodes By: /s/ Douglas R. Brian
----------------------------- -----------------------------
Title: President Title: Senior Vice President
----------------------------- ----------------------------
<PAGE>
19
State of New Mexico )
County of Bernalillo )
Personally appeared before me, the undersigned, a Notary Public in and
for said County, Buck A. Rhodes personally known to me, who, being by me first
duly sworn, declared that he is the President of RhoMed Incorporated, that
being duly authorized he did sign and seal said instrument as such officer of
and on behalf of such corporation, and that the same is such corporation's free
act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at
this 14th day of July, 1993.
/s/ Connie J. Jefferson
__________________________
Notary Public
My commission expires:
September 6, 1998
<PAGE>
20
REGISTERED PATENT ASSIGNMENT AND LICENSE AGREEMENT
--------------------------------------------------
THIS ASSIGNMENT AND LICENSE AGREEMENT IS A REGISTERED PATENT ASSIGNMENT AND
LICENSE AGREEMENT . BOOKS FOR THE REGISTRY OF THIS PATENT ASSIGNMENT AND
LICENSE AGREEMENT ARE KEPT AT THE OFFICE OF THE LICENSEE . NO TRANSFER OF THIS
ASSIGNMENT AND LICENSE AGREEMENT SHALL BE VALID UNLESS MADE ON THE LICENSEE'S
BOOKS AT THE OFFICE OF THE LICENSEE, BY THE REGISTERED HOLDER OF THIS
ASSIGNMENT AND LICENSE AGREEMENT IN PERSON OR BY OFFICER OF THE REGISTERED
HOLDER IN WRITING , AND SIMILARLY NOTED ON THIS ASSIGNMENT AND LICENSE
AGREEMENT FORM BELOW.
DATE OF IN WHOSE ADDRESS SIGNING
REGISTRATION NAME REGISTERED OF HOLDER OFFICER
- ------------ --------------- --------- -------
Aberlyn Capital 1000 Winter Street
Management Limited Suite 1100
7-15-93 Partnership Waltham, MA 02154 /s/ Douglas R. Brian
- --------------- ----------------- ----------------- -----------------
- --------------- ----------------- ----------------- -----------------
- --------------- ----------------- ----------------- -----------------
- --------------- ----------------- ----------------- -----------------
<PAGE>
21
SCHEDULE A
TO PATENT ASSIGNMENT AND LICENSE AGREEMENT
U.S. PATENT PURCHASE PRICE
----------- --------------
#4,940,670 $1,150,000.00
<PAGE>
22
SCHEDULE B
TO PATENT ASSIGNMENT AND LICENSE AGREEMENT
LICENSE TERMS AND BASE ROYALTIES
TERM: The Term is THIRTY-SIX (36) MONTHS , commencing on July 15, 1993
(the "Effective Date").
BASE ROYALTY: Licensee shall pay Licensor THIRTY-SIX (36) Royalty payments, in
ADVANCE, in the following amounts, commencing August 1, 1993 (the
"Royalty Payment Commencement Date") and on the same day of each month
thereafter for the entire Term:
ROYALTY PAYMENT NOS.: ROYALTY PAYMENT AMOUNT :
1 $150,000.00 EACH
2 - 12 $ 0.00 EACH
13 - 36 $ 55,600.00 EACH
If a Royalty payment date shall fall on a day that is not a business day, the
Royalty due and payable on such day shall be made on the business day next
succeeding such Royalty payment date.
PURCHASE OPTION: Notwithstanding any provision contained in the Agreement to
the contrary, Licensee shall have the option to purchase from the Company all
of the Company's rights, title and interest in and to all but not less than
all the Patents on the date of the last Royalty payment date with respect
thereto, or upon prepayment of all Royalties and other amounts due to
Licensor, provided that Licensee is not in default hereunder, for the amount
of $1.00.
<PAGE>
23
SCHEDULE C
TO PATENT ASSIGNMENT AND LICENSE AGREEMENT
LIENS, CHARGES, ENCUMBRANCES, CLAIMS AND
RIGHTS OF THIRD PARTIES
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24
SCHEDULE D
TO PATENT ASSIGNMENT AND LICENSE AGREEMENT
INFRINGEMENTS, CLAIMS, PROCEEDINGS, EXCEPTIONS
MASTER LEASE AGREEMENT
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No: 0013E
Date: NOVEMBER 16, 1994
THIS MASTER LEASE AGREEMENT which, together with all Lease Schedules,
Acceptance Certificates, riders, exhibits, amendments and other documents now
or hereafter attached hereto and made a part hereof (the "Lease") is entered
into as of NOVEMBER 16, 1994 by and between Aberlyn Capital Management Limited
Partnership, a Delaware limited partnership, with an office at 1000 Winter
Street, Waltham, MA 02154, (hereinafter called "Lessor"), and RHOMED
INCORPORATED, a corporation organized under the laws of the State of NEW
MEXICO with its executive office at 4261 BALLOON PARK ROAD, N.E., ALBUQUERQUE,
NM 87109-5802 (hereinafter with its successors and assigns called "Lessee").
I. LEASING: Subject to the terms and conditions set forth below,
Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor the
equipment and other personal property described in any Lease Schedule or Lease
Schedules which may be executed from time to time by the parties hereto and
identified as a schedule of this Lease (individually a "Schedule" and
collectively the "Schedules") (which property, together with any replacement
parts, replacements, substitutions, additions, repairs and accessories
incorporated therein and/or affixed thereto, is hereafter referred to
individually as an "Item of Equipment" and collectively as the "Equipment")
upon the terms and conditions set forth in this Lease supplemented by the
terms and conditions set forth in the applicable Schedules. All Schedules
shall be incorporated by reference herein and this Lease and all Schedules
which may be executed pursuant hereto shall constitute a single lease of
equipment.
II. LEASE TERM: The Lease term for any Item of Equipment shall
commence the date on which such Item of Equipment is accepted by Lessee as
evidenced by an Acceptance Certificate. Unless sooner terminated pursuant to
the terms hereof, the Lease term for any Item of Equipment for which an
Acceptance Certificate has been executed pursuant to Section V below shall
terminate on the date set forth in the applicable Schedule. Lessor may
terminate this Lease with respect to any Item of Equipment for which an
Acceptance Certificate has not been executed on or at any time subsequent to
the date on which Lessor's commitment to Lessee expires, as provided in a
written notice to Lessee if, prior to the execution of such Acceptance
Certificate, any event or condition exists which, with notice or the passage
of time or both, would constitute a default hereunder or under any agreement
between the parties. In the event Lessor elects to terminate its obligations
hereunder with respect to such Item of Equipment not covered by an Acceptance
Certificate, Lessee shall promptly purchase from Lessor all of Lessor's
rights, title and interest in such Item of Equipment for the amount Lessor has
paid or become obligated to pay on account thereof, plus all other amounts
owed by Lessor in respect thereof. Lessee agrees to indemnify and defend
Lessor and Lessor's assignees (including any Lender who from time to time may
hold a security interest in this Lease) from any claims including any demand
for payment of the purchase price of such Item of Equipment by the
manufacturer or seller of such Item of Equipment.
III. RENT; COMMENCEMENT DATE: Rent for each Item of Equipment shall
be as provided in the applicable Schedule. Throughout this Lease, "Rent"
shall mean the periodic charge set forth in such Schedule (whether
denominated Rent, Rental, Rental Payment, or otherwise), and "Supplemental
Rent" shall mean all other amounts due and payable hereunder. Lessee shall
pay all Rent and Supplemental Rent to Lessor at the address set forth above,
or to such other person or place as Lessor from time to time may designate in
writing. The first Rent payment shall be due on the Rental Payment
Commencement Date as defined in the Schedule. Interim rent, if any, specified
in such Schedule shall commence on the date Lessor advances any funds to
manufacturers, suppliers, vendors or others in connection with the acquisition
of any Item of Equipment, shall be payable monthly in ADVANCE on the first day
of each month thereafter, and shall accrue on the entire amount so advanced
outstanding from time to time through and including the Lease Term
Commencement Date. The Lease Term Commencement Date with respect to any
schedule shall be the first day of the calendar month following the signing of
the Acceptance Certificate.
IV. DISCLAIMER OF WARRANTIES; REPRESENTATIONS AND WARRANTIES: Lessee
acknowledges that Lessor is not the manufacturer of the Equipment, nor
manufacturer's agent, and Lessee represents that Lessee has selected the
Equipment leased hereunder based upon Lessee's judgment prior to having
requested Lessor to purchase the same for leasing to Lessee, and Lessee agrees
that the Equipment leased hereunder is of a design, size, fitness and capacity
selected by Lessee and that Lessee is satisfied that the capacity of the same
is suitable
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and fit for its intended purposes. THE EQUIPMENT IS NOT TO BE
USED, AND IS NOT BEING ACQUIRED HEREBY, FOR USE IN ANY RESPECT FOR LESSEE'S OR
ANY OTHER PARTY'S PERSONAL OR FAMILY PURPOSES AND, AS SUCH, THE EQUIPMENT DOES
NOT CONSTITUTE "CONSUMER GOODS" AS SUCH TERM IS DEFINED UNDER APPLICABLE LAW.
LESSEE FURTHER AGREES THAT LESSOR LEASES AND LESSEE TAKES THE EQUIPMENT "AS
IS" AND "WHERE IS" AND WITHOUT ANY RECOURSE TO LESSOR AND THAT LESSOR HAS NOT
MADE, DOES NOT MAKE AND SHALL NOT BE DEEMED TO MAKE ANY REPRESENTATION OR
WARRANTY, EITHER EXPRESSED OR IMPLIED OR ARISING BY APPLICABLE LAW OR
OTHERWISE, OF ANY KIND WHATSOEVER WITH RESPECT TO THE EQUIPMENT, INCLUDING BUT
NOT LIMITED TO, THE TITLE, VALUE, CONDITION, WORKMANSHIP, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OF THE EQUIPMENT,
THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, THE ABSENCE
OF ANY VIOLATION OR CONFLICT WITH ANY LAW, GOVERNMENTAL REGULATION, CONTRACT
OR SPECIFICATION.
Lessee specifically waives all rights to make claim against Lessor herein for
breach of any warranty of any kind whatsoever and Lessor hereby assigns to
Lessee all warranties, if any, received by Lessor by virtue of its interest in
the Equipment. Lessor shall not be liable to Lessee for any loss, damage or
expense of any kind or nature caused directly or indirectly by any Equipment
leased hereunder or for the use or maintenance thereof, or for the failure of
operations thereof, or for the repairs, service, or adjustment thereto, or by
any delay or failure to provide any thereof, or by any interruption of service
or loss of use thereof or for any loss of business or any other damage
whatsoever and howsoever caused. No defect in, non-conformity or unfitness of
the Equipment shall relieve Lessee of the obligation to pay Rent with respect
to such Equipment, or any other obligation under this Lease to Lessor.
Lessor's agreement to enter into this Lease is in reliance upon the freedom
from liability or responsibility for the matters waived and disclaimed herein,
and the provisions of this section have been negotiated by the Lessor and the
Lessee.
Lessee hereby represents and warrants that (a) if it is an entity
other than an individual or sole proprietorship, it is duly organized and
validly existing in good standing under the laws of the jurisdiction of its
organization, (b) the execution, delivery and performance of this Lease and
all related documents have been duly authorized by all necessary action on the
part of Lessee and do not and will not contravene any law, governmental rule,
regulation or order binding on Lessee or, if Lessee is a corporation, trust or
partnership, contravene the articles of incorporation, by-laws or other
constituting documents of the Lessee or contravene the provisions of, or
constitute a default under, or result in the creation of any lien, security
interest or other encumbrance upon the property of Lessee under, any
indenture, mortgage, contract or other agreement to which Lessee is a party or
by which it or any of its property may be bound, (c) neither the execution and
delivery by the Lessee of this Lease nor the consummation by the Lessee of any
of the transactions contemplated hereby require the consent or approval of,
the giving of notice to, the registration with, or the taking of any other
action in respect of, any governmental authority or agency, (d) this Lease and
all related documents have been duly executed and delivered by Lessee and
constitute legal, valid and binding obligations of Lessee enforceable against
Lessee in accordance with their terms, (e) there are no pending or threatened
actions or proceedings before any court, governmental authority,
administrative body or tribunal which, if adjudicated against Lessee, would
materially adversely affect the business operations or financial condition of
Lessee or the ability of Lessee to perform its obligations hereunder, (f) any
information including financial information furnished to Lessor or its
assignees by Lessee in connection herewith is true and correct and any balance
sheet or statement of income of Lessee furnished to Lessor or its assignees by
Lessee in connection herewith fairly presents the financial position of Lessee
as at the date of such balance sheet and the results of operations of Lessee
for the period covered by such statement of income, all in accordance with
generally accepted accounting principles applied on a consistent basis, and
(g) no mortgage, deed of trust or other Lien which now covers or affects any
property or interest therein of Lessee now attaches or hereafter will attach
to the Equipment or any Item of the Equipment, or in any manner affects or
will affect adversely Lessor's right, title and interest therein, or
assignee's security interest therein, (h) for purposes of Federal, state or
local income tax laws, Lessee, rather than Lessor or any assignee of Lessor,
will be treated as the owner of the Equipment and all payments made by Lessee
to Lessor or any assignee of Lessor will constitute returns of capital and/or
payments for the use or forbearance of money and (i) if requested by Lessor,
Lessee will provide an opinion of counsel and other supporting documents to
the foregoing effect and with respect to such other legal matter as Lessor may
request.
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V. ACCEPTANCE OF EQUIPMENT; NONCANCELLABLE: Lessee's acceptance of
any Item of Equipment shall be conclusively and irrevocably evidenced by
Lessee signing the Acceptance Certificate in form approved or provided by
Lessor covering such Item of Equipment and upon such acceptance, this
Agreement shall be noncancellable by Lessee with respect to such Item of
Equipment. If Lessee cancels or terminates this agreement prior to delivery of
an Item of Equipment or fails or refuses to sign the Acceptance Certificate as
to all or any part of such Item of Equipment within a reasonable time, not to
exceed sixty (60) days, after such Item of Equipment has been delivered,
tested and ready for use, then in such event Lessee will be deemed to have
cancelled this Lease with respect to such Item of Equipment and Lessee shall
automatically assume all of the Lessor's purchase obligations for such Item of
Equipment and Lessee agrees to indemnify and defend Lessor and Lessor's
assignees from any claims, including any demand for payment of the purchase
price for such Item of Equipment by the manufacturer or seller of such Item of
Equipment. In addition thereto, Lessee shall pay Lessor all of Lessor's
out-of-pocket expenses relating to such Item of Equipment. Lessor may apply
any advance Rent payments to sums due from Lessee under the above. NOTHING
CONTAINED IN THIS PARAGRAPH SHALL BE CONSTRUED AS INCONSISTENT WITH OR
DIMINISHING THE EFFECT OF THE DISCLAIMER OF WARRANTIES CONTAINED IN PARAGRAPH
IV OF THIS LEASE.
VI. SURRENDER: Unless Lessee has acquired the Equipment pursuant to
paragraph VIII or XVII below, Lessee, at its expense but at Lessor's option,
shall at the expiration or earlier termination of this Lease with respect to
any Item of Equipment, return such Item of Equipment, properly packed and
crated with freight prepaid to Lessor, or its' designated agent, at such place
and by such reasonable means as may be designated by Lessor in the same
repair, condition and working order as at the commencement of the term hereof
with respect thereto, except for reasonable wear and tear resulting from
permitted use.
If requested by Lessor, Lessee, prior to returning any Equipment to
Lessor, shall provide suitable and adequate storage space for a period not to
exceed ninety (90) days at the Equipment location shown in the applicable
Schedule or such location to which such Equipment may have been moved with the
written consent of Lessor, during which time Lessee shall insure that Lessor
will be allowed reasonable access thereto.
VII. POSSESSION; USE; LOCATION; MAINTENANCE; INSPECTION: Lessor
covenants to Lessee that as long as Lessee shall not be in default hereunder,
Lessee may possess and use the Equipment in accordance with this Lease free
from persons lawfully claiming by, through, or under Lessor. Lessee warrants
that the Equipment will not be used or operated in violation of any law,
ordinance or governmental regulation. Lessee will not make or suffer any
changes, alterations, improvements or remove any parts, accessories or
attachments to or from the Equipment other than in the course of routine
maintenance. Lessee shall, at its sole cost, maintain the Equipment in good
operating order, repair and condition, excepting normal wear and tear
resulting from permitted use. Lessee shall perform maintenance on the
Equipment in the manner recommended by the manufacturers of the Equipment and
shall, if appropriate, maintain a service contract with the Equipment
manufacturer or other company approved by Lessor, with respect to the
Equipment. Lessee shall not move the Equipment from the location specified on
the applicable Schedule without Lessor's prior written consent. Lessor, or its
designated agent or assignee, may during normal business hours with prior
notice to Lessee inspect the Equipment and the maintenance records pertaining
thereto. At its expense, Lessee shall make all modifications to the Equipment
which are required by law, governmental rule or regulation. Lessee will not,
without the prior written consent of Lessor, affix or install any accessory,
equipment, or device on any Equipment if such addition will impair the
originally intended function or use of such Equipment or diminish its value or
utility. All additions, repairs, parts, accessories, equipment and devices
furnished or affixed to any Equipment shall become the property of Lessor
except such as may be removed and which are in fact removed, without in any
way damaging the Equipment or without in any way affecting or impairing the
originally intended function or use of such Equipment. Lessee, without the
prior consent of Lessor, shall not affix any Equipment to any real property.
Lessee agrees not to abandon the Equipment to any party.
VIII. CASUALTY OCCURRENCE: Lessee hereby assumes and shall bear all
risk of any loss, theft or destruction of, or damage to, the Equipment from
any cause whatsoever ("Casualty Occurrence"). No Casualty Occurrence shall
relieve Lessee from its obligations under this Lease; however, the Lessee's
obligation to pay Rent with respect to any item of Equipment that has suffered
a Casualty Occurrence may be discharged by compliance with the terms of this
Section VIII.
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In the event of a Casualty Occurrence to any Item of Equipment,
Lessee shall give Lessor prompt notice thereof and thereafter shall, at
Lessee's cost and expense, place such Item of Equipment in good repair,
condition and working order to the satisfaction of Lessor; provided that, if
Lessor reasonably determines such Item of Equipment to be lost, stolen,
destroyed or damaged beyond repair, then Lessee, at Lessor's option, if not in
default, shall either (a) replace such Item of Equipment with like equipment
in the condition required by Section VII hereof which has a fair market value
at least equal to that of the replaced Item of Equipment immediately prior to
the Casualty Occurrence and which will be subject to the terms and conditions
hereof, and give clear title thereto by appropriate instrument to Lessor, or
(b) pay to the Lessor not later than sixty (60) days after notification by
Lessor, the "Casualty Value" of such Item of Equipment as such term is defined
herein. The Casualty Value of any Item of Equipment shall be equal to a total
of (i) all matured but unpaid Rent and other amounts, if any, due at the time
of such payment, plus (ii) the sum of unmatured Rent payments with respect to
such Item of Equipment, plus (iii) the Purchase Option, if any, of said Item
of Equipment less the net amount of the recovery, if any, actually received by
Lessor from insurance or otherwise for such loss, theft, damage or
destruction. [In the event of the condemnation, confiscation, requisition,
seizure, forfeiture or other taking of title to or use of an Item of
Equipment, or the prohibition of the use of an Item of Equipment by Lessee by
any governmental authority for a period in excess of 30 days, Lessee shall
inform Lessor within 5 days of such event and shall pay to Lessor, in cash,
the Casualty Value.] Upon payment of the Casualty Value, this Lease shall
terminate with, and only with, respect to the Item of Equipment or portion
thereof so paid for and Lessee shall become entitled to such paid for Item of
Equipment or portion thereof AS-IS, WHERE-IS.
IX. INSURANCE: During the Lease term of any Equipment, Lessee
shall, at its expense, keep in effect an "all risk" property insurance policy
covering the Equipment in an amount not less than the full replacement cost of
the Equipment. In addition, Lessee shall also carry a public liability
insurance policy (comprehensive general liability or other similar form of
third party liability coverage acceptable to Lessor) in an amount not less
than $1,000,000 combined single limit per occurrence, unless Lessor specifies
otherwise. All insurance policies shall be in form and amount and with
insurers reasonably acceptable to Lessor. The all risk property insurance
policy shall name the Lessor and its assigns as loss payee, and the public
liability insurance policy shall name the Lessor and its assigns as an
additional insured. Each policy shall provide (i) for no less than thirty (30)
days prior written notice of modification, cancellation or non-renewal to
Lessor, (ii) that such policy shall not be invalidated as against Lessor or
its assigns for any violation of any term of the policy, and (iii) that such
insurance is primary insurance and any other insurance covering Lessor or its
assigns shall be secondary and excess of such policy. Lessee shall pay the
premiums there for and deliver to Lessor at the commencement of the Lease term
of any Item of Equipment, a Certificate of Insurance, or other evidence
satisfactory to Lessor, stating that coverage is in effect, provided, however,
Lessor shall be under no duty either to ascertain the existence of or to
examine such insurance policy or to advise Lessee in the event such insurance
shall not comply with the requirements hereof. Proceeds from any public
liability insurance policy, relating to the equipment coverage, shall be made
payable first on behalf of the Lessor and its assigns to the extent of their
liability, if any. Lessee shall promptly notify any appropriate insurer and
Lessor of each and every occurrence which may become the basis of a claim or
cause of action against the insureds and provide Lessor with all data
pertinent to such occurrence. The proceeds of casualty insurance, at the
option of Lessor and its assigns, shall be applied toward (a) the repair or
replacement of the appropriate Equipment, (b) payment of the Casualty Value
thereof, or (c) the payment of any other accrued obligation of Lessee
hereunder. Any excess of such proceeds remaining shall belong to Lessee.
X. GENERAL TAX INDEMNITY: Lessee agrees to pay, and indemnify and
hold Lessor, Lessor's assignees, and their respective permitted successors and
assigns, harmless on an after-tax basis from, any and all Federal, state,
local and foreign taxes, fees, withholdings, levies, imposts, duties
assessments and charges of any kind and nature whatsoever, together with any
penalties, fines or interest thereon (herein called "taxes or other
impositions") howsoever imposed, whether levied or imposed upon or asserted
against Lessor, assignee, Lessee, the Equipment, any Item of Equipment, or any
part thereof, by any Federal, state or local government or taxing authority in
the United States, or by any taxing authority or governmental subdivision of a
foreign country, upon or with respect to (a) the Equipment, or any Item of
Equipment or any part thereof, (b) the manufacture, construction, ordering,
purchase, ownership, delivery, financing, leasing, releasing, possession,
operation, use, maintenance, registration, titling, licensing, documentation,
return, sale or other application or disposition of the Equipment, or any Item
of Equipment or any part thereof, (c) the rentals, receipts or earnings
arising from the Equipment or any Item of Equipment of any part thereof, (d)
this Lease, any supplemental lease schedules, the Rent and/or Supplemental
Rent and other payments payable by Lessee hereunder, or (e) any of the other
documents executed as part of this Lease,
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and any payment made pursuant thereto or any other transaction contemplated
therein; provided, however, that the foregoing indemnity shall not apply to
any taxes or other impositions based upon or measured solely by Lessor's or
assignee's net income which are imposed or levied by any Federal, state or
local taxing authority in the United States or any taxing authority of a
foreign country. Lessor or assignee (whichever is applicable) shall furnish
Lessee with copies of any requests for information received by Lessor or
assignee from any taxing authority relating to any tax or other imposition
with respect to which the Lessee is required to indemnify hereunder, and if
claim is made against Lessor or assignee for any such taxes or other
impositions, with respect to which Lessee is liable for a payment or indemnity
hereunder, Lessor or assignee shall give Lessee notice in writing of such
claim. Lessee may, at its sole cost and expense, either in its own name or in
the name of Lessor or assignee, contest the validity, applicability or amount
of such tax or other imposition by (i) resisting payment thereof if
practicable in the sole discretion of Lessor, (ii) not paying the same except
under protest, if protest is necessary or advisable and proper, or (iii) if
the payment is made by Lessee, using reasonable efforts to obtain a refund
thereof in appropriate administrative and judicial proceedings; provided,
however, that such contest shall be permitted only if (A) no Event of Default
has occurred and is continuing hereunder (B) only if and to the extent that
such contest is being conducted in good faith, is being diligently prosecuted
by Lessee by appropriate legal proceedings, and Lessor and assignee shall have
determined in their sole judgment that the action to be taken in connection
with such contest will not result in the sale, forfeiture or loss of, or the
creation of a Lien (other than a Lessor Lien) on, the Equipment or any part
thereof or title thereto or any interest of Lessor or assignee therein, (C)
the amount being contested exceeds $100,000, (D) Lessee furnishes to Lessor,
at Lessee's expense, a written opinion of outside tax counsel satisfactory to
Lessor that there is substantial authority for such contest, and (E) Lessee
agrees there shall be no appeal of any judicial decision resulting from such
counsel. If Lessor or assignee shall obtain a refund of any amount paid by
Lessee pursuant to this Section X, Lessor or assignee (whichever is
applicable) shall pay to Lessee the amount of such refund, together with the
amount of any interest actually received by Lessor or assignee on account of
such refund. Lessee will promptly notify Lessor or assignee of all reports or
returns required to be made with respect to any tax or other imposition with
respect to which Lessee is required to indemnify hereunder, and will promptly
provide Lessor or assignee with all information necessary for the making and
timely filing of such reports or returns by Lessor or assignee. If Lessor or
assignee requests that any such reports or returns be prepared and filed by
Lessee, Lessee will prepare and file the same if permitted by applicable law
to file the same, and if not so permitted, Lessee shall prepare such reports
or returns for signature by Lessor or assignee (whichever is applicable), and
shall forward the same, together with immediately available funds for payment
of any tax or other imposition due, to Lessor or assignee, at least ten (10)
business days in advance of the date such payment is to be made. Upon written
request, Lessee shall furnish Lessor or assignee (whichever is applicable)
with copies of all paid receipts or other appropriate evidence of payment of
all taxes or other impositions paid by Lessee pursuant to this Section X. All
of the indemnities contained in this Section X shall continue in full force
and effect notwithstanding the expiration or earlier termination of this Lease
in whole or in part, including the expiration or termination of the lease term
with respect to any Item (or all) of the Equipment, and are expressly made for
the benefit of, and shall be enforceable by, Lessor and assignee and their
respective permitted successors and assigns. All payments made by the Lessee
under this Section X shall be made directly to the party entitled thereto. As
used herein, the term "Lien" shall mean any lien, mortgage, encumbrance,
pledge, charge and security interest of any kind, and the term "Lessor Lien"
shall mean a Lien arising as a result of an independent act of or claim
against Lessor which (i) does not result from, or arise out of, the
manufacture, purchase, ownership, financing, leasing, operation or management
of the Equipment and (ii) is not a Lien that Lessee is required to remove or
indemnify against.
XI. PERFORMANCE OF OBLIGATIONS BY LESSOR: If Lessee shall fail to make
any payment or perform any act or obligation required of Lessee hereunder,
Lessor may, but need not, at any time thereafter make such payment or perform
such act or obligation at the expense of Lessee. Any expense so incurred by
Lessor shall constitute "Supplemental Rent" due hereunder and shall be payable
by Lessee to Lessor upon demand. Such demand by Lessor shall not be deemed a
cure or waiver of any default or release of any obligation of Lessee.
XII. INDEMNIFICATION: Lessee agrees to indemnify, defend and hold Lessor,
and its employees, officers, directors, successors and assigns (including any
other Lender who from time to time may hold a security interest in this Lease)
harmless from and against any and all liabilities, damages, claims, injuries,
death, actions, suits, proceedings, penalties, costs and expense, including
reasonable attorney's fees and costs, of whatsoever kind and nature
(hereinafter "Claims") arising out of the use, condition (including, but not
limited to, latent or other defects and whether or not discoverable by Lessee
or Lessor), operation, acquisition, ownership or leasing of any Item of
Equipment, including without limitation the manufacture, selection, purchase,
delivery, acceptance, rejection, possession, return or disposition of any Item
of Equipment, and including without limitation claims arising by contract
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or tort including negligence, strict liability or otherwise, regardless of
where, how and by whom the Equipment was operated or any failure on the part
of Lessee to perform or comply with any of its obligations under this Lease.
If any Claim is made against Lessee, Lessor or any other indemnified party,
the party receiving notice of such Claim shall promptly notify the other, but
the failure of such person receiving notice so to notify the other shall not
relieve Lessee of any obligation hereunder. This indemnity shall survive the
expiration or other termination of this Lease.
XIII. ASSIGNMENT: Without Lessor's prior written consent, Lessee
shall not transfer, assign, sublease, sell or otherwise dispose of any of
Lessee's interest in any Equipment or this Lease, and any attempt by Lessee to
accomplish the same without Lessor's consent shall be void. Lessor, and any
assignee of, or successor in interest to Lessor, may, at any time, without
notice to Lessee, mortgage, grant security interests in or otherwise transfer,
sell or assign all or any part of its interest in this Lease or any Equipment
or any Rent or other sums due or to become due hereunder, except that the
interest of any such mortgagee, transferee or assignee shall be subject to
Lessee's rights of use and possession, renewal rights and purchase options, if
any, hereunder so long as no Event of Default has occurred and is continuing
hereunder. No assignment, sale or transfer by either party shall relieve
Lessee of its obligations hereunder, for which Lessee shall at all times
remain primarily liable. Lessee acknowledges that this Lease and all Rent and
Supplemental Rent (except for the indemnity payments which by their terms are
explicitly due to and reserved for the Lessor under this Lease and any
proceeds of public liability insurance payable to Lessor hereunder) due and to
become due hereunder may be assigned by Lessor to an assignee, and Lessor may
grant a security interest in this Lease, the Rent and all Supplemental Rent
(except for such indemnity payments which are explicitly reserved for the
benefit of the Lessor) due and to become due hereunder and in the Equipment,
to assignee, under a separate agreement. Lessee and Lessor agree that the Rent
and all Supplemental Rent (other than such indemnity payments) payable by
Lessee hereunder shall be paid directly to assignee or upon its written order.
Lessee further acknowledges and agrees that (i) the rights of assignee in and
to the sums payable by the Lessee under any provision of this Lease shall not
be subject to any abatement, defense, set-off, counterclaim or recoupment in
Lessor's title, or for any cause whatsoever, it being the intent hereof that
Lessee shall be unconditionally and absolutely obligated to pay directly to
assignee all of the Rent and all Supplemental Rent (except indemnity payments
to Lessor, which, unless Lessor notifies Lessee to the contrary, shall remain
payable directly to Lessor) payable by Lessee; (ii) Lessee's representations
and warranties in this Lease shall be deemed to be made to and for the benefit
of assignee as well as Lessor; and (iii) assignee shall be entitled to the
benefit of all covenants and obligations to be performed by Lessee under this
Lease, except Lessee's covenants and obligations relating to indemnifying
Lessor. LESSEE HEREBY WAIVES AS AGAINST ANY ASSIGNEE OF LESSOR, ITS SUCCESSORS
AND ASSIGNS, ANY CLAIM OR DEFENSE THAT LESSEE MAY NOW OR HEREAFTER HAVE AS
AGAINST LESSOR, WHETHER FOR BREACH OF THIS LEASE, BREACH OF WARRANTY OR
OTHERWISE. Lessee and Lessor acknowledges that all obligations of Lessor to
Lessee under this Lease shall be and remain enforceable by the Lessee against,
and only against, Lessor.
XIV. COMPENSATION FOR LATE PAYMENTS : SUPPLEMENTAL RENT : (a) In addition
to each payment of Rent that shall become due and payable hereunder or under
with respect to any Equipment Schedule, on the due date thereof Lessee shall
be liable for and shall pay to Lessor compensation for late payment (as
defined below): provided, however to the extent such payment of Rent shall be
received by Lessor in good collected indefeasible funds on the due date
thereof, Lessee shall be relieved of its obligation to pay the compensation
for late payment attributable to such Rent payment. With respect to each
payment of Rent, the compensation for late payment shall be chargeable on the
amount in arrears for each month during the period such amount remains unpaid
or an appropriate pro-rated portion thereof. Such compensation shall be
calculated by reference to the average return generated by the transaction
during the period preceding the defaults, provided that if such compensation
exceeds the highest charges of such type permitted by applicable law, then the
said compensation shall be the highest such as permitted by applicable law.
(b) All sums due or to be due hereunder in addition to Rent provided for on
the Schedules, shall be payable by Lessee as Supplemental Rent hereunder.
Supplemental Rent shall include all sums due or to become due hereunder in
addition to the Rent, including the Acquisition Cost, Casualty Value, and
payments constituting indemnities, reimbursements, expenses and other charges
payable pursuant to the terms thereof.
XV. DEFAULT: The occurrence of any of the following shall constitute
an Event of Default under this Lease: (a) Lessee fails to pay any Rent or
other sums when due hereunder; (b) Lessee fails to maintain the required
insurance with respect to any Equipment; (c) Lessee fails to perform any other
covenant herein and such failure continues for twenty (20) days after written
notice to Lessee specifying such failure and demanding that same be remedied;
(d) Lessee shall be in default in the payment of any other indebtedness or
with respect to any obligation
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<PAGE>
now or hereafter owed by Lessee to Lessor, an affiliate of Lessor or any
assignee of Lessor under any other agreement or instrument; (e) Lessee files a
petition in bankruptcy, or for reorganization, or for an arrangement pursuant to
the U.S. Bankruptcy Code, or any similar federal or state or foreign law, or it
is adjudicated bankrupt or insolvent, or makes an assignment for the benefit of
creditors, or admits in writing to its inability to pay its debts generally as
they become due, or is dissolved, or suspends payment of any of its obligations,
or takes any corporate action in furtherance of any of the foregoing; (f) a
petition or answer proposing the adjudication of Lessee as a bankrupt, or its
reorganization under the U.S. Bankruptcy Code, or any similar federal or state
or foreign law is filed in any court, and (i) Lessee shall consent to such
filing, or (ii) such petition or answer is not discharged or denied within
thirty (30) days after such filing; (g) a receiver, trustee or liquidator (or
other similar official) is appointed for or takes possession or charge of
Lessee, substantially all of its assets, or any Equipment; (h) Lessee's interest
in any Equipment is levied upon or attached in any proceeding, and such process
is not vacated or discharged within thirty (30) days thereafter; (i) Lessee
attempts to sell, transfer, mortgage, pledge, or otherwise encumber, sublet or
part with possession of any Equipment; (j) if Lessee is an individual, the death
or judicial incompetence of Lessee; (k) any representation or warranty made by
Lessee herein or in any document or certificate furnished by Lessee in
connection herewith or pursuant hereto shall prove to have been incorrect in
any material respect at the time made; or (l) the occurrence of any event
described in (d), (e), (f), (g), (j), or (k) with respect to any guarantor or
other party liable for the payment or performance of this Lease or the
termination or adverse modification of any instrument, agreement or document
by which such guarantor or other party is liable for the obligations of Lessee
hereunder.
XVI. REMEDIES: Upon occurrence of any Event of Default, or at any time
thereafter, Lessor or its assignees may exercise one or more of the following
remedies: (i) declare all accrued and unpaid Rent immediately due and payable;
(ii) terminate this Lease as to any or all Items of Equipment upon written
notice to Lessee, without prejudice to any other remedies hereunder; (iii)
enter at any time any premises where the Equipment may be located with or
without legal process and take possession thereof; (iv) proceed by appropriate
action either at law or in equity to enforce performance by Lessee of the
applicable covenants of this Lease or to recover damages for breach thereof;
and (v) exercise any and all rights available to Lessor under applicable law
upon a default by Lessee. Lessee, upon default hereunder, shall pay to Lessor
(a) as liquidated damages for the loss of the bargain and not as a penalty an
amount equal to the Casualty Value of the Equipment, as defined in Section
VIII above, as of the date of occurrence of the Event of Default, and (b) all
costs and expenses (including reasonable attorney's fees) incurred by Lessor
in connection with collecting any amounts due hereunder or enforcing any right
or remedy of Lessor hereunder. If Lessor repossesses the Equipment, Lessor
shall attempt to mitigate Lessee's damages as hereinafter provided. Lessor
shall be entitled to attempt to sell or release (the choice being reserved to
Lessor's reasonable discretion) the Equipment in a public or private
transaction at which Lessor may be the purchaser and Lessor may use Lessee's
premises for the foregoing without liability for Rents, cost, damages, or
otherwise and if notice thereof is required by law, any notice in writing of
any such sale or lease by Lessor not less than ten (10) days prior to the date
thereof shall constitute reasonable notice thereof to Lessee. The proceeds of
such sale or lease, if any, shall be applied first (i) to all of Lessor's
costs, charges and expenses incurred in taking, removing, holding, repairing
and selling or leasing the Equipment; then (ii) to the extent not previously
paid by Lessee, to pay Lessor any amounts or damages (including any Casualty
Value) then remaining unpaid hereunder; then (iii) to reimburse Lessee any
such sums previously paid by Lessee to Lessor as damages hereunder; and (iv)
any surplus shall be retained by Lessee. Lessee shall pay Lessor any
deficiency retained by Lessor. Lessee shall pay Lessor any deficiency in (i)
and (ii) within ten (10) days of written request for same. Lessor's remedies
provided for herein shall be cumulative and in addition to any and all other
remedies provided, existing or available in its favor under any other
provisions of this Lease or any other agreement, at law, in equity or under
statute. Lessor's remedies may be exercised concurrently or separately, and
the exercise of one remedy shall not be deemed to be an election of such
remedy or to preclude the exercise of any other remedy. No failure or delay on
the part of Lessor in exercising any right or remedy provided hereunder shall
operate as a waiver thereof. Waiver of default shall not be a waiver of any
other or subsequent default. Lessee waives demand of performance and notice of
sale or lease. Lessee waives notice of place of sale or lease and manner and
place of any advertising.
XVII. RETURN OF EQUIPMENT; END OF LEASE PURCHASE OPTION: Upon expiration
of the term of the Lease or each Item of Equipment, as specified in the
applicable Lease Schedule, or upon demand of Lessor as provided in Section
XVI, Lessee, at its own expense, shall immediately return the Equipment
described in such Lease Schedule in the same condition as when delivered to
Lessee, ordinary wear and tear excepted, to such location as Lessor shall
designate. The Equipment shall be returned free and clear of all liens,
encumbrances and rights of others. The risk of loss of the Equipment shall
remain with Lessee until the returned Equipment is accepted by Lessor or such
other entity to whom the Equipment is returned, and Lessee shall maintain
insurance on the
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Equipment in accordance with Section IX until such acceptance occurs. Unless and
until the Equipment is returned and accepted as herein provided, or otherwise
disposed of by written agreement of Lessor and Lessee, the term of this Lease
with respect to such Equipment shall continue on a month-to-month basis
terminable by Lessor upon thirty (30) days advance written notice at a Rent per
month equal to the highest monthly Rent for the Equipment payable during the
Lease Term.
If a purchase option is set forth in any Schedule, such option
shall apply to all of Lessor's rights, title and interest in and to all but
not less than all the Equipment covered by such Schedule on the Purchase
Option Date designated as such on the Schedule provided that Lessee is not
then in default hereunder. Lessee may exercise such option by giving Lessor
written notice of same no sooner than one hundred eighty (180) days or later
than ninety (90) days prior to the Purchase Option Date. When applicable,
Lessee shall take title to the Equipment "AS IS, WHERE IS."
XVIII. NOTICES: All notices required hereunder shall be in writing and
shall be deemed to have been given (i) if mailed, when received or five (5)
days after mailing with proper postage, whichever is earlier; (ii) if
delivered, when delivered, and (iii) if telecopied, when transmitted,
addressed to Lessor or Lessee, as the case may be, at their respective
addresses as set forth herein or at such other address as either shall from
time to time designate in writing.
XIX. TITLE TO EQUIPMENT; LIENS: Title to all Equipment leased hereunder
shall at all times remain in Lessor, and Lessee shall have no right, title or
interest in the Equipment except as expressly set forth herein. Lessee, at its
sole expense, will protect and defend Lessor's title to the Equipment and will
keep the Equipment free from any and all claims, liens, encumbrances and legal
processes of Lessee's creditors and other persons other than those claiming by
and through Lessor. Lessee shall notify Lessor immediately in writing upon
receipt of notice of any Lien affecting the Equipment in whole or in part.
Lessor shall have the right to display notice of its ownership of the
Equipment by affixing, or by requesting Lessee to affix, in which case Lessee
hereby agrees to affix, an appropriate notice to each Item of Equipment in a
conspicuous place and Lessee shall not obscure, deface or remove such notice.
The Equipment is, and shall at all times during the term hereof remain,
personal property notwithstanding that any such Equipment may now or
hereinafter be affixed to realty, with or without the consent of Lessor.
Lessee and Lessor acknowledge that the transactions documented hereunder shall
not constitute a "Lease" or a "true lease" and instead shall constitute a
"lease intended as security" or "security interest" as the case may be for
purposes of applicable law (including Section 1-201 (37) of the Uniform
Commercial Code.) Without limiting any provision of the Lease, (i) to secure
Lessee's obligations to Lessor hereunder and under the other lease documents
(both now existing and hereafter arising), Lessee hereby grants to Lessor a
first priority security interest in the Equipment described in each Lease
Schedule and in all Rent and Supplemental Rent due thereunder, including all
proceeds of said Equipment, Rent and Supplemental Rent, and (ii) the security
interest granted to Lessor in clause (i) will be throughout the Lease Term a
valid, perfected first priority security interest in such Equipment pursuant
to the Uniform Commercial Code and other applicable law beginning upon the
earlier to occur of (1) Lessor's payment to Lessee or any supplier, as the
case may be, of the total invoice cost (or any portion thereof) of such
Equipment, or (2) the filing of UCCs and/or fixture filings in the office of
the appropriate State and/or County recording office, naming Lessee as debtor,
and Lessor as secured party, and describing the Equipment.
XX. NET LEASE; OFFSET; SURVIVAL: This Lease is a net lease, and
Lessee's obligation to pay Rent, Supplemental Rent and other sums payable by
Lessee hereunder and the rights of Lessor in and to such payments shall be
absolute and unconditional. Lessee shall not be entitled to any abatement or
recoupment of Rent or Supplemental Rent or other payments due hereunder or any
reduction thereof under any circumstances or for any reason whatsoever. Lessee
hereby waives any and all existing and future claims as offsets, defenses or
counterclaims against any Rent, Supplemental Rent, or other payments due
hereunder and agrees to pay the Rent, Supplemental Rent, and other amounts due
hereunder as and when due regardless of any offset or claim which may be
asserted by Lessee or on its behalf. This Lease shall not terminate, nor the
respective obligations of Lessor or Lessee be otherwise affected, nor shall
Lessor have any liability whatsoever to Lessee, by reason of any failure or
delay in delivery of any or all of the Equipment, any defect in or damage to
or loss or destruction of any of the Equipment from whatever cause, the
prohibition of Lessee's use of the Equipment, the interference with such use
by any government, person or corporation, the invalidity or unenforceability
or lack of due authorization or other infirmity of this Lease, any lack of
right, power or authority of Lessor or Lessee to enter into this Lease or any
other cause whether similar or dissimilar to the foregoing.
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<PAGE>
XXI. FINANCIAL STATEMENTS: Lessee will, within thirty (30) days of the
close of each fiscal year of Lessee, deliver to Lessor, Lessee's, and each
guarantor's, preliminary balance sheets and statements of income certified by
the chief financial officer of Lessee, and within one hundred twenty (120)
days of the close of each fiscal year of Lessee, deliver to Lessor audited
balance sheet and audited statement of income certified to by a recognized
firm of certified public accountants and by the chief financial officer of
Lessee, or such guarantor, as appropriate. Lessee will deliver to Lessor, upon
Lessor's request, within sixty (60) days of the close of each fiscal quarter
of Lessee, copies of Lessee's and each guarantor's quarterly financial report
certified to by the chief financial officer of Lessee or such guarantor, as
appropriate. Lessee will deliver to the Lessor, within ten (10) days of the
close of each calendar month, copies of Lessee's and each guarantor's monthly
financial reports certified by the chief financial officer of Lessee or such
guarantor, as appropriate.
XXII. ADDITIONAL DOCUMENTS; FURTHER ASSURANCES: Lessee further agrees to
execute or to use best efforts to obtain and deliver to Lessor, at Lessor's
request, such additional documents as Lessor may reasonably deem necessary to
protect Lessor's interest in the Equipment or in this Lease, including,
without limitation, financing statements, landlord's waivers, and mortgagee's
waivers. Lessee shall pay to Lessor upon demand as Supplemental Rent any
filing fees or expenses incurred in connection with such additional documents.
Further, Lessor's obligations under each Equipment Schedule, including
Lessor's obligation to purchase and participate in the financing of any
Equipment to be leased thereunder, are conditioned upon Lessor having
received: (i) evidence as to due compliance with the insurance provisions
hereof; (ii) UCCs and all other filings and recordings with respect to the
transactions contemplated thereunder which are necessary or appropriate to
establish, protect, perfect or give first priority to Lessor's title in the
Equipment leased thereunder and (iii) the absence of any adverse material
change in the financial condition of Lessee.
XXIII. MISCELLANEOUS: This Lease executed by and between Lessor and
Lessee and the applicable Schedules shall constitute the entire agreement
between the parties with respect to the Equipment and the subject matter of
this Lease. No term or provision of this Lease may be changed, waived, amended
or terminated except by a written agreement signed by the parties, except that
Lessor may insert the serial number of any Item of Equipment and the
Commencement Date on the appropriate Schedule. No express or implied waiver by
Lessor of any Event of Default shall in any way be, or be construed to be, a
waiver of any future or subsequent Event of Default whether similar in kind or
otherwise. The titles of the section of this Lease are for convenience only
and shall not define or limit any of the terms or provisions hereof. Time is
of the essence in this Lease and all of its provisions. Except as expressly
provided herein and in the applicable Schedules, no options to purchase any of
the Equipment or extend the term of this Lease with respect to any Equipment
have been granted or agreed to by Lessor. No information, exhibit or report
furnished or to be furnished by the Lessee to the Lessor in connection with
the negotiation of this Lease and the transactions contemplated hereby
contains or will contain any material misstatement of fact or omits or will
omit a fact necessary to make the statement contained therein not misleading
when made. The Lessee is not aware of any material facts or circumstances not
disclosed to the Lessor which might, if disclosed, be of material consequence
in the credit evaluation of the Lessee by the Lessor. If this Lease is signed
by more than one Lessee, then each Lessee shall be jointly and severally
liable for all the obligations to be performed by Lessee hereunder.
XXIV. GOVERNING LAW; JURISDICTION: THIS LEASE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
Lessee hereby consents to the jurisdiction of any court of record of The
Commonwealth of Massachusetts or of the United States District Court for the
District of Massachusetts over the person of Lessee, and service of process in
any action or suit brought by Lessor may be made upon Lessee by mailing a copy
of the summons to the Lessee at its address indicated above or at the last
address of Lessee appearing in Lessor's records. Lessee also waives (i) right
to trial by jury in the event of any litigation to which Lessor and Lessee are
parties commenced in respect of this Lease and whether or not other person are
also parties thereto, (ii) any claim that Massachusetts or the District of
Massachusetts is an inconvenient forum, and (iii) any claim against Lessor for
consequential or special damages.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed these presents to be
effective as of the day and year first above written.
LESSOR: LESSEE:
Aberlyn Capital Management RHOMED INCORPORATED
Limited Partnership
By Its: General Partner
Aberlyn Capital Management Company, Inc.
By: /s/ Douglas R. Brian By: /s/ Stephen A. Slusher
---------------------------- ----------------------------
Name: Douglas R. Brian Name: Stephen A. Slusher
---------------------------- ----------------------------
Title: President Title: Vice President
---------------------------- ----------------------------
State of New Mexico
County of Bornalillo
On this 16 day of November, 1994, before me personally appeared Stephen A.
Slusher, to me known, who, being duly sworn did depose and say that he is the
Vice President of RhoMed Incorporated, the corporation described in and which
executed the foregoing instrument.
Notary Public /s/ Connie J. Jefferson SEAL
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<PAGE>
REGISTERED MASTER LEASE
THIS LEASE IS A REGISTERED MASTER LEASE. BOOKS FOR THE REGISTRY OF THIS MASTER
LEASE AGREEMENT ARE KEPT AT THE OFFICE OF THE LESSEE. NO TRANSFER OF THIS
MASTER LEASE AGREEMENT SHALL BE VALID UNLESS MADE ON THE LESSEE'S BOOKS AT THE
OFFICE OF THE LESSEE, BY THE REGISTERED HOLDER OF THIS MASTER LEASE AGREEMENT
IN PERSON OR BY OFFICER OF THE REGISTERED HOLDER IN WRITING, AND SIMILARLY
NOTED ON THIS MASTER LEASE AGREEMENT FORM BELOW.
DATE OF IN WHOSE ADDRESS SIGNING
REGISTRATION NAME REGISTERED OF HOLDER OFFICER
- ------------ --------------- --------- -------
Aberlyn Capital 1000 Winter Street
Management Limited Suite 1100
11/13/94 Partnership Waltham, MA 02154 /s/ Douglas R. Brian
- ----------------- -----------------
- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- -----------------
- ----------------- ----------------- ----------------- -----------------
LETTER AGREEMENT
----------------
This Letter Agreement (the "Letter Agreement") is entered into as of
April 28, 1995 by and between Aberlyn Capital Management Limited Partnership
("Aberlyn"), a Delaware limited partnership and RhoMed Incorporated
("RhoMed"), a New Mexico corporation.
RhoMed has entered into various financing agreements with Aberlyn whereby
Aberlyn and RhoMed entered into a certain Patent Assignment and License
Agreement No. 0013P dated July 15, 1993 and Patent Schedule Nos. 002, 003, 004
and 005 thereunder and a Financial Covenant Rider, dated as of November 16,
1994 and Amendment thereto dated December 29, 1994 and a certain Master Lease
Agreement No. 0013E dated November 16, 1994 and Lease Schedule No. 001
thereunder and a Financial Covenant Rider, dated as of November 16, 1994 and
Amendment thereto dated December 29, 1994 (collectively referred to as the
"Agreements").
Aberlyn and RhoMed hereby agree to modify the terms of the Agreements as
follows:
1. a.) RhoMed agrees to remit to Aberlyn beginning May 1, 1995, the
following amounts (the "Revised Payment Amounts") that will be applied on a
pro-rated basis against each Patent Schedule and Lease Schedule for the term
of 48 months commencing May 1, 1995: (Aberlyn will issue a Modification
Agreement amending the original Royalty Payment and original Rental amounts
(the "Original Payment Amounts") for each Patent Schedule and Lease Schedule
within 20 days of the date hereof.) Month No.: Revised Payment Amount:
Months 01 - 12: $ 5,000.00
Months 13 - 24: $ 20,000.00
Months 25 - 48: $ 91,695.00
b.) Payments for months 1 - 24 will be applied toward principal only
and interest shall accrue on the outstanding principal during this period (the
"Accrued Interest"). Such Accrued Interest, however, shall not be payable in
cash but shall be converted into shares of RhoMed's Common Stock (the
"Stock"). The number of shares of Stock will be determined at the date of
issuance (the "Issue Date") and will be equal to the cumulative Accrued
Interest (as calculated in Exhibit A attached hereto ) at the Issue Date
divided by an amount to be negotiated at a future date.
c.) The Issue Date will be either the end of month 24 as referred to
in paragraph 1(b) above (April 30, 1997) or, in the event RhoMed redeems
Aberlyn's debt during months 1 - 24, at the end of the month following such
redemption.
d.) Contingent upon the agreement of the underwriter of an IPO, the
Stock will be free and tradable by Aberlyn within 180 days of Aberlyn
receiving the Stock. The Stock will be subject to piggy-back registration
rights.
e.) The total outstanding principal as of the end of month 24 will
be amortized over the 24 month period beginning May 1, 1997, along with
interest which shall begin to accrue on May 1, 1997.
2. RhoMed further agrees to issue to Aberlyn upon the signing of this
Letter Agreement a warrant to purchase a minimum of 200,000 shares of RhoMed's
Common Stock, at an exercise price to be negotiated at a future date.
3. RhoMed shall have an option to redeem any or all of Aberlyn's
outstanding principal and accrued interest, subject to paragraph 1 above, at
any time, without penalty.
<PAGE>
10
4. RhoMed will redeem up to one-hundred percent (100%) of the outstanding
Aberlyn debt upon completion of an IPO raising net proceeds of more than $5
million, the final percent to be agreed upon by Aberlyn, The Castle Group Ltd.
("Castle") and the IPO underwriter.
5. Aberlyn will receive Board of Director's observation rights for the
term of the Agreements.
6. Aberlyn hereby waives any default under the Agreements and waives any
recourse it may have with regard to such default based on any occurrence
happening on or prior to May 1, 1995, including but not limited to the
following:
a.) With regard to the Patent Assignment and License Agreement
dated July 15, 1993, all Events of Default occurring on or
prior to May 1, 1995 as such are defined in Section 1(a) of
such Patent Assignment and License Agreement, are waived; and
all rights and remedies, whether provided in Section 5 of such
Patent Assignment and License Agreement or otherwise are
waived;
b.) With regard to the Master Lease Agreement dated November 16,
1994, all Events of default occurring on or prior to May 1,
1995 as such are defined in Section XV of such Master Lease
Agreement are waived; and all rights and remedies whether
provided in Section XVI of such Master Lease Agreement or
otherwise are waived.
7. Aberlyn hereby waives all future defaults relating to the Original
Payment Amounts referred to in paragraph 1 of this Letter Agreement and
specifically waives all Events of Default as such are defined in Section 1(a)
of such Patent Assignment and License Agreement or Section XV of such Master
Lease Agreement, relating to any admission by RhoMed of its inability to pay
its debts as they become due. The Revised Payment Amounts shall be subject to
all default provisions contained within the Agreements.
8. The Agreements are amended by deleting, from the Financial Covenant
Rider dated as of November 16, 1994 and the Amendment to the Financial
Covenant Rider dated as of December 29, 1994, the provisions of paragraphs 3,
4, and 5 inclusive, of both the Financial Covenant Rider and the Amendment
thereto.
9. Aberlyn hereby expressly recognizes that Castle is arranging for a
$300,000 line of credit to RhoMed in reliance upon the Agreements set forth
herein, and Aberlyn recognizes Castle as a third-party beneficiary of this
Letter Agreement.
This Letter Agreement, and any term hereof, may not be changed, waived,
discharged or terminated unless amended in writing signed by both parties.
RHOMED INCORPORATED ABERLYN CAPITAL MANAGEMENT
LIMITED PARTNERSHIP
BY ITS: GENERAL PARTNER
ABERLYN CAPITAL MANAGEMENT
COMPANY, INC.
By: /s/ Buck A. Rhodes By: /s/ Douglas R. Brian
----------------------------- ------------------------------
Name: Buck A. Rhodes Name: Douglas R. Brian
----------------------------- ------------------------------
Title: President Title: President
----------------------------- ------------------------------
Date: June 19, 1995 Date: June 19, 1995
----------------------------- ------------------------------
STOCK PURCHASE AND MODIFICATION AGREEMENT
RhoMed Incorporated, a New Mexico corporation ("RhoMed"), Aberlyn
Capital Management Limited Partnership, a Delaware limited partnership
("ACM"), and Aberlyn Holding Company, Inc., a Delaware corporation ("AHC")
(ACM and AHC together called "Aberlyn"), agree:
1. Recitals. RhoMed has entered into five agreements to issue
warrants to ACM and two agreements to issue warrants to AHC. Exhibit A to this
Stock Purchase and Modification Agreement (this "Agreement") lists these seven
agreements to issue warrants (collectively, the "Warrant Agreements"). RhoMed
and ACM have also entered into a Letter Agreement effective as of April 28,
1995 (the "Letter Agreement"), which restructured various financing
arrangements between RhoMed and ACM, and granted certain rights to ACM,
including the right in paragraph number 2 therein to purchase a minimum of
200,000 shares of RhoMed common stock at an exercise price to be negotiated at
a future date. The parties wish to enter into a stock transaction, terminate
the Warrant Agreements and modify certain terms of the Letter Agreement.
2. Stock purchase and consideration. Upon execution of this
Agreement, ACM will purchase from RhoMed and RhoMed will issue to ACM or its
designees nine hundred thirty thousand and twenty-three (930,023) shares (the
"Stock") of RhoMed's common stock. The consideration for this transaction is
as follows:
a. Payment of accrued interest. RhoMed will issue the Stock
to ACM as payment of the three hundred twenty-four thousand five hundred and
forty-six dollars ($324,546) which RhoMed owes ACM as accrued interest through
April 30, 1996, under the financing agreements named in the Letter Agreement,
as calculated on the
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amortization schedule set forth as Exhibit A to the Letter Agreement. RhoMed's
issuance of the Stock will satisfy RhoMed's obligation under paragraph 1(b) of
the Letter Agreement to issue its common stock in payment of accrued interest
for months 01-12.
b. Termination of Warrant Agreements and Letter Agreement
Warrant. The Warrant Agreements will terminate upon issuance of the Stock, and
RhoMed will have no further obligation to issue warrants or stock under the
Warrant Agreements or pursuant to paragraph 2 of the Letter Agreement.
3. Conversion of accrued interest for months 13-24. RhoMed will
continue to be obligated to issue common stock to ACM in payment of accrued
interest as required under paragraph 1(b) of the Letter Agreement, but only
for months 13-24. The per share price for determining the number of shares of
common stock to be issued (the "Accrued Interest Conversion Price") will be
three quarters (3/4) of the per share offering price for RhoMed's common stock
(or securities received in exchange for RhoMed's common stock) in any offering
commencing after April 30, 1996, in which the total offering proceeds exceed
five million dollars ($5,000,000). In the event that RhoMed does not complete
such an offering before April 30, 1997, the Accrued Interest Conversion Price
will be three quarters (3/4) of the average closing per share price for the
twenty trading days immediately preceding April 30, 1997, provided that RhoMed
common stock (or securities received in exchange for RhoMed's common stock)
trades on a national securi ties exchange, on the National Association of
Security Dealers, Inc. Automated Quotations System ("NASDAQ"), or on the OTC
Electronic Bulletin Board or in "pink sheets." Any shares of common stock
issued pursuant to this Article 3 will have registration rights as provided
for the Stock in Article 4 of this Agreement.
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<PAGE>
4. Registration rights. RhoMed agrees that no later than 180 days
after the later of (x) issuance of the Stock or (y) the first date on which
RhoMed's common stock (or securities received in exchange for RhoMed's common
stock) trades on a national securi ties exchange, on the National Association
of Security Dealers, Inc. Automated Quotations System ("NASDAQ"), or on the
OTC Electronic Bulletin Board or in "pink sheets," RhoMed will use its
reasonable best efforts to file a registration statement (the "Registration
Statement") registering the Stock for public sale under the Securities Act of
1933 (the "Act"), and use its reasonable best efforts to effect the
registration of the Stock and maintain the effectiveness of the Registration
Statement until the completion of the distribution of the Stock as
contemplated in the Registration Statement; provided, however, that the
obligation to file, effect and maintain a Registration Statement shall obtain
if and only for so long as the Stock (i) has not been disposed of pursuant to
a registration statement declared effective by the Commission, (ii) has not
been sold in a transaction exempt from the registration and prospectus
delivery requirements of the Act so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale, or (iii) is not saleable as exempt securities pursuant to Section
3(a)(10) of the Act. Notwithstanding the foregoing, RhoMed (i) will not be
obligated to enter into any underwriting agreement for the sale of any of the
Stock and (ii) may delay the filing for a period not to exceed sixty (60) days
if RhoMed determines in good faith that such filing would have an adverse
effect on RhoMed or would otherwise be inadvisable.
a. Expenses. All Registration Expenses ("Registration
Expenses" means all expenses incurred by RhoMed in complying with Article 4
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and expenses of counsel for
RhoMed, blue sky fees and expenses for a reasonable number of states and the
expense of any special audits incident to or required
Page 3
<PAGE>
by any such registration, but excluding the fees of legal counsel for any
holder of Stock) incurred in connection with any registration, qualification
or compliance pursuant to Article 4 shall be borne by RhoMed. All Selling
Expenses ("Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Stock and all fees and expenses of legal
counsel for any holder of Stock) relating to the sale of securities registered
by or on behalf of holders of Stock shall be borne by such holders pro rata on
the basis of the number of securities so registered.
b. Assignment of registration rights. The rights to cause
RhoMed to register Stock under this Article 4 may be assigned in full by a
holder of Stock, provided, that: (i) such transfer may otherwise be effected
in accordance with applicable securities laws; (ii) such transfer involves not
less than the lesser of all of such holder's shares of Stock or 100,000 shares
of Stock; (iii) such holder gives prior written notice to RhoMed; and (iv)
such transferee agrees to comply with the terms and provisions of this
Agreement, and such transfer is otherwise in compliance with this Agreement.
Except as specifically permitted by this Section 4 (b), the rights of a holder
with respect to Stock as set out herein shall not be transferable to any other
person, and any attempted transfer shall cause all rights of such holder
therein to be forfeited.
c. Holdback agreement. If RhoMed files a registration
statement with the Securities and Exchange Commission in connection with a
public offering of RhoMed's securities, the holder of any Stock, by accepting
this Agreement, agrees, if so requested by RhoMed, that such holder will not
directly or indirectly sell, make any short sale of, grant any option for the
purchase of, or otherwise dispose of any capital stock of RhoMed during the
30-day period ending, and the 180-day period beginning (or any such other
period as is required by the underwriter of such offering) on the first date
of the
Page 4
<PAGE>
effectiveness of such registration statement. Upon request, the holder will
sign an agreement in reasonable form to such effect with the underwriter of
such an offering.
d. Indemnification. RhoMed will indemnify the holders of
Stock which is included in each registration statement under this Article 4
substantially to the same extent as is customary for indemnification and
contribution provisions in favor of underwriters and selling shareholders of
similar offerings, and such holders of Stock will indemnify RhoMed with
respect to information furnished by them in writing to RhoMed for inclusion
therein substantially to the same extent as is customary for indemnification
and contribution provisions is favor of companies by underwriters in similar
offerings.
e. Amendment of registration rights. With the written
consent of RhoMed and the holders holding at least a majority of the Stock
that is then outstanding, any provision of this Article 4 may be waived
(either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely) or
amended. Upon the effectuation of each such waiver or amendment, RhoMed shall
promptly give written notice thereof to the holders of Stock, if any, who have
not previously received notice thereof or consented thereto in writing.
5. Representations and warranties of Aberlyn. Aberlyn acknowledges,
represents and warrants to RhoMed that:
a. Authorization and enforceability. ACM is a partnership
and AHC is a corporation, both duly organized under the laws of the
jurisdiction of their organization, and have the power to execute, deliver and
perform this Agreement and have taken all necessary action to authorize them
to execute, deliver and perform this Agreement. Aberlyn's execution, delivery
and performance of this Agreement does not and will not
Page 5
<PAGE>
violate any provision of their organizational documents, or any law,
regulation, order, or judgment of any governmental authority to which they are
subject. ACM and AHC have duly executed and delivered this Agreement. When
RhoMed accepts and executes this Agreement, it will constitute the legal,
valid and binding obligation of each, enforceable against each in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally, by general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity
or at law), and by statutory rescission rights under any applicable state
securities laws. Aberlyn does not need to obtain the consent, authorization or
order of, or make any filing or registration with, any governmental authority
or other person, in order to execute, deliver and perform this Agreement.
b. Private placement; Regulation D; legends. Aberlyn
understands that (i) RhoMed intends for the sale and issuance of Stock under
this Agreement to be exempt from the registration and prospectus delivery
requirements of the Act, and (ii) there is no existing public or other market
for the Stock. Aberlyn is acquiring the Stock for their own account, or the
account of one or more institutional Accredited Investors (as the term
"Accredited Investor" is defined under Regulation D of the Act) for which
Aberlyn is acting as a duly authorized fiduciary or agent, and not with a view
to or for sale in connection with any distribution of Stock in violation of
the Act or any other applicable securities laws. Aberlyn has sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of Aberlyn's investment in the Stock and
Aberlyn is capable of bearing the economic risks of investment in the Stock,
including a complete loss of that investment. ACM and AHC are Accredited
Investors because each is an organization or partnership, not formed for the
specific purpose of acquiring the securities offered, with total assets in
excess of
Page 6
<PAGE>
$5,000,000, and each is further an entity in which all of the equity owners
are Accredited Investors. Aberlyn recognizes purchasing the Stock involves a
high degree of risk, including, but not limited to, the risk of economic
losses from operations of RhoMed. Aberlyn understands that (i) the Stock is
not registered under the Act or any other applicable securities laws, and
Aberlyn may resell shares of the Stock only if RhoMed registers the Stock
under the Act or if an exemption from registration requirements is available;
and (ii) except as set forth in Article 4 of this Agreement (concerning
registration rights), RhoMed does not currently anticipate taking any action,
including the filing of any reports or other information with the Securities
and Exchange Commission, in order to enable Aberlyn to take advantage of the
rules promulgated under the Act that are designed to facilitate the sale of
restricted securities. Aberlyn agrees to comply with all applicable federal
and state securities laws in connection with any subsequent resale of the
Stock. Aberlyn is aware that the Act restricts the transferability in the
United States of securities issued in reliance on the exemption from the
registration requirements of the Act provided by Regulation D thereunder and
that each certificate representing the Stock will bear a restrictive legend
limiting transferability, which will be binding on each holder of Stock.
6. Corporate restructuring. If, before RhoMed issues the Stock or any
common stock due on account of accrued interest pursuant to Article 3, RhoMed
amends its articles of incorporation or enters into any agreement which
results in shares of RhoMed's common stock being replaced by a different
number or class of securities or securities of another corporation (a
"Corporate Restructuring"), then RhoMed or its successor will issue securities
in the kind and number which ACM would have received, had RhoMed issued the
Stock or shares of common stock to ACM before the Corporate Restructuring.
Page 7
<PAGE>
7. Termination of observation right. ACM's right to observe meetings
of RhoMed's directors, granted under paragraph 5 of the Letter Agreement, is
terminated.
8. Miscellaneous. This Agreement benefits and is binding on the
parties, their successors and assigns, represents the entire agreement of the
parties as to its subject matter, may be modified only in writing signed by
the parties, and is governed by the laws of the state of New Mexico.
Dated as of June 24 , 1996.
RHOMED INCORPORATED
By: s/ John J. McDonough Date: 6/24/96
--------------------
John J. McDonough
CFO and Vice President
ABERLYN CAPITAL MANAGEMENT LIMITED PARTNERSHIP
By: Aberlyn Capital Management Co., Inc.
Its: General Partner
By: s/ Douglas R. Brian Date: 6/18/96
----------------------
Name: Douglas R. Brian
-----------------
Title:President
----------------
ABERLYN HOLDING COMPANY, INC.
By: s/ Douglas R. Brian Date: 6/18/96
----------------------
Name: Douglas R. Brian
-----------------
Title:President
----------------
Page 8
<PAGE>
EXHIBIT A
WARRANT AGREEMENTS
W-1. Agreement to Issue Warrant, dated as of July 15, 1993, between Aberlyn
Capital Management Limited Partnership and RhoMed, as to 57,500 shares.
W-2. Agreement to Issue Warrant, dated as of July 15, 1993, between Aberlyn
Holding Company and RhoMed, as to 57,500 shares.
W-3. Agreement to Issue Warrant, dated as of August 1, 1994, between Aberlyn
Capital Management Limited Partnership and RhoMed, as to 115,000.
W-4. Agreement to Issue Warrant, dated as of July 22, 1994, between Aberlyn
Capital Management Limited Partnership and RhoMed, as to 40,000 shares.
W-5. Agreement to Issue Warrant, dated as of July 22, 1994, between Aberlyn
Holding Company and RhoMed, as to 40,000 shares.
W-6. Agreement to Issue Warrant, undated (but entered into pursuant to an
agreement dated as of August 1, 1994) between Aberlyn Capital Management
Limited Partnership and RhoMed, as to 20,023 shares.
W-7. Agreement to Issue Warrant, dated as of November 16, 1994, between
Aberlyn Capital Management Limited Partnership and RhoMed, as to 400,000
shares.
Page 9
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LEASE
THIS INDENTURE, made this 18th day of DECEMBER, 1992,
by and between CHARLES C. AND ELLEN C. FRANCE REVOCABLE TRUST,
hereinafter, whether singular or plural, masculine, feminine, or neuter,
designated as "Lessor," which expression shall include Lessor's heirs,
personal representatives, assigns, and successors in interest, and
RHOMED INCORPORATED, a New Mexico Corporation, hereinafter, whether singular or
plural, masculine, feminine, or neuter, designated as "Lessee," which expression
shall include all Lessees, jointly and severally, and shall include Lessee's
heirs, personal representatives, assigns, and successors in interest,
WITNESSETH:
I. DEMISE OF PREMISES.
Lessor, for and in consideration of the covenants and agreements herein
contained to be kept and performed by Lessee, Lessee's heirs, personal
representatives, assigns, and successors in interest, and upon the terms and
conditions herein contained, does hereby let, lease, and demise to Lessee the
following-described premises situated in Albuquerque in the County of
Bernalillo, State of New Mexico, to wit: 4255 and 4261 Balloon Park Road, N.E.
II. TERM OF LEASE.
The term of this Lease shall be for a period of three (3) years,
beginning on the 1st day of July, 1993, and ending on the 30th day of
June, 1996.
III. RENT.
Lessee, for and in consideration of this Lease and the demise of the
said premises by Lessor to Lessee, hereby agrees and covenants with Lessor to
pay as rent for the said premises, without notice or demand, the sum of
One Hundred Thirty Three Thousand Fifty Six and no/100 Dollars ($133,056.00)
in the following manner, to wit:
$3,696.00 per month payable on the first of every month without demand or
offset. In the event that said rent is not received on or before the 15th day of
the month, a 2% late charge shall be assessed on the outstanding balance.
All of the rent shall be paid by Lessee to Lessor or Lessor's order in lawful
money of the United States at 6204 Osuna, NE, Albuquerque, NM 87109 or at such
other place as Lessor may designate from time to time for this purpose.
IV. USE OF PREMISES.
Lessee, for and in consideration of this Lease and the demise of the
said premises by Lessor to Lessee, hereby agrees and covenants with Lessor to
use and occupy the said premises for the purpose of maintaining Lessee's current
bio-medical research business and related items, and for no other purpose
without first obtaining the written consent of Lessor therefor; the Lessee shall
not use or occupy or permit the demised premises to be used or occupied, or do
or permit anything to be done in or on the demised premises, in a manner which
will make void or voidable any insurance then in force with respect thereto, or
which will make it impossible to obtain fire or other insurance required to be
furnished hereunder, or which will cause or be likely to cause structural damage
to the demised premises or any portion thereof, or which will constitute a
public or private nuisance. Further, the Lessee shall not use or occupy or
permit the demised premises to be used or occupied for any business, purpose, or
use deemed disreputable or extra-hazardous, or for any purpose or in any manner
which is in violation of any present or future municipal, state and federal
ordinances, laws, rules and regulations.
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<PAGE>
================================================================================
V. CONDITION OF PREMISES AND REPAIRS.
Lessee, for and in consideration of this Lease and the demise of the
said premises, hereby agrees and covenants with Lessor that Lessee has examined
the said premises prior to the execution hereof, knows the condition thereof,
and acknowledges that Lessee has received the said demised premises in good
order and condition, and that no representation or warranty as to the condition
or repair of the said premises has been made by Lessor, and, at the expiration
of the term of this Lease, or any renewal or extension thereof, Lessee will
yield up peaceably the said premises to Lessor in as good order and condition as
when the same were entered upon by Lessee, loss by fire or inevitable accident,
damage by the elements, and reasonable use and wear expected; that Lessee will
keep, at Lessee's own expense, the said premises in good order and repair during
the term of this Lease, or any extension or renewal thereof, and will repair and
replace promptly, at Lessee's own expense, any and all damage, including, but
not limited to, damage to roof, walls, floors and foundations, heating and
cooling units, plumbing, glass, sidewalks, and all other appurtenances, that may
occur from time to time; that Lessee hereby waives any and all right to have
such repairs or replacements made by Lessor or at Lessor's expense; and that, if
Lessee fails to make such repairs and replacements promptly, or, if such repairs
and replacements have not been made within fifteen (15) days after the occurence
of damage, Lessor may, at Lessor's option, make such repairs and replacements,
and Lessee hereby agrees and covenants to repay the cost thereof to Lessor on
demand.
VI. LIABILITY OF LESSOR.
Lessee, for and in consideration of this Lease and the demise of the
said premises, hereby agrees and covenants with Lessor that Lessor shall not be
liable for any damage to persons or property arising from any cause whatsoever,
which shall occur in any manner in or about the said premises, and Lessee hereby
agrees to indemnify and save harmless Lessor form any and all claims and
liability for damage to persons or property arising from any cause whatsoever,
which shall occur in any manner in or about the said premises. Further, Lessee
hereby agrees and covenants with Lessor that Lessor shall not be liable for any
damage to the said demised premises, or to any part thereof, or to any property
or effects therein or thereon, caused by leakage from the roof of said premises
or by bursting, leakage, or overflowing of any waste pipes, water pipes, tanks
drains, or stationary washstands, or by reason of any damage whatsoever caused
by water from any source whatsoever, and Lessee hereby agrees and covenants to
indemnify and save harmless Lessor from any and all claims and liability for any
damage to the said demised premises, or to any part thereof, or to any property
or effects therein or thereon.
VII. REQUIREMENTS OF PUBLIC AUTHORITY
Lessee, for and in consideration of this Lease and the demise of the
said premises, hereby agrees and covenants with Lessor that during the term of
this Lease, lessee shall, at its own cost and expense, promptly observe and
comply with all present and future municipal, state, and federal ordinances,
laws, rules, and regulations affecting the demised premises or appurtenances
thereto, or any part thereof, whether the same are in force and effect at the
time of the commencement of the term of this Lease or may in the future be
passed, enacted, or directed, and lessee shall pay all costs, expenses,
liabilities, losses, damages, fines, penalties, claims, and demands, including
reasonable attorney's fees, that may in any manner arise out of or be imposed
because of the failure of Lessee to comply with the covenants and agreements of
this paragraph VII. Further, Lessee hereby agrees and covenants with Lessor that
if Lessee fails to comply promptly with any present or future municipal, state,
and federal ordinances, laws, rules, and regulations, or fails to comply by such
time that compliance may be required by law, Lessor may, at Lessor's option,
take such actions as may be necessary to comply with all present and future
municipal, state, and federal ordinances, laws, rules, and regulations, and
Lessee hereby agrees and covenants to repay the cost incurred by Lessor in
taking such action to Lessor on demand.
VIII. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.
Lessee, for and in consideration of this Lease and the demise of the
said premises, hereby agrees and covenants with Lessor that Lessee shall not
make, or suffer or permit to be made, any alterations, additions, or
improvements whatsoever in or about the said demised premises without first
obtaining the written consent of Lessor therefor; provided, however, that such
consent, if given, shall be subject to the express condition that any and all
alterations, additions, and improvements shall be done at Lessee's own expense
and in accordance and compliance with all applicable municipal, state, and
federal ordinances, laws, rules, and regulations, and that Lessee hereby
covenants and agrees with Lessor that in doing and performing such work Lessee
shall do and perform the same at Lessee's own expense, in conformity and
compliance with all applicable municipal, state, and federal ordinances, laws,
rules, and regulations, and that no liens of mechanics, materialmen, laborers,
architects, artisans, contractors, sub-contractors, or any other lien of any
kind whatsoever shall be created against or imposed upon the said demised
premises, or any part thereof, and that Lessee shall indemnify and save harmless
Lessor from any and all liability and claims for damages of every kind and
nature which might be made, or from judgments rendered against Lessor or against
said demised premises on account of or arising out of such alterations,
additions, or improvements.
<PAGE>
IX. OWNERSHIP OF ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.
Lessee, for and in consideration of this Lease and the demise of the
said premises, hereby agrees and covenants with Lessor that any and all
alterations, additions, and improvements, except signs, shelving, movable
furniture and equipment not affixed to the roof, walls, or floors, made at
Lessee's own expense after having first obtained the written consent of Lessor
therefor, in accordance with the provisions contained in Paragraph VII hereof,
whether or not attached to the roof, walls, floors, foundations, or the premises
in any manner whatsoever, shall immediately merge and become a permanent part of
the realty, and any and all interest of the Lessee therein shall immediately
vest in Lessor, and all such alterations, additions, and improvements shall
remain on the said premises and shall not be removed by Lessee at the
termination of this Lease. The signs, shelving, moveable furniture and equipment
not affixed to the roof, walls, or floors, shall be removed by Lessee at
Lessee's expense on or before the termination of the Lease, and Lessee shall
repair any damage caused thereby at Lessee's own expense, such that the premises
shall be in as good order and condition as when the same were entered upon by
Lessee.
X. ASSIGNMENT AND SUBLETTING.
Lessee, for and in consideration of this Lease and the demise of the
said premises, hereby agrees and covenants with Lessor that neither Lesser nor
Lessee's heirs, personal representatives, assigns, or successors in interest
shall assign this Lease or sublet the said demised premises, in whole or in
part, without first obtaining the written consent of Lessor therefor: that no
assignment of this Lease or any subletting of the said demised premises, in
whole or in part, shall be valid, except by and with the written consent of
Lessor first obtained; that the consent of Lessor to any such assignment or
subletting shall not operate to discharge Lessee or Lessee's heirs, personal
representatives, assigns, or successors in interest from their liability upon
the agreements and covenants of this Lease, and Lessee, Lessee's personal
representatives, assigns, and successors in interest shall remain liable for the
full and complete performance of all of the terms, conditions, covenants, and
agreements herein contained as principals and not as guarantors or sureties, to
the same extent as though no assignment or sublease had been made; that any
consent of Lessor to any such assignment or subletting shall not operate as a
consent to further assignment or subletting or as a waiver of this covenant and
agreement against assignment and subletting; and that following any such
assignment or subletting, the assignee and/or sublettee shall be bound by all of
the terms, conditions, covenants, and agreements herein contained including the
covenant against assignment and subletting.
XI. UTILITY AND OTHER CHARGES.
Lessee, for and in consideration of this Lease and the demise of the
said premises, hereby agrees and covenants with Lessor to pay promptly all
utility and other charges of whatsoever kind and nature, including charges for
electrical, gas, garbage, sewage, telephone, and other services, which may be
incurred in connection with Lessee's use of the said premises, and to indemnify
and save harmless Lessor therefrom.
XII. LESSOR'S RIGHT OF ENTRY AND TO MAKE ALTERATIONS, ADDITIONS, AND
IMPROVEMENTS.
Leasee, for and in consideration of this Lease and the demise of the
said premises, hereby agrees and covenants with Lessor that Lessor, Lessor's
heirs, personal representatives, assigns, agents, attorneys, and successors in
interest shall have the right at any time, upon reasonable notice to Lessee, to
enter upon the said premises to inspect the same and to make any and all
improvements, alterations, and additions of any kind whatsover upon the said
premises, providing such improvements, alterations, and additions are reasonably
necessary or convenient to the use to which the said premises are being put at
the time, but at no time shall Lessor be compelled or required to make any
improvements, alterations, or additions.
XIII. TAXES, OTHER ASSESSMENTS, AND INSURANCE.
Lessee and Lessor hereby covenant and agree that all taxes and special
and general assessments of whatsover kind and nature, extraordinary as well as
ordinary, which have been or may be levied upon the said demised premises and
upon any alterations, additions, and improvements thereon, shall be paid by
Lessee at the time when the same become due and payable, and that all taxes and
special and general assessments of whatsoever kind and nature, extraordinary as
well as ordinary, which have been or may be levied upon the personal property
located upon the said demised premises shall be paid by Lessee at the time when
the same shall become due and payable. Lessee, for and in consideration of this
Lease and the demise of the said premises, hereby agrees and covenants with
Lessor to carry and maintain in full force and effect during the term of this
Lease, and any extension or renewal thereof, at Lessee's expense, public
liability insurance covering bodily injury and property damage liability, in a
form and with an insurance company acceptable to Lessor, with limits of coverage
of not less than $1,000,000 for each person and $1,000,000 in the aggregate for
bodily injury or death liability for each accident, and $1,000,000 for property
damage liability for each accident, for the benefit of both Lessor and Lessee as
protection against all liability claims arising from the premises. Lessee hereby
agrees and covenants with Lessor to deliver
================================================================================
<PAGE>
================================================================================
a copy of the insurance policy or policies to Lessor at the beginning of the
term of this Lease, or as soon thereafter as practicable, and to give Lessor not
less than ten (10) days' written notice informing Lessor of the expiration of
any such policy. Fire and extended coverage insurance upon all buildings,
alterations, and improvements upon the said premises shall be provided for as
follows: Lessee, and fire and extended coverage insurance upon all of the
contents and other personal property situated upon the said premises shall be
provided for as follows: Lessee.
It is understood and agreed by and between the parties that a copy of each
policy of fire and extended coverage insurance shall be provided to the parties
hereto at the beginning of the term of this Lease, or as soon thereafter as
practicable, and that the party who is responsible for paying the premiums on
each policy of fire and extended coverage insurance shall give the other party
not less than ten (10) days' written notice informing the other party of the
expiration of any such policy.
XIV. HOLDING OVER.
Lessee, for and in consideration of this Lease and the demise of the
said premises, agrees and covenants with Lessors that no holding over by Lessee
after the expiration of this Lease, or any renewal or extension thereof, whether
with or without the consent of Lessor, shall operate to extend or renew this
Lease, and that any such holding over shall be construed as a tenancy from month
to month at the monthly rental which shall have been payable at the time
immediately prior to when such holding over shall have commenced, and such
tenancy shall be subject to all the terms, conditions, covenants, and agreements
of this Lease.
XV. BANKRUPTCY AND CONDEMNATION.
Lessee, for and in consideration of this Lease and the demise of the
said premises, hereby agrees and covenants with Lessor that should Lessee make
an assignment for the benefit of creditors or should be adjudged a bankrupt,
either by voluntary or involuntary proceedings, or if otherwise a receiver or
trustee should be appointed by any court of competent jurisdiction for Lessee
because of any insolvency, or any execution, attachment, replevin, or other
court order should be issued against the Lessee or any of Lessee's property,
whereby the demised premises or any building or buildings, or alterations,
additions, or improvements thereon, shall be taken or occupied or attempted to
be taken or occupied by someone other than the Lessee, the occurrence of any
such event shall be deemed a breach of this Lease, and, in such event, Lessor
shall have the option to forthwith terminate this Lease to re-enter the said
demised premises and take possession thereof, whereupon Lessee shall quit and
surrender peaceably the said demised premises to Lessor. In no event shall this
Lease be deemed an asset of lessee after the assignment for the benefit of
creditors, the adjudication in bankruptcy, the appointment of a receiver or
trustee, or the issuance of a Writ of Execution, a Writ of Attachment, a Writ of
Replevin, or other court order against Lessee or Lessee's property whereby the
demised premises or any building or buildings, or alterations, additions, or
improvements thereon, shall be taken or occupied or attempted to be taken or
occupied by someone other than the Lessee. Further, Lessee hereby covenants and
agrees with Lessor that in the event the said demised premises, or any part
thereof, shall be taken for any public or quasi-public use under any statute or
by right of eminent domain, this Lease shall automatically terminate, as to the
part so taken, as of the date possession shall have been taken, and the rent
reserved shall be adjusted so that Lessee shall be required to pay for the
remainder of the term that portion of the rent reserved in the proportion that
the said demised premises remaining after the taking for public or quasi-public
use bears to the whole of the said demised premises before the taking for public
or quasi-public use. All damages and payments resulting from the taking for
public or quasi-public use of the said demised premises shall accrue to and
belong to Lessor, and Lessee shall have no right to any part thereof.
XVI. DESTRUCTION.
Lessee, for and in consideration of this Lease and the demise of the
said premises, agrees and covenants with Lessor that if at any time during the
term of this Lease, or any extension or renewal thereof, the said demised
premises shall be totally or partially destroyed by fire, flood, earthquake, or
other calamity, then Lessor shall have the option to rebuild or repair the
building or buildings, and any alterations, additions, or improvements on the
demised premises, in as good condition as they were immediately prior to such
calamity; provided, however, that such rebuilding or repair shall be commenced
within a period of thirty days after notice in writing to Lessor of such
destruction or damage. In such case, a just and proportionate part of the rental
herein specified shall be abated until such demised premises shall have been
rebuilt and repaired. In case, however, Lessor shall within thirty days
following notice in writing to him of such damage elect not to rebuild or repair
said premises, Lessor shall so notify Lessee and, thereupon, this Lease shall
terminate and become null and void. Moreover, in no event, shall Lessor have any
duty or obligation to rebuild or repair any signs, shelving, moveable furniture,
equipment not affixed to the roof, walls, or floors as a permanent part of the
realty, or any other personal property owned or leased by the Lessee and used to
carry out the purpose for which Lessee is leasing the demised premises.
XVII. SIGNS.
Lessor and Lessee covenant and agree that Lessee may at Lessee's own
expense erect and maintain a sign or signs to carry out the purpose for which
Lessee is leasing the said demised premises; provided, however, the location,
type and design of all exterior signs shall be first approved in writing by
Lessor. Upon the expiration of this Lease, or any renewal or extension thereof,
Lessee shall remove such sign or signs and shall repair any damage to the
premises caused thereby at Lessee's own expense. Further, at any time within
thirty days prior to the termination of this Lease, or any renewal or extension
thereof, Lessor shall have the right to place upon any part of said demised
premises any "For Rent" or "For Lease" signs that Lessor may select.
<PAGE>
XVIII. TERMINATION AND REMEDIES.
It is expressly understood and agreed between the parties hereto, that
if the rent above reserved, or any part thereof, shall be in arrears or unpaid
on the day of payment thereon the same ought to be paid as aforesaid, or if
default shall be made in any of the covenants or agreements herein contained to
be kept by Lessee, Lessee's heirs, personal representatives, assigns, and
successors in interest, it shall and may be lawful for the Lessor, Lessor's
heirs, personal representatives, agents, attorneys, assigns, or successors in
interest, at Lessor's election, to declare said term ended and to re-enter the
said premises, or any part thereof, either with or without process of law, and
to expel, remove, and put out the Lessee, or any other person or persons
occupying the demised premises, using such force as may be necessary in so
doing, and to repossess and enjoy the same premises again as in its first and
former state, and to distrain for any rent that may be due thereon any property
belonging to Lessee, whether or not the same be exempt from execution and
distress by law, and Lessee in that case hereby waives any and all legal rights
which Lessee now has or may have, to hold or retain any such property under any
exemption laws now or hereafter in force in the State of New Mexico, or in any
other way. It is the intent of the parties hereto to hereby recognize in Lessor,
Lessor's heirs, personal representatives, assigns, or successors in interest, a
valid first lien as provided by the laws of New Mexico, upon any and all goods,
chattels, and other property belonging to Lessee and located in said premises,
as security for the payment of said rent and fulfillment of the faithful
performance of the agreements, covenants, terms, and conditions hereof as herein
provided, anything hereinbefore mentioned to the contrary notwithstanding. And
if at any time said term shall be ended at such election of Lessor, Lessor's
heirs, pesonal representatives, assigns, or successors in interest, as
aforesaid, or in any other way, Lessee, Lessee's heirs, personal
representatives, assigns, or successors in interest, do hereby covenant and
agree to surrender and deliver up the above-described premises and property
peaceably to Lessor, Lessor's heirs, personal representatives, assigns, or
successors in interest, immediately upon the termination of said term as
aforesaid, and if Lessee shall remain in possession of the same ten (10) days
after notice of such default, or after the termination of the Lease in any of
the ways above named, Lessee shall be deemed guilty of a forcible detainer of
said premises under the laws of New Mexico and shall be subject to all the
conditions and provisions above named, and shall also be subject to eviction and
removal forcible or otherwise, with or without process of law as above stated.
Further, it is covenanted and agreed by and between the parties hereto that at
any time after any such termination, the Lessor may relet the demised premises,
or any part thereof, in the name of the Lessor or otherwise, for such term and
on such conditions as the Lessor, in Lessor's sole and absolute discretion, may
determine, and may collect and receive the rent therefor. Moreover, in the event
Lessor relets the demised premises, or any part thereof, it is explicitly
understood and agreed by and between the parties hereto that the term may be
greater of lesser than the period which would otherwise have constituted the
balance of the term of this Lease, and the conditions may include free rent or
other concessions which may be reasonably required to induce another party to
lease the demised premises. Notwithstanding anything herein to the contrary, the
Lessor shall have no obligation hereunder to relet the demised premises, or any
part thereof, and shall in no way be responsible or liable for any failure to
collect any rent due upon such reletting. It is also covenanted and agreed by
and between the parties hereto that no such termination of this Lease shall
relieve the Lessee of its liabilities and obligations under this Lease, and such
liabilities and obligations shall survive any such termination. In the event of
any such termination, whether or not the demised premises, or any part thereof,
shall have been relet, the total remaining balance of the rent which would be
due and payable for the remainder of the term of this Lease, if this Lease were
still in effect, less the net proceeds of any reletting effected pursuant to the
Lessor's sole discretion, after deducting from the net proceeds all of the
Lessor's expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, legal expenses,
reasonable attorney's fees, alteration costs, and expenses of preparation for
such reletting, shall become immediately due and payable, as and for liquidated
damages of the Lessee's default. Nothing herein contained, however, shall limit
or prejudice the right of Lessor to prove for and obtain as liquidated damages
by reason of such termination, an amount equal to the maximum allowed by statute
or rule of law in effect at the time when, and governing the proceedings in
which, such damages are to be proved, whether or not such amount be greater
than, equal to, or less than, the amount of the difference referred to above,
and whether or not such amount shall be immediately or otherwise due and
payable. Further, it is covenanted and agreed to by and between the parties
hereto, that in addition to other remedies provided for in this Lease, the
Lessor shall be entitled to restraint by injunction of the violation, or
attempted or threatened violation, of any agreement or covenant of this Lease,
or to a decree specifically
================================================================================
<PAGE>
================================================================================
compelling performance of any such agreement or covenant. The Lessee, the
Lessee's heirs, personal representatives, assigns, and successors in interest,
hereby expressly waives, so far as permitted by law, the service of any notice
of intention to re-enter provided for in any statute, or of the institution of
legal proceedings to that end. Lessee, the Lessee's heirs, personal
representatives, assigns, and successors in interest, also hereby expressly
waives any right of redemption or re-entry or repossession or to restore the
operation of this Lease in case the Lessee shall be dispossessed by a judgment
or by warrant of any court or judge or in case of re-entry or repossession by
the Lessor. It is further covenanted and agreed by and between the parties
hereto, that the Lessee shall pay and discharge all costs, reasonable attorney's
fees, and expenses incurred by Lessor, Lessor's heirs, personal representatives,
assigns, or successors in interest, in enforcing the covenants of this Lease, or
incurred by Lessor in pursuing any or all remedies which are or may be available
hereunder or allowed at law or in equity, or incurred by Lessor in connection
with reletting the demised premises.
XIX. LESSOR'S REMEDIES ARE CUMULATIVE.
The specified remedies to which the Lessor may resort under the terms of
this Lease are cumulative and and are not intended to be exclusive of any other
remedies or means of redress to which the Lessor may be lawfully entitled in
case of any breach or threatened breach by the Lessee of any of the agreements
and covenants herein contained.
XX. WAIVERS.
Lessee, for and in consideration of this Lease and the demise of the
said premises, agrees and covenants with Lessor that the delay or omission in
the enforcement of any of the agreements and covenants herein contained, or in
the exercise of any of Lessor's rights hereunder, shall not affect the duty of
the Lessee to thereafter faithfully fulfill and perform all of the agreements
and covenants herein contained, and that the failure, neglect, or omission of
Lessor to terminate this Lease for any one or more breaches of any agreements
and covenants hereof, shall not be deemed a consent by Lessor of such breach and
shall not impede, impair, estop, bar or prevent Lessor from thereafter
terminating this Lease, either for such violation, or for prior or subsequent
violations of any covenant or agreement hereof.
XXI. BINDING ON HEIRS, PERSONAL REPRESENTATIVES, ASSIGNS, AND SUCCESSORS IN
INTEREST.
It is understood and agreed by and between the parties hereto that the
agreements, covenants, terms, conditions, provisions, and undertakings in this
Lease, or in any extension or renewal thereof, shall extend to and be binding
upon the heirs, personal representatives, assigns, and successors in interest of
the respective parties hereto, as if they were in every case named and
expressed, and shall be construed as covenants running with the land; and
wherever reference is made to either of the parties hereto, it shall be held to
and include and apply also to the heirs, personal representatives, successors,
and assigns of such party, as if in each and every case so expressed.
XXII. ADDRESSES FOR NOTICES.
Any and all notices required or permitted to be given hereunder shall be
considered to have been given if in writing and delivered to the respective
party designated below upon the date of such personal delivery, or upon a date
three (3) days following the mailing of any such notice by certified or
registered mail, return receipt requested, addressed to the respective party at
the respective address set forth below, or at such other address as either party
may furnish the other for this purpose by written notification delivered or
mailed to the other as herein provided:
NOTICES TO LESSOR: NOTICES TO LESSEE:
6204 Osuna, N.E. 4261 Balloon Park Road, N.E.
Albuquerque, NM 87109 Albuquerque, NM 87109
XXIII. DECLARATION OF CONTRACTUAL LIABILITY.
If there is more than one party Lessee, the covenants and agreements of
the Lessee shall be joint and several obligations of each such party.
XXIV. GRAMMATICAL USAGE.
In construing this Lease, feminine or neuter pronouns shall be
substituted for those masculine in form and vice versa, and plural terms shall
be substituted for singular and singular for plural in any place in which the
context so requires.
XXV. COVENANT TO EXECUTE ADDITIONAL INSTRUMENTS.
The parties hereto hereby agree to execute and deliver any instruments
in writing necessary to carry out any agreement, covenant, term, condition, or
assurance in this Lease whenever an occasion shall arise and request for such
instrument shall be made.
XXVI. SEVERABILITY.
If any provision of this Lease, or any application thereof, shall be
declared invalid or unenforceable by any court of competent jurisdiction, the
remainder of this Lease, and any other application of such provision, shall
continue in full force and effect.
XXVII. CAPTIONS.
The section headings are for convenience of reference only and shall not
otherwise affect the meaning hereof.
XXVIII. GOVERNING LAW.
The Lease shall be governed by and construed in accordance with the laws
of the State of New Mexico.
XXIX. AMENDMENTS.
It is understood and agreed by and between the parties hereto that this
Lease shall not be altered, changed, or amended except by instrument in writing
executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the day and
year first above written.
CHARLES C. AND ELLEN C. FRANCE
REVOCABLE TRUST RHOMED INCORPORATED, a NM Corporation
- ------------------------------------ ----------------------------------------
/s/ Charles C. France /s/ Stephen A. Slusher
- ------------------------------------ ----------------------------------------
By: Charles C. France, Trustee By: Stephen A. Slusher, Vice President
ACKNOWLEDGEMENTS
A. FOR A NATURAL PERSON ACTING IN HIS OWN RIGHT.
STATE OF NEW MEXICO
COUNTY OF BERNALILLO
The foregoing instrument was acknowledged before me this 18th day of December,
1992, by Charles C. France, Trustee on behalf of the Charles C. and Ellen C.
France Revocable Trust
------------------------------------------------------
(Names or Name of Person or Persons Acknowledging)
/s/
---------------------------------------
NOTARY PUBLIC
My commission expires:
1-6-95
- ------------------------------------
E. FOR A CORPORATION OR INCORPORATED ASSOCIATION:
STATE OF NEW MEXICO
COUNTY OF BERNALILLO
--------------
The foregoing instrument was acknowledged before me this 18th day of December,
1992, by Stephen A. Slusher, Vice President, of RhoMed Incorporated, a
------------------ -------------- -------------------
(Name of officer) (Title of officer) (Name of corporation
acknowledging)
New Mexico corporation, on behalf of the corporation.
- ----------------------------------
(State or County of incorporation)
/s/
----------------------------------------
NOTARY PUBLIC
My commission expires:
1-6-95
- ----------------------------------
================================================================================
IMPORTANT NOTICE: IF THIS INSTRUMENTS BEING EXECUTED BY AN ATTORNEY-IN FACT FOR
A NATURAL PERSON AS PRINCIPAL, OR BY A GENERAL PARTNERSHIP ACTING BY ONE OR MORE
PARTNERS, OR BY A LIMITED PARTNERSHIP ACTING BY ONE OR MORE GENERAL PARTNERS, IT
WILL BE NECESSARY TO APPEND THE PROPER STATUTORY FORM OF ACKNOWLEDGMENT.
<PAGE>
ADDENDUM
This is an Addendum dated this 18th day of December, 1992, to the Lease,
dated this same day by and between CHARLES C. AND ELLEN C. FRANCE
REVOCABLE TRUST ("LESSOR") RHOMED INCORPORATED, a New Mexico
Corporation ("Lessee"). The parties hereby agree as follows:
1. Paragraph II, titled "TERM OF LEASE". This new paragraph shall be added
to the end of this paragraph to read as follows: "In the event that the
leased premises become completely available before July 1, 1993, Lessee
may, at its election, begin the lease term before July 1, 1993 on the
same terms and conditions herein. In such case, all dates in the lease
shall be adjusted by way of an Amendment to this lease."
Lessor hereby grants an option to renew this lease under the same terms
and conditions herein, providing that Lessee is in no way in default of
any of the terms of this lease, for a term of three (3) years. The CPI
increase clause shall remain in full force in the event of Lessee's
election to exercise said option.
2. Paragraph III, titled "RENT". This new paragraph shall be added to the
end of this paragraph to read as follows: "Lessee's rent shall be
increased by the same percentage as the CPI-U.S. All Goods and Services
increases annually beginning on July 1, 1994. Said increases shall also
occur during the option period described herein in the event that Lessee
elects to exercise its option to renew this lease. The base month for
said CPI increase shall be June, 1993."
3. Paragraph VIII, titled "ALTERATIONS, ADDITIONS, AND IMPROVEMENTS". This
new paragraph shall be added to the end of this paragraph to read as
follows: "Lessor agrees to pay for tenant improvements for Lessee's use
up to an amount of $35,000.00. Lessee shall pay a monthly amount along
with their base rent to Lessor equal to Lessor's monthly payment on a
loan to provide said improvement money to Lessee. In the event that
Lessee should vacate the premises before said loan is paid in full,
Lessee shall pay the entire outstanding amount due on the loan,
including principal and interest, prior to vacating the premises to
Lessor. When the exact amount of improvement money is determined to be
provided by Lessor, an Amendment shall be prepared to this lease
stating the amount of Lessee's monthly payment to Lessor."
4. Paragraph IV, titled "USE OF PREMISES". This paragraph is amended to
provide that the premises may be used and occupied by subsidiaries and
affiliates of Lessee, including HuMAb Corporation, an affiliate of
Lessee.
5. Paragraph X, titled "ASSIGNMENT AND SUBLETTING". This paragraph
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<PAGE>
shall be amended to provide that this Lease may be assumed by any
successor to all or substantially all of the business of Lessee,
including any successor in the event Lessee agrees to consolidate or
merge with any corporation, or sell all or substantially all of its
assets.
6. Paragraph XVII, titled "SIGNS". This new sentence shall be amended to
read as follows: "The exterior sign currently being used by Lessee, is
approved by Lessor."
7. On or before July 1, 1993, the effective date of Term of Lease, as set
forth in Paragraph II, Lessor shall, at its expense, reroof the premises
with Rapid Roof II Metal Roofing System as bid by Techwest, Inc., or
equivalent. Upon completion of the reroofing and acceptance of work by
Lessee, Lessee shall thereafter be responsible for repair of and damages
to the roof, as set forth in Paragraph V, Condition of Premises and
Repairs.
8. On the effective date of the Term of Lease, as set forth in Paragraph
II, the Lease by and between CHARLES C. AND ELLEN C. FRANCE REVOCABLE
TRUST, Lessor, and RHOMED INCORPORATED, Lessee, dated January 10, 1992
and covering the premises at 4216 Balloon Park Road, NE consisting of
approximately 6,366 square feet, is terminated.
All other terms and conditions outlined in the Lease shall remain the
same.
In witness whereof, the parties hereto have hereunto set their hands the
day and year first above written.
CHARLES C. AND ELLEN C. FRANCE RhoMed Incorporated
REVOCABLE TRUST
By: /s/ Charles C. France By: /s/ Stephen A. Slusher
--------------------------------- ----------------------------
Charles C. France Stephen A. Slusher
Trustee Vice President
Page 2
AMENDMENT TO LEASE
This First Amendment to the Lease dated the 18th day of December, 1992,
entered into by and between Charles C. and Ellen C. France Revocable Trust
("Lessor") and RhoMed Incorporated ("Lessee"), is made this 1st day of November,
1993, and forms a part of that lease.
1. Paragraph XIII, TAXES, OTHER ASSESSMENTS, AND INSURANCE. Notwithstanding
the provisions of this Section, Lessee shall pay to Lessor each month a
prorated amount for all taxes and special and general assessments which
have or may be levied upon the said demised premises and upon any
alterations, additions, and improvements thereon, and for fire and extended
coverage insurance upon all buildings, alterations, and improvements upon
the said premises. Lessor shall pay all taxes and special and general
assessments, and shall pay for and maintain fire and extended coverage
insurance. Lessor and Lessee may adjust, annually on the anniversary of the
lease, the amounts to be paid monthly to Lessor for such taxes and special
and general assessments, and for fire and extended coverage insurance. For
the first year of the lease, Lessee shall pay to Lessor $429.09 each month,
representing taxes pro rated over a twelve month period, and $171.75,
representing insurance pro rated over a twelve month period.
2. Paragraph VIII, ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. The total amount
Lessor has provided for tenant improvements is $35,000.00, which Lessor has
obtained through the proceeds of a five year promissory note from United
New Mexico Bank for $35,000.00 at 9.0% interest, for which the monthly
payments are $726.68. Commencing on August 15, 1993, and on or before the
15th of each succeeding month, Lessee shall pay to United Mexico Bank, on
and for the account of Lessor in payment of the promissory note, the amount
of $726.68.
IN WITNESS WHEREOF, the parites hereto have hereunto set their hands the
day and year first above written.
RhoMed Incorporated Charles C. and Ellen C. France
Revocable Trust
By: /s/ Stephen A. Slusher By: /s/ Charles C. France
----------------------- ----------------------
Stephen A. Slusher Charles C. France
Vice President Trustee
Page 1
SECOND AMENDMENT TO LEASE
Dated the 18th day of December 1992, entered into by and between: Charles C. And
Ellen C. France, Revocable Trust, ("Lessor"), and RhoMed Incorporated
("Lessee"), is made this 5th day of July, 1996, and forms a part of that lease.
IT IS AGREED BETWEEN THE PARTIES:
1. Paragraph II, titled "Term of Lease", is amended to provide that the term of
the Lease shall be extended until December 31, 1996.
2. It is agreed that Lessee shall pay off the balance due on the Promissory Note
executed on July 15, 1993, prior to July 15, 1996. Failure to do so shall
constitute a default under the lease.
3. Lessee agrees to deposit with Lessor a security deposit equal to one month's
rent, ($4,554.45) upon execution of this amendment, as security for Lessee's
faithful performance of its obligation under this Lease. Lessor and Lessee agree
that the Security Deposit may be commingled with funds of Lessor and lessor
shall have no obligation or liability for payment of interest on such deposit.
Lessee shall not mortgage, assign, transfer or encumber the Security Deposit
without the prior written consent of Lessor and any attempt by Lessee to do so
shall be void, without force or effect and shall not be binding upon Lessor.
Within (15) days after the Term (or any extension thereof) has expired or Lessee
has vacated the Premises, whichever shall last occur, and provided Lessee is not
then in default on any of its obligations hereunder, Landlord shall return the
Security Deposit to Lessee, or, if Lessee has assigned its interest under this
lease, to the last assignee of Lessee. If Lessor sells its interest in the
Premises, Lessor may deliver this deposit to the purchaser of Lessor's interest
and thereupon be relieved of any further liability or obligation to the Security
Deposit.
ALL OTHER TERMS AND CONDITIONS OF THE LEASE SHALL REMAIN IN FULL FORCE AND
EFFECT.
/s/ Charles C. France Jr. /s/ John J. McDonough
- --------------------------- -----------------------------
Lessor: Trustee Lessee: John J. McDonough
Vice President & CFO
RhoMed Incorporated
/s/ Charles C. France Jr.
- ---------------------------
Lessor:
RHOMED INCORPORATED
1995 EMPLOYEE INCENTIVE STOCK OPTION PLAN
1. Purpose. The 1995 Employee Incentive Stock Option Plan (the "Plan") is
intended to advance the interests of RhoMed Incorporated (the "Company") and
its shareholders by providing an employment incentive, in order to retain
employees of the Company with training, experience, and ability, to attract
new employees whose services are considered unusually valuable, to encourage
the sense of proprietorship of employees, and to stimulate the active interest
of employees in the development and financial success of the Company.
2. Definitions. As used in the Plan, the following capitalized terms have
the following meanings:
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated under the Internal Revenue Code of 1986, as amended,
or any successor legislation and regulations.
"Committee" means the body administering the Plan, which is the
Compensation Committee of the Board, or if the Board has not established a
Compensation Committee, then it is the Board meeting as the Committee.
"Company" means RhoMed Incorporated.
"Eligible Employee" means an Employee of the Company to whom the
Committee determines to grant an Option in order to carry out the purpose of
the Plan stated above.
"Employee" means an employee, as determined in accordance with the
withholding tax rules under Code section 3401(c), of the Company, its parent,
as defined in Code section 424(e), or subsidiary, as defined in Code section
424(f).
"Option" means an option to purchase Stock granted under the Plan.
"Option Agreement" means a written agreement between the Company and an
Optionee for the purchase of Stock pursuant to an Option.
"Option Stock" means Stock which is or may become purchasable under an
Option.
"Option Price" means the price per share of Option Stock.
"Optionee" means an Employee to whom the Company has granted an Option.
"Over Ten Percent Shareholder" means an Eligible Employee who, at the
time of grant of an Option, owns stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company or of its
parent or subsidiary corporation. For purposes of this definition, ownership
is determined according to the attribution rules set forth in Code section
424(d).
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<PAGE>
"Plan" means this 1995 Employee Incentive Stock Option Plan.
"Stock" means the Common Stock of the Company, or any other stock
issuable upon exercise of an Option as adjusted pursuant to section 8.7 of the
Plan, or as substituted or assumed as permitted pursuant to Code section
424(a).
3. Effective dates of the Plan; shareholder approval required. The
Plan will be in effect from July 28, 1995 until July 28, 2005, unless the
Board terminates the Plan earlier. If the Company's shareholders do not
approve the Plan before July 28, 1996, the Plan will terminate on July 28,
1996 and any Options granted under the Plan will be void. No Option will be
exercisable before the Company's shareholders approve the Plan.
4. Administration of the Plan. The Committee will administer the
Plan. The Committee will report its actions to the Board at the first meeting
of the Board which follows each action of the Committee. By majority vote of
its members, the Committee will: determine Eligible Employees, amounts of
Option Stock, Option Prices, dates of grant, periods of exercise, methods of
exercise and all other terms of Options which the Plan does not specify;
construe and interpret the Plan; determine the terms of Option Agreements,
which need not be identical; and make all other determinations and take all
other actions which the Committee deems necessary or advisable for
administration of the Plan, except that the Committee may not amend or
terminate the Plan. All actions and determinations of the Committee will be
binding on the Company and its Employees.
5. Authority to grant Options. On behalf of the Company, the
Committee may, by majority vote of its members, grant Options from time to
time to any one or more Eligible Employees of the Company. The Company's
executive officers will prepare, execute on behalf of the Company, and
deliver, Option Agreements according to the Committee's instructions.
6. Amount of Stock available and reserved. The Company may grant
Options to purchase up to an aggregate of seven million five hundred thousand
(7,500,000) shares of Stock. While any Option is outstanding, the Company will
keep reserved, for issuance upon exercise of Options, the amount of Option
Stock which is or may become purchasable under all outstanding Options.
7. Limitation on amount of Option Stock. The Company will not grant
an Option if, as a result of granting the Option, the aggregate fair market
value of stock with respect to which incentive stock options, as defined in
Code section 422(b), are exercisable for the first time by that Optionee
during any calendar year (under all
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<PAGE>
plans of the Company and its parent and subsidiary corporations) would exceed
one hundred thousand dollars ($100,000). For purposes of this limitation, the
fair market value of any stock is determined as of the time the option with
respect to such stock is granted.
8. Terms and conditions of Options. All Options will be evidenced by
an Option Agreement and will be subject to the following terms and conditions:
8.1 Nontransferability. An Option is, by its terms, not
transferable by the Optionee otherwise than by will or the laws of descent and
distribution, and is exercisable, during the Optionee's lifetime, only by the
Optionee.
8.2 Option Price. The Option Price under Options granted to
Employees other than Over Ten Percent Shareholders will be not less than the
fair market value of the Stock at the time the Option is granted. The Option
Price under Options granted to Over Ten Percent Shareholders will be at least
one hundred ten percent (110%) of the fair market value of the Stock at the
time the Option is granted. The Committee will determine fair market value at
the time of grant.
8.3 Period for exercise of Option. Options granted to
Employees other than Over Ten Percent Shareholders will, by their terms, not
be exercisable after the expiration of ten (10) years from the date the Option
is granted. Options granted to Over Ten Percent Shareholders will, by their
terms, not be exercisable after the expiration of five (5) years from the date
the Option is granted. Within these limits, the Committee may set any period
during which all or any portion of an Option will be exercisable.
8.4 Shareholder rights. Neither an Optionee nor the
Optionee's successor has any of the rights of a shareholder of the Company,
with respect to any Option Stock, until the Company has received payment in
full of the Option Price for that Option Stock upon exercise.
8.5 Termination of employment. The granting of an Option
does not grant any right to the Optionee to continue as an Employee. On the
date when an Optionee ceases to be an Employee for any reason, the amount of
Option Stock which the Optionee may purchase under each Option which that
Optionee holds automatically becomes limited to only that amount of Option
Stock as to which the Option was already exercisable on the date the Optionee
ceased to be an Employee. The Committee may, at the time it grants an Option,
set a time limit on the exercisability of an Option after the Optionee ceases
to be an Employee.
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<PAGE>
8.6 Accelerated exercisability and early expiration of
Options in certain corporate transactions. If the Company enters into an
agreement to engage in a transaction to which Code section 424(a) would apply
if the requirements of Code sections 424(a)(1) and 424(a)(2) were met, and no
corporation either substitutes a new option for or assumes an outstanding
Option, as permitted pursuant to Code section 424(a), or agrees in writing to
do so upon consummation of the transaction, then thirty days before the agreed
date of consummation of the transaction, that Option will become exercisable
as to the entire amount of Option Stock (other than Option Stock as to which
the Option has already expired) purchasable at any time under that Option, and
will expire on the earlier of (i) consummation of the transaction or (ii) that
Option's original expiration date. The Committee will give the Optionee
written notice of the accelerated exercisability and potential early
expiration of that Option at least thirty days before its potential early
expiration date.
8.7 Changes in Stock. If the Company's shareholders approve
an amendment to the Company's articles of incorporation which effects a change
in shares or rights of shareholders, or an exchange, reclassification or
cancellation of shares or rights of shareholders, then the Committee will
immediately adjust the amount and/or class of Option Stock purchasable and/or
the Option Price under all outstanding Options as the Committee deems
appropriate, provided that such adjustment does not constitute a modification
as defined in Code section 424(h).
8.8 Restriction on exercise of Options and issuance of
Option Stock. If the Company determines that exercise of an Option or issuance
of Option Stock will violate any tax, securities or other law or regulation,
then the Optionee may not exercise the Option until the Company determines
that the exercise or issuance will comply with that law or regulation. The
Option Stock as issued may be restricted under the Securities Act of 1933, as
amended, or other securities laws.
8.9 Other terms and conditions. The Committee may establish
any other terms and conditions for Options consistent with those specified in
the Plan, and consistent with the definition of incentive stock option under
Code section 422(b).
9. Amendment, Suspension, or Termination of Plan. The Board may at
any time amend, suspend or terminate the Plan.
10. Code references. In the event that a Code section referred to in
the Plan is amended or repealed, the Committee will interpret the Plan in
accordance with any successor provision or the remainder of the Code, in such
a way that Options will
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<PAGE>
continue to be treated, if possible, as incentive stock options under Code
section 422(a) or any successor provision.
I certify that the foregoing is a true and accurate copy of the 1995
Employee Incentive Stock Option Plan:
-as adopted by the Board by unanimous written consent dated July 28,
1995, and approved by the shareholders of the Company at the regular annual
meeting held on August 15, 1995; and
-as amended by the Board by unanimous written consent dated March 20,
1996 and approved by the shareholders of the Company at the regular annual
meeting held on April 4, 1996; and
-as amended by the Board by unanimous written consent dated April 15,
1996 and approved by the shareholders of the Company at the special meeting
held on May 24, 1996.
s/ Stephen A. Slusher
---------------------
Stephen A. Slusher
Assistant Secretary
Page 5
RHOMED INCORPORATED
1995 NONQUALIFIED STOCK OPTION PLAN
1. Purpose. The 1995 Nonqualified Stock Option Plan (the "Plan") is
intended to advance the interests of RhoMed Incorporated (the "Company") and
its shareholders by encouraging and enabling selected officers and key
independent contractors, including consultants, directors and members of the
scientific advisory board, upon whose judgment, initiative and effort the
Company is largely dependent for the successful conduct of its business, to
acquire and retain a proprietary interest in the Company by ownership of its
stock. The Company does not intend for options granted under the Plan to be
options which meet the requirements of section 422 of the Internal Revenue
Code of 1986.
2. Definitions. As used in the Plan, the following capitalized terms
have the following meanings:
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated under the Internal Revenue Code of 1986, as amended,
or any successor legislation and regulations.
"Committee" means the body administering the Plan, which is the
Compensation Committee of the Board, or if the Board has not established a
Compensation Committee, then it is the Board meeting as the Committee.
"Company" means RhoMed Incorporated.
"Option" means an option to purchase Stock granted under the Plan.
"Option Agreement" means a written agreement between the Company and an
Optionee for the purchase of Stock pursuant to an Option.
"Option Stock" means Stock which is or may become purchasable under an
Option.
"Option Price" means the price per share of Option Stock.
"Optionee" means a person to whom the Company has granted an Option.
"Plan" means this 1995 Nonqualified Stock Option Plan.
"Stock" means the Common Stock of the Company, or any other stock
issuable upon exercise of an Option as adjusted pursuant to section 7.4 of the
Plan, or as substituted or assumed in connection with a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization,
or liquidation.
3. Effective dates of the Plan; shareholder approval required. The
Plan will be in effect from July 28, 1995 until July 28, 2005, unless the
Board terminates the Plan earlier. If the Company's shareholders do not
approve the Plan before July 28, 1996,
Page 1
<PAGE>
the Plan will terminate on July 28, 1996 and any Options granted under the
Plan will be void. No Option will be exercisable before the Company's
shareholders approve the Plan.
4. Administration of the Plan. The Committee will administer the
Plan. The Committee will report its actions to the Board at the first meeting
of the Board which follows each action of the Committee. By majority vote of
its members, the Committee will: determine persons who receive Options,
amounts of Option Stock, Option Prices, dates of grant, periods of exercise,
methods of exercise and all other terms of Options which the Plan does not
specify; construe and interpret the Plan; determine the terms of Option
Agreements, which need not be identical; and make all other determinations and
take all other actions which the Committee deems necessary or advisable for
administration of the Plan, except that the Committee may not amend or
terminate the Plan. All actions and determinations of the Committee will be
binding on the Company and its Employees.
5. Authority to grant Options. On behalf of the Company, the
Committee may, by majority vote of its members, grant Options from time to
time to any one or more persons. The Company's executive officers will
prepare, execute on behalf of the Company, and deliver, Option Agreements
according to the Committee's instructions.
6. Amount of Stock available and reserved. The Company may grant
Options to purchase up to an aggregate of two million (2,000,000) shares of
Stock. While any Option is outstanding, the Company will keep reserved, for
issuance upon exercise of Options, the amount of Option Stock which is or may
become purchasable under all outstanding Options.
7. Terms and conditions of Options. All Options will be evidenced by
an Option Agreement and will be subject to the following terms and conditions:
7.1 Nontransferability. An Option is, by its terms, not
transferable by the Optionee otherwise than by will or the laws of descent and
distribution, and is exercisable, during the Optionee's lifetime, only by the
Optionee.
7.2 Shareholder rights. Neither an Optionee nor the
Optionee's successor has any of the rights of a shareholder of the Company,
with respect to any Option Stock, until the Company has received payment in
full of the Option Price for that Option Stock upon exercise.
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<PAGE>
7.3 Accelerated exercisability and early expiration of
Options in certain corporate transactions. If the Company enters into an
agreement to engage in a transaction to which Code section 424(a) would apply
(if an Option were an incentive stock option as defined in Code section 422
and the requirements of Code sections 424(a)(1) and 424(a)(2) were met), and
no corporation either substitutes a new option for or assumes an outstanding
Option, or agrees in writing to do so upon consummation of the transaction,
then thirty days before the agreed date of consummation of the transaction,
that Option will become exercisable as to the entire amount of Option Stock
(other than Option Stock as to which the Option has already expired)
purchasable at any time under that Option, and will expire on the earlier of
(i) consummation of the transaction or (ii) that Option's original expiration
date. The Committee will give the Optionee written notice of the accelerated
exercisability and potential early expiration of that Option at least thirty
days before its potential early expiration date.
7.4 Changes in Stock. If the Company's shareholders approve
an amendment to the Company's articles of incorporation which effects a change
in shares or rights of shareholders, or an exchange, reclassification or
cancellation of shares or rights of shareholders, then the Committee will
immediately adjust the amount and/or class of Option Stock purchasable and/or
the Option Price under all outstanding Options as the Committee deems
appropriate.
7.5 Restriction on exercise of Options and issuance of
Option Stock. If the Company determines that exercise of an Option or issuance
of Option Stock will violate any tax, securities or other law or regulation,
then the Optionee may not exercise the Option until the Company determines
that the exercise or issuance will comply with that law or regulation. The
Option Stock as issued may be restricted under the Securities Act of 1933, as
amended, or other securities laws.
7.6 Other terms and conditions. The Committee may establish
any other terms and conditions for Options consistent with those specified in
the Plan.
8. Amendment, Suspension, or Termination of Plan. The Board may at
any time amend, suspend or terminate the Plan.
9. Code references. In the event that a Code section referred to in
the Plan is amended or repealed, the Committee will interpret the Plan in
accordance with any successor provision or the remainder of the Code.
Page 3
<PAGE>
I certify that the foregoing is a true and accurate copy of the 1995
Employee Incentive Stock Option Plan adopted by the Board of Directors of
RhoMed Incorporated by unanimous written consent dated July 28, 1995, and
approved by the Shareholders of RhoMed Incorporated at the regular Annual
Meeting held on August 15, 1995.
s/ Stephen A. Slusher
---------------------
Assistant Secretary
Page 4
PALATIN TECHNOLOGIES, INC.
1996 STOCK OPTION PLAN
1. Purpose.
The purposes of the 1996 Stock Option Plan (the "Plan") are to induce
certain employees, consultants and directors to remain in the employ or
service, or to continue to serve as directors, of Palatin Technologies, Inc.
(the "Company") and its present and future subsidiary corporations (each a
"Subsidiary"), as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended (the "Code"), to attract new individuals to enter into such
employment or service and to encourage such individuals to secure or increase
on reasonable terms their stock ownership in the Company. The Board of
Directors of the Company (the "Board") believes that the granting of stock
options (the "Options") under the Plan will promote continuity of management
and increased incentive and personal interest in the welfare of the Company by
those who are or may become primarily responsible for shaping and carrying out
the long range plans of the Company and securing its continued growth and
financial success. Options granted hereunder are intended to be either (a)
"incentive stock options" (which term, when used herein, shall have the
meaning ascribed thereto by the provisions of Section 422(b) of the Code) or
(b) options which are not incentive stock options ("non-incentive stock
options") or (c) a combination thereof, as determined by the Committee (the
"Committee") referred to in Section 4 hereof at the time of the grant thereof.
2. Effective Date of the Plan.
The Plan became effective on August 28, 1996, by action of the Board,
subject to ratification by stockholders of the Company.
3. Stock Subject to Plan.
1,000,000 of the authorized but unissued shares of the Common Stock,
$0.01 par value, of the Company (the "Common Stock") are hereby reserved for
issue upon the exercise of Options granted under the Plan; provided, however,
that the number of shares so reserved may from time to time be reduced to the
extent that a corresponding number of issued and outstanding shares of the
Common Stock are purchased by the Company and set aside for issue upon the
exercise of Options. If any Options expire or terminate for any reason without
having been exercised in full, the unpurchased shares subject thereto shall
again be available for the purposes of the Plan.
4. Committee.
The Committee shall consist of two or more members of the Board both
or all of whom shall be "non-employee directors" within the meaning of Rule
16b-3(b)(3)(i) promulgated under
<PAGE>
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
"outside directors" within the contemplation of Section 162(m)(4)(C)(i) of the
Code. The President of the Company shall also be a member of the Committee,
ex-officio, whether or not he or she is otherwise eligible to be a member of
the Committee. The Committee shall be appointed annually by the Board, which
may at any time and from time to time remove any members of the Committee,
with or without cause, appoint additional members to the Committee and fill
vacancies, however caused, in the Committee. In the event that no Committee
shall have been appointed, the Board shall serve as the Committee. A majority
of the members of the Committee shall constitute a quorum. All determinations
of the Committee shall be made by a majority of its members present at a
meeting duly called and held. Any decision or determination of the Committee
reduced to writing and signed by all of the members of the Committee shall be
fully as effective as if it had been made at a meeting duly called and held.
5. Administration.
Subject to the express provisions of the Plan, the Committee shall
have complete authority, in its discretion, to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, to
determine the terms and provisions of the respective option agreements or
certificates (which need not be identical), to determine the individuals (each
a "Participant") to whom and the times and the prices at which Options shall
be granted, the periods during which each Option shall be exercisable, the
number of shares of the Common Stock to be subject to each Option and whether
such Option shall be an incentive stock option or a non-incentive stock option
and to make all other determinations necessary or advisable for the
administration of the Plan. In making such determinations, the Committee may
take into account the nature of the services rendered by the respective
employees and consultants, their present and potential contributions to the
success of the Company and the Subsidiaries and such other factors as the
Committee in its discretion shall deem relevant. The Committee's determination
on the matters referred to in this Section 5 shall be conclusive. Any dispute
or disagreement which may arise under or as a result of or with respect to any
Option shall be determined by the Committee, in its sole discretion, and any
interpretations by the Committee of the terms of any Option shall be final,
binding and conclusive.
6. Eligibility.
A. An Option may be granted only to (i) an employee or consultant of
the Company or a Subsidiary, (ii) a director of the Company who is not
employed by the Company or any of the Subsidiaries (a "Non-Employee Director")
and (iii) employees of a corporation or other business enterprise which has
been acquired by the Company or a Subsidiary, whether by exchange or purchase
of stock, purchase of assets, merger or reverse merger or otherwise, who hold
options with respect to the stock of such corporation which the Company has
agreed to assume or for which the Company has agreed to provide substitute
options.
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<PAGE>
B. (i) On August 28, 1996, each Non-Employee Director shall be
granted an Option (a "Non-Employee Director's Formula Option") to purchase
20,000 shares of the Common Stock at the initial per share option price equal
to the fair market value of a share of the Common Stock on the date of grant.
(ii) At the first meeting of the Board immediately following the
annual meeting of the Stockholders of the Company held in 1997, and at the
first meeting of the Board immediately following each subsequent annual
meeting of the Stockholders of the Company, each Non- Employee Director shall
be granted an Option (a "Non-Employee Director's Formula Option") to purchase
10,000 shares of the Common Stock at the initial per share option price equal
to the fair market value of a share of the Common Stock on the date of grant.
(iii) Each Non-Employee Director who becomes a director subsequent to
the adoption date of the Plan, and prior to the date of any annual meeting of
the Shareholders of the Company, shall be granted, on the date he or she
becomes a director, an Option (a "Non-Employee Director's Formula Option") to
purchase the number of shares of the Common Stock equal to the product of (i)
10,000 and (ii) a fraction, the numerator of which is the number of full
calendar months prior to the next scheduled annual meeting of Shareholders and
the denominator of which is 12, at the initial per share option price equal to
the fair market value of a share of the Common Stock on the date of grant.
(iv) A Non-Employee Director may not exercise a Non-Employee
Director's Formula Option during the period commencing on the date of the
granting of such Option to him or her and ending on the day next preceding the
first anniversary of such date. A Non-Employee Director may (i) during the
period commencing on the first anniversary of the date of the granting of a
Non-Employee Director's Formula Option to him or her and ending on the day
next preceding the second anniversary of such date, exercise such Option with
respect to one-fourth of the shares granted thereby, (ii) during the period
commencing on such second anniversary and ending on the day next preceding the
third anniversary of the date of the granting of such Option, exercise such
Option with respect to one-half of the shares granted thereby, (iii) during
the period commencing on such third anniversary and ending on the date next
preceding the fourth anniversary of the date of the granting of such Option,
exercise such Option with respect to three-fourths of the shares granted
thereby and (iv) during the period commencing on such fourth anniversary and
ending on the date of the expiration of such Option, exercise such Option with
respect to all of the shares granted thereby.
7. Option Prices.
A. Except as otherwise provided in Section 17, the initial per share
option price of any Option shall be the price determined by the Committee, but
not less than the fair market value of a share of the Common Stock on the date
of grant; provided, however, that, in the case of a Participant who owns
(within the meaning of Section 424(d) of the Code) more than 10% of the
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<PAGE>
total combined voting power of the Common Stock at the time an Option which is
an incentive stock option is granted to him or her, the initial per share
option price shall not be less than 110% of the fair market value of a share
of the Common Stock on the date of grant.
B. For all purposes of the Plan, the fair market value of a share of
the Common Stock on any date shall be determined by the Committee as follows:
(i) If the Common Stock is listed on the OTC Electronic Bulletin
Board, its fair market value shall be the closing selling price on such date
for the Common Stock as reported on the OTC Electronic Bulletin Board. If
there are no sales of the Common Stock on that date, then the reported closing
selling price for the Common Stock on the next preceding date for which such
closing selling price is quoted shall be determinative of fair market value;
or,
(ii) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation, the Nasdaq National
Market System or the Nasdaq SmallCap Market System, its fair market value
shall be the reported closing selling price for the Common Stock on the
principal securities exchange or national market system on which the Common
Stock is at such date listed for trading. If there are no sales of Common
Stock on that date, then the reported closing selling price for the Common
Stock on the next preceding day for which such closing selling price is quoted
shall be determinative of fair market value; or,
(iii) If the Common Stock is not traded on the OTC Electronic
Bulletin Board, an exchange, or a national market system, its fair market
value shall be determined in good faith by the Committee, and such
determination shall be conclusive and binding on all persons.
8. Option Term.
Participants shall be granted Options for such term as the Committee
shall determine, not in excess of ten years from the date of the granting
thereof; provided, however, that, except as otherwise provided in Section 17,
in the case of a Participant who owns (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of the Common Stock
of the Company at the time an Option which is an incentive stock option is
granted to him or her, the term with respect to such Option shall not be in
excess of five years from the date of the granting thereof; provided, further,
however, that the term of each Non-Employee Director's Formula Option shall be
ten years from the date of the granting thereof.
9. Limitations on Amount of Options Granted.
A. Except as otherwise provided in Section 17, the aggregate fair
market value of the shares of the Common Stock for which any Participant may
be granted incentive stock options
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<PAGE>
which are exercisable for the first time in any calendar year (whether under
the terms of the Plan or any other stock option plan of the Company) shall not
exceed $100,000.
B. Except as otherwise provided in Section 17, no Participant shall,
during any fiscal year of the Company, be granted Options to purchase more
than 500,000 shares of the Common Stock.
10. Exercise of Options.
A. Except as otherwise provided in Section 17 and except as otherwise
determined by the Committee at the time of the grant of an Option other than a
Non-Employee Director's Formula Option, a Participant may not exercise an
Option during the period commencing on the date of the granting of such Option
to him or her and ending on the day next preceding the first anniversary of
such date. Except as otherwise set forth in Sections 9A and 17 and in the
preceding sentence, a Participant may (i) during the period commencing on the
first anniversary of the date of the granting of an Option to him or her and
ending on the day next preceding the second anniversary of such date, exercise
such Option with respect to one-fourth of the shares granted thereby, (ii)
during the period commencing on such second anniversary and ending on the day
next preceding the third anniversary of the date of the granting of such
Option, exercise such Option with respect to one-half of the shares granted
thereby, (iii) during the period commencing on such third anniversary and
ending on the date next preceding the fourth anniversary of the date of the
granting of such Option, exercise such Option with respect to three-fourths of
the shares granted thereby and (iv) during the period commencing on such
fourth anniversary and ending on the date of the expiration of such Option,
exercise such Option with respect to all of the shares granted thereby.
B. Except as hereinbefore otherwise set forth, an Option may be
exercised either in whole at any time or in part from time to time.
C. An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specific number of shares of the Common
Stock and payment to the Company of the amount of the option price for the
number of shares of the Common Stock so specified.
D. Except in the case of a Non-Employee Director's Formula Option,
the Board may, in its discretion, permit any Option to be exercised, in whole
or in part, prior to the time when it would otherwise be exercisable.
E. Notwithstanding any other provision of the Plan to the contrary,
including, but not limited to, the provisions of Section 10D, if any
Participant shall have effected a "Hardship Withdrawal" from a "401(k) Plan"
maintained by the Company and/or one or more of the Subsidiaries, then, during
the period of one year commencing on the date of such Hardship Withdrawal,
such Participant may not exercise any Option. For the purpose of this
paragraph E, a
5
<PAGE>
Hardship Withdrawal shall mean a distribution to a Participant provided for in
Reg. ss. 1.401(k)- 1(d)(1)(ii) promulgated under Section 401(k)(2)(B)(i)(iv)
of the Code and a 401(k) Plan shall mean a plan which is a "qualified plan"
within the contemplation of section 401(a) of the Code which contains a
"qualified cash or deferred arrangement" within the contemplation of section
401(k)(2) of the Code.
11. Transferability.
No Option shall be assignable or transferable except by will and/or
by the laws of descent and distribution and, during the life of any
Participant, each Option granted to him or her may be exercised only by him or
her.
12. Termination of Employment.
A. In the event a Participant leaves the employ of the Company and
the Subsidiaries or ceases to serve as a consultant to the Company and/or as a
Non-Employee Director of the Company, whether voluntarily or otherwise, each
Option theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall, to the extent not theretofore
exercised, terminate upon the earlier to occur of the expiration of 90 days
after the date of such Participant's termination of employment or service and
the date of termination specified in such Option. Notwithstanding the
foregoing, if a Participant's employment by the Company and the Subsidiaries
or service as a consultant and/or as a Non-Employee Director of the Company is
terminated for "cause" (as defined herein), each Option theretofore granted to
him or her which shall not have theretofore expired or otherwise been
cancelled shall, to the extent not theretofore exercised, terminate forthwith.
B. For purposes of the foregoing, the term "cause" shall mean: (i)
the commission by a Participant of any act or omission that would constitute a
crime under federal, state or equivalent foreign law, (ii) the commission by a
Participant of any act of moral turpitude, (iii) fraud, dishonesty or other
acts or omissions that result in a breach of any fiduciary or other material
duty to the Company and/or the Subsidiaries or (iv) continued alcohol or other
substance abuse that renders a Participant incapable of performing his or her
material duties to the satisfaction of the Company and/or the Subsidiaries.
13. Adjustment of Number of Shares.
A. In the event that a dividend shall be declared upon the Common
Stock payable in shares of the Common Stock, the number of shares of the
Common Stock then subject to any Option and the number of shares of the Common
Stock reserved for issuance in accordance with the provisions of the Plan but
not yet covered by an Option and the number of shares set forth in
6
<PAGE>
Sections 6B and 9B shall be adjusted by adding to each share the number of
shares which would be distributable thereon if such shares had been
outstanding on the date fixed for determining the stockholders entitled to
receive such stock dividend. In the event that the outstanding shares of the
Common Stock shall be changed into or exchanged for a different number or kind
of shares of stock or other securities of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, sale of assets, merger or consolidation in which the
Company is the surviving corporation, then, there shall be substituted for
each share of the Common Stock then subject to any Option and for each share
of the Common Stock reserved for issuance in accordance with the provisions of
the Plan but not yet covered by an Option and for each share of the Common
Stock referred to in Sections 6B and 9B, the number and kind of shares of
stock or other securities into which each outstanding share of the Common
Stock shall be so changed or for which each such share shall be exchanged.
B. In the event that there shall be any change, other than as
specified in Section 13, in the number or kind of outstanding shares of the
Common Stock, or of any stock or other securities into which the Common Stock
shall have been changed, or for which it shall have been exchanged, then, if
the Committee shall, in its sole discretion, determine that such change
equitably requires an adjustment in the number or kind of shares then subject
to any Option and the number or kind of shares reserved for issuance in
accordance with the provisions of the Plan but not yet covered by an Option
and the number or kind of shares referred to in Sections 6B and 9B, such
adjustment shall be made by the Committee and shall be effective and binding
for all purposes of the Plan and of each stock option agreement or certificate
entered into in accordance with the provisions of the Plan.
C. In the case of any substitution or adjustment in accordance with
the provisions of this Section 13, the option price in each stock option
agreement or certificate for each share covered thereby prior to such
substitution or adjustment shall be the option price for all shares of stock
or other securities which shall have been substituted for such share or to
which such share shall have been adjusted in accordance with the provisions of
this Section 13.
D. No adjustment or substitution provided for in this Section 13
shall require the Company to sell a fractional share under any stock option
agreement or certificate.
E. In the event of the dissolution or liquidation of the Company, or
a merger, reorganization or consolidation in which the Company is not the
surviving corporation, then, except as otherwise provided in the second
sentence of Section 13A, each Option, to the extent not theretofore exercised,
shall terminate forthwith.
14. Purchase for Investment, Withholding and Waivers.
A. Unless the shares to be issued upon the exercise of an Option by a
Participant shall be registered prior to the issuance thereof under the
Securities Act of 1933, as amended, such Par-
7
<PAGE>
ticipant will, as a condition of the Company's obligation to issue such
shares, be required to give a representation in writing that he or she is
acquiring such shares for his or her own account as an investment and not with
a view to, or for sale in connection with, the distribution of any thereof.
B. In the event of the death of a Participant, a condition of
exercising any Option shall be the delivery to the Company of such tax waivers
and other documents as the Committee shall determine.
C. In the case of each non-incentive stock option, a condition of
exercising the same shall be the entry by the person exercising the same into
such arrangements with the Company with respect to withholding as the
Committee may determine.
15. No Stockholder Status.
Neither any Participant nor his or her legal representatives,
legatees or distributees shall be or be deemed to be the holder of any share
of the Common Stock covered by an Option unless and until a certificate for
such share has been issued. Upon payment of the purchase price thereof, a
share issued upon exercise of an Option shall be fully paid and
non-assessable.
16. No Restrictions on Corporate Acts.
Neither the existence of the Plan nor any Option shall in any way
affect the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Common Stock or the rights
thereof, or dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other corporate act or
proceeding whether of a similar character or otherwise.
17. Options Granted in Connection With Acquisitions.
In the event that the Committee determines that, in connection with
the acquisition by the Company or a Subsidiary of another corporation which
will become a Subsidiary or division of the Company or a Subsidiary (such
corporation being hereafter referred to as an "Acquired Subsidiary"), Options
may be granted hereunder to employees and other personnel of an Acquired
Subsidiary in exchange for then outstanding options to purchase securities of
the Acquired Subsidiary. Such Options may be granted at such option prices,
may be exercisable immediately or at any time or times either in whole or in
part, and may contain such other provisions not inconsistent with the Plan, or
the requirements set forth in Section 19 that certain amendments to
8
<PAGE>
the Plan be approved by the stockholders of the Company, as the Committee, in
its discretion, shall deem appropriate at the time of the granting of such
Options.
18. No Employment or Service Right.
Neither the existence of the Plan nor the grant of any Option shall
require the Company or any Subsidiary to continue any Participant in the
employ of the Company or such Subsidiary or require the Company to continue
any Participant as a director of the Company.
19. Termination and Amendment of the Plan.
The Board may at any time terminate the Plan or make such
modifications of the Plan as it shall deem advisable; provided, however, that
the Board may not without further approval of the holders of a majority of the
shares of the Common Stock present in person or by proxy at any special or
annual meeting of the stockholders, increase the number of shares as to which
Options may be granted under the Plan (as adjusted in accordance with the
provisions of Section 13), or change the manner of determining the option
prices, or extend the period during which an Option may be granted or
exercised; provided, however, the provisions of the Plan governing the grant
of Non-Employee Director's Formula Options may not be amended except by the
vote of a majority of the members of the Board and by the vote of a majority
of the members of the Board who are employees of the Company or a Subsidiary
and shall not be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act
of 1974 or the Rules of the Securities and Exchange Commission promulgated
under Section 16 of the Exchange Act. Except as otherwise provided in Section
13, no termination or amendment of the Plan may, without the consent of the
Participant to whom any Option shall theretofore have been granted, adversely
affect the rights of such Participant under such Option.
20. Expiration and Termination of the Plan.
The Plan shall terminate on August 27, 2006 or at such earlier time
as the Board may determine. Options may be granted under the Plan at any time
and from time to time prior to its termination. Any Option outstanding under
the Plan at the time of the termination of the Plan shall remain in effect
until such Option shall have been exercised or shall have expired in
accordance with its terms.
9
EXECUTION COPY
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of November 16, 1995, between RHOMED
INCORPORATED (the "Corporation"), a Delaware corporation, and EDWARD J. QUILTY,
an individual residing at 620 Grindan Drive, Yardly, Pennsylvania 19067 (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ the Executive, and the
Executive desires to be employed by the Corporation, upon the terms and subject
to the conditions hereinafter provided.
NOW, THEREFORE, the parties hereto hereby agree as follows:
FIRST: Employment. The Corporation hereby employs the Executive, and
the Executive hereby enters into the employ of the Corporation, for a term (the
"Employment Period") of one year commencing as of the date of this Employment
Agreement, which term shall thereafter be automatically extended for successive
twelve-month periods (the "Renewal Periods") unless either party shall give the
other written notice to the contrary no less than three months prior to the
commencement of any such twelve-month period, and which term is subject to
earlier termination as hereinafter provided.
<PAGE>
SECOND: Duties, Powers and Authority. During the Employment Period
the Executive shall be employed by the Corporation in the capacity of President
and Chief Executive Officer of the Corporation, with all such duties, powers
and authority as appertain to such office in accordance with the Corporation's
by-laws, subject to overall direction consistent with the legal authority of
the Board of Directors of the Corporation (the "Board"), and such duties,
powers and authority shall not be limited or materially changed by the
Corporation during the Employment Period. As President and Chief Executive
Officer, the Executive shall supervise, control and be responsible for the
general management and operations of the Corporation and have such other
executive powers and duties as may from time to time be prescribed by the
Board. The Executive shall report solely to the Board and there shall be no
employee of the Corporation who shall have authority equal or superior to the
authority of the Executive. The Corporation shall cause the Executive to be
elected to the Board at all times during the Employment Period, and the
Executive shall serve as a member of the Board at all times during the
Employment Period. The Executive shall devote all of his business time and
efforts to the business of the Corporation.
THIRD: Compensation.
A. The Corporation shall pay the Executive, and the Executive shall
accept from the Corporation, for the Executive's services during the Employment
Period, payable in accordance with
2
<PAGE>
the Corporation's customary payroll policy as in effect from time to time, but
in no event less frequently than semi-monthly, a base salary at the rate of no
less than $300,000 per annum (the "Base Salary"), subject to increase pursuant
to part B of this Article THIRD.
B. The Base Salary of the Executive shall be reviewed by the Board at
least semi-annually during the Employment Period, commencing on the six-month
anniversary of the date of this Agreement and such Base Salary may be increased
or maintained (but not decreased), in the sole and absolute discretion of the
Board. Any increase in Base Salary or other compensation shall in no way reduce
any other obligation of the Corporation hereunder.
C. At the sole and absolute discretion of the Board, the Executive
may be awarded an annual incentive bonus equal to one year's Base Salary, or
such other amount as the Board deems appropriate.
D. The Corporation shall reimburse the Executive for all reasonable
and necessary expenses incurred by him in connection with the performance of
his duties hereunder, including, without limitation, expenses for entertainment
and travel (including lodging). The Executive shall account to the Corporation
for all such expenses.
E. During the Employment Period, the Executive and his dependents
shall be entitled to participate in all employee benefit plans and arrangements
now in effect or which may hereafter be established which are generally
applicable to other
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senior executives of the Corporation and their dependents, including, without
limitation, all medical, hospital, dental, other health benefits, disability
insurance, retirement, pension, bonus, profit sharing, management incentive,
stock option and other related fringe benefit plans and policies, so long as
such plans and policies remain in effect with respect to senior executives of
the Corporation. In addition, during the Employment Period the Corporation
shall reimburse the Executive for any premiums, co-payments, deductibles and
other expenses incurred by the Executive to maintain the $1,000,000 term life
insurance policy issued in 1992, procured by the Executive from New England
Life Insurance Company for his benefit and the benefit of his designees. The
Executive shall also be entitled to the same amount of vacation time as is
generally available to other senior executives of the Corporation, but in no
event less than three weeks of paid vacation per year.
F. During the Employment Period, the Executive shall be an insured
under all director's and officer's insurance policies now in effect or which
may hereafter be established which are generally applicable to other senior
executives of the Corporation.
FIFTH: Termination.
A. The Employment Period, and the Executive's employment hereunder,
shall terminate as a result of any of the following events:
(i) the Executive's death;
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<PAGE>
(ii) in the event the Executive shall have been unable
substantially to perform his duties hereunder by reason of illness,
accident or other physical or mental disability for a continuous
period of 180 days or an aggregate period of 270 days during any
continuous twelve-month period (a "Disability"), upon the election of
the Board;
(iii) upon the election of the Board based on its
determination that the Executive's employment should be terminated by
the Corporation for "Cause" (as hereinafter defined), provided that
the Corporation shall have given the Executive proper notice thereof,
and the Executive shall have had at least a 30 day period in order to
cure such "Cause";
(iv) upon the election of the Executive based on his
determination that he has "Good Reason" (as hereinafter defined) for
such termination, provided that the Executive shall have given the
Corporation proper notice thereof, and the Corporation shall have had
at least a 30 day period in order to cure such "Good Reason";
(v) upon the election of the Executive following a "Change
in Control" (as hereinafter defined);
(vi) upon the mutual agreement of the Executive and the
Corporation; or
(vii) upon the decision of the Board without Cause.
B. The party terminating the Employment Period pursuant to clause
(ii), (iii), (iv), (v) or (vii) of part A of this Article FIFTH shall provide
the other with a written notice (a "Termination Notice") of such termination,
which notice shall
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<PAGE>
indicate the specific provision being relied upon and set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination.
The date on which termination is deemed to be effective is hereinafter referred
to as the "Termination Date."
C. For purposes of this Agreement, (i) the Corporation shall have
"Cause" to terminate the Executive's employment hereunder only if (a) the
Executive shall engage in fraudulent activities materially injurious to the
Corporation, (b) the Executive shall be convicted of a felony, (c) the
Executive shall willfully refuse to carry out the reasonable instructions,
consistent with the terms of this Agreement, of the Board, which willful
refusal shall materially adversely affect the Corporation, or (d) a
determination shall be made by any federal or state governmental agency, self
regulatory organization or other regulatory administrative agency having
jurisdiction over the business conducted by the Corporation that the Executive
should be removed or disqualified from acting as an officer of the Corporation;
(ii) "Good Reason" shall mean a breach by the Corporation of any of its
obligations under this Agreement; and (iii) a "Change in Control" shall be
deemed to occur upon (a) the sale by the Corporation of all or substantially
all of its assets to any person (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934), the consolidation of the
Corporation with any person, or the merger of the Corporation with any person
as a result of which merger the Corporation is not the surviving entity, or if
the survivor, the Corporation is
6
<PAGE>
owned by a parent company; or (b) the sale or transfer by one or more of the
Corporation's shareholders, in one or more transactions, related or unrelated,
to one or more persons under circumstances whereby any person and its
"affiliates" (as hereafter defined) shall own, as a result of such sale or
transfer and thereafter, at least one-half of the outstanding shares of the
Corporation. Nothing contained in the definition of Change in Control shall
limit or restrict the right of the Executive, in his capacity as a member of
the Board, from participating in any discussions or voting on any matter
referred to in said definition at any meeting of the Board. An "affiliate"
shall mean any person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
any other person.
SIXTH: Options.
A. The Corporation shall give to the Executive an Option (the "Initial
Option") to acquire such number of shares as will equal a 10% fully diluted
equity interest in the Corporation (the "Optioned Shares") at an exercise price
of $0.01 per share (the "Exercise Price"), which Option shall vest and become
exercisable solely during the Employment Period in 36 equal increments on each
of the first 36 monthly anniversaries of the commencement of the Executive's
employment with the Corporation, unless this Agreement is terminated by the
Executive because there is a Change in Control of the Corporation in which case
the Initial Option shall vest and be exercisable in full immediately upon
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<PAGE>
such event. If the Executive's employment is terminated by the Corporation
other than for Cause or is terminated by the Executive for Good Reason, any
shares that shall be issued upon the exercise of the portion of the Initial
Option that has theretofore vested and become exercisable shall be subject to
any lock up agreement between the Corporation and any underwriter in effect
upon such event, and the portion of the Initial Option that would have vested
and become exercisable in the twelve-month period occurring immediately after
the Termination Date shall vest and be exercisable upon such event, but any
shares that shall be issued upon the exercise of such portion of the Initial
Option shall be subject to any lock up agreement between the Corporation and
any underwriter in effect upon such event. If the Corporation effects an
Initial Public Offering, any shares that shall be issued upon the exercise of
the portion of the Initial Option that has vested and become exercisable prior
to such Initial Public Offering shall be subject to any lock up agreement
between the Corporation and any underwriter in connection therewith. If the
Executive's employment is terminated because of his death, any shares that
shall be issued to the executors and administrators of the Executive's estate
upon the exercise of the portion of the Initial Option that has vested and
become exercisable before his death shall be subject to any lock up agreement
between the Corporation and any underwriter in effect at such time. In addition
to the foregoing, the Board in its sole discretion may from time to time issue
additional stock options to the Executive.
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B. The Exercise Price in effect from time to time and the number of
shares represented by the Initial Option shall be subject to adjustment, as
follows:
(i) In the event that a dividend shall be declared on the
Common Stock payable in shares of the Common Stock, the Optioned
Shares shall be adjusted by adding to each Optioned Share the number
of shares which would be distributable thereon if such Optioned Share
had been outstanding on the date fixed for determining the
stockholders entitled to receive such stock dividend. In the event
that the outstanding shares of the Common Stock shall be changed into
or exchanged for a different number or kind of shares of stock or
other securities of the Corporation or of another corporation,
whether through reorganization, recapitalization, stock split-up,
combination of shares, sale of assets, merger or consolidation in
which the Corporation is the surviving corporation, then, there shall
be substituted for each Optioned Share the number and kind of shares
of stock or other securities into which each outstanding share of the
Common Stock shall be so changed or for which each such share shall
be exchanged.
(ii) In the event that any sale of shares of Common Stock
(except any such sale made pursuant to any right, option, warrant or
convertible security outstanding prior to the date of this
Agreement), or the issuance of any rights, options, or warrants to
subscribe for or purchase Common Stock (or securities convertible
into or exchangeable for Common Stock) occurs after the date of this
Agreement and during the Employment Period,
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<PAGE>
then, upon each such sale or issuance, the Executive shall be
issued an additional Option (an "Anti-Dilution Option") to
acquire the number of shares that, when aggregated with the
Optioned Shares, equals not less than 3.75% of the outstanding
(fully diluted) shares of the outstanding Common Stock of the
Corporation, at an exercise price equal to the Exercise Price,
and shall vest and be exercisable solely during the Employment
Period in equal increments during the period commencing with
the date of the issuance of such Anti-Dilution Option and ending
on the third anniversary of the commencement of the Executive's
employment with the Corporation, unless this Agreement is
terminated by the Executive because there is a Change in Control
of the Corporation in which case each Anti-Dilution Option shall
vest and be exercisable in full immediately upon such event. If
the Executive's employment is terminated by the Corporation other
than for Cause or the Executive terminates for Good Reason, any
shares that shall be issued upon the exercise of the portion of
the Anti-Dilution Option that has theretofore vested and become
exercisable shall be subject to any lock up agreement between the
Corporation and any underwriter in effect upon such event, and the
portion of the Anti-Dilution Option that would have vested and become
exercisable in the twelve-month period occurring immediately after
the Termination Date shall vest and be exercisable upon such event,
but any shares that shall be issued upon the exercise of such portion
of the Anti-Dilution Option shall be subject to any lock up agreement
between the Corporation and any underwriter in effect upon such
event. If the Corporation effects an Initial
10
APITAL PRINTING SYSTEMS]
<PAGE>
Public Offering, any shares that shall be issued upon the exercise of
the portion of the Anti-Dilution Option that has vested and become
exercisable prior to such Initial Public Offering shall be subject to
any lock up agreement between the Corporation and any underwriter in
connection therewith. If the Executive's employment is terminated
because of his death, any shares that shall be issued to the
executors and administrators of the Executive's estate upon the
exercise of the portion of the Anti-Dilution Option that has vested
and become exercisable before his death shall be subject to any lock
up agreement between the Corporation and any underwriter in effect at
such time. Each Anti-Dilution Option shall be entitled to the full
anti-dilution protection in clause (i) of this paragraph B.
Hereinafter the Initial Option and the Anti-dilution Option are
referred to as the "Options".
(iii) Neither the Executive nor the Executive's legal
representatives nor the executors or administrators of his estate
shall be or be deemed to be the holder of any share of the Common
Stock covered by an Option unless and until a certificate for such
share shall have been issued. Upon payment of the Exercise Price
therefore, a share issued upon exercise of the Option shall be fully
paid and nonassessable.
(iv) In order to exercise an Option, the Executive shall
give written notice of intent to exercise the Option to the Chief
Financial Officer of the Corporation or his delegate, in form and
substance reasonably satisfactory to the Board, specifying the number
of shares of Common Stock with respect to
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<PAGE>
which the Option is being exercised, and accompanied by payment to
the Corporation of the amount of the Exercise Price for the number of
shares of Common Stock so specified.
(v) Unless the shares of Common Stock to be issued upon the
exercise of an Option shall be registered prior to the issuance
thereof under the Securities Act of 1933, as amended, the Executive
(or, in the event of his death, the executors or administrators of
his estate) shall, as a condition of the Corporation's obligation to
issue such shares, give a representation in writing that he is (or
they are) acquiring such shares for his (or their) own account as an
investment and not with a view to, or for sale in connection with,
the distribution of any thereof and the certificate representing such
shares shall bear such legend, if any, as counsel for the Corporation
may deem to be necessary or desirable in order to comply with the
provisions of said Act.
(vi) In the event that the Corporation shall register
shares under the Securities Act of 1933, as amended, subsequent to
the Initial Public Offering, then, the Corporation shall at any time
during the period commencing with the first anniversary of such
Initial Public Offering and ending on the fifth anniversary of such
Initial Public Offering, upon the request of the Executive (or, in
the event of his death, of the executors or administrators of his
estate), include in such first mentioned registration the number of
shares of the Common Stock owned by the Executive (or his executors
or administrators) on the date of such request, for re-sale by him or
his executors or
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administrators. Notwithstanding the foregoing, the Corporation's
obligations under clause (vi) of this paragraph B shall be reduced to
the extent that the lead underwriter in such first mentioned
registration requests in good faith, in a letter addressed to the
Executive, such reduction.
(vii) If a holding company shall register shares under the
Securities Act of 1933, as amended, and the only material assets of
such holding company are shares of stock of the Corporation, and the
holding company has no material liabilities, the Corporation shall
arrange, at the timely request of the Executive (or, in the event of
his death, at the timely request of the executors or administrators
of his estate), to convert the Common Stock, and Options of the
Corporation owned by the Executive into shares of stock of the
holding company and options to acquire shares of stock of the holding
company so that after such conversion the Executive will own the same
percentage of the shares of stock of the holding company that he
owned in the Corporation and have options exercisable into the same
percentage of the shares of stock of the holding company that he was
entitled to acquire in the Corporation. If the holding company has
material assets other than shares of stock of the Corporation, or if
the holding company has material liabilities, the Executive and the
Corporation agree to negotiate in good faith an appropriate exchange
ratio between shares and options of the Corporation and shares and
options of the holding company.
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<PAGE>
SEVENTH: Payments on Termination.
A. If prior to the first anniversary of the date of this Agreement
the Executive's employment is terminated by the Corporation other than for
Cause (but including by reason of death or Disability), or by the Executive for
Good Reason, then the Corporation shall pay to the Executive, (i) the
Executive's full Base Salary through the Termination Date, together with all
benefits, bonuses and incentive and other compensation earned or accrued
through such date and (ii) an amount equal to one year's Base Salary. All
payments provided in the foregoing clause (ii) shall be made at the time when
the same would have become due if such termination had not occurred, unless the
Executive's employment is terminated by reason of his death or Disability, in
which case such payments shall be made on the fifth business day following the
Termination Date.
B. If during any Renewal Period the Executive's employment is
terminated by the Corporation other than for Cause, (but including death and
Disability), or terminated by the Executive for Good Reason, then, the
Corporation shall pay to the Executive, (i) the Executive's full Base Salary
through the Termination Date, together with all benefits, bonuses and incentive
and other compensation through such date and (ii) an amount equal to one year's
Base Salary. All payments provided in the foregoing clause (ii) shall be made
at the time when the same would have become due if such termination had not
occurred, unless the Executive's employment is terminated by reason of his
death or Disability, in which case such payments shall be made on
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<PAGE>
the fifth business day following the Termination Date.
C. The Executive shall not be required to mitigate the amount of any
payment provided for in parts A or B of this Article SEVENTH by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for therein be reduced by any compensation or retirement benefits
heretofore or hereafter earned by the Executive as the result of employment by
any other person, firm or corporation.
D. If during the Employment Period the Executive's employment is
terminated by the Corporation for Cause, or terminated by the Executive other
than for Good Reason, the Corporation shall pay to the Executive the
Executive's full Base Salary through the Termination Date, together with all
benefits, bonuses and incentive and other compensation through such date, on
the fifth day following the Termination Date.
EIGHTH: Confidentiality; Non-Solicitation.
A. The Executive acknowledges that by virtue of his employment
hereunder he will have access to "Confidential Information" (as hereinafter
defined) of the Corporation and that the communication of such Confidential
Information to third parties could irreparably injure the business of the
Corporation. Accordingly, the Executive agrees that he will treat and safeguard
as confidential and secret all Confidential Information received by him at any
time and that without the prior written consent of the Corporation, except as
required by law, he will not disclose or reveal any of the Confidential
Information to any
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<PAGE>
third party whatsoever or use the same in any manner, except in connection with
the business of the Corporation. For purposes of this Agreement, "Confidential
Information" means any information not generally known to the public or
recognized as standard industry practice, including, without limitation,
customer lists, trade secrets, inventions, formulas, methods or processes,
whether or not patented or patentable, pricing policies and records of the
Corporation and such other information normally understood to be confidential
or otherwise designated as such in writing by the Corporation, all of which the
Executive expressly acknowledges and agrees shall be confidential and
proprietary information belonging to the Corporation. Upon termination of his
employment with the Corporation, the Executive shall return to the Corporation
all documents and papers belonging to the Corporation, including any
Confidential Information, together with any copies, abstracts or summaries
thereof.
B. The Executive acknowledges and agrees that, because of the unique
and extraordinary nature of his services and in view of the nature and business
of the Corporation, any breach of any provisions of this Article EIGHTH will
cause irreparable injury and incalculable harm to the Corporation and that the
Corporation shall, accordingly, in addition to damages and reasonable
attorney's fees and expenses, be entitled to preliminary and permanent
injunctive or other equitable relief, without the necessity of proving actual
damages.
C. During the Employment Period and for a period of one year
thereafter, the Executive will not directly or indirectly
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<PAGE>
employ, solicit for employment, or advise or recommend to any other person that
they employ or solicit for employment, any person whom he knows to be an
employee of the Corporation or any parent, subsidiary or affiliate of the
Corporation.
NINTH: Non-Compete.
A. The Executive agrees that, during the Employment Period and, to
the extent applicable, for the period specified in paragraph B of this Article
NINTH, the Executive shall not, without the prior written approval of the
Board, for any reason whatsoever, directly or indirectly:
(i) Own, manage, operate, join or control, or participate
in the ownership, management, operation or control of, or be a
director, officer or employee of, or a consultant to, any business
enterprise which reasonably may be deemed "competitive" (as
hereinafter defined) with any business engaged in by the Corporation.
Nothing in this paragraph shall preclude the Executive from holding
an interest or investment of less than 5% of a publicly owned company
or business entity.
B. The provisions of paragraph A of this Article NINTH shall be
applicable, in the event of (a) the termination of the Executive's employment
hereunder by the Corporation for Cause, (b) the termination of the Executive's
employment by reason of the Executive's Disability, (c) the termination of the
Executive's employment by the Executive without Good Reason, or (d) the
termination of the Executive's employment by the Executive following a Change
in Control, for a period of twelve
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months after the Termination Date. In the event of the termination of the
Executive's employment hereunder by the Corporation other than for Cause and
other than by reason of the Executive's Disability, or by the Executive for
Good Reason, the provisions of paragraph A of this Article NINTH shall not be
applicable after the Termination Date.
C. A business shall be considered "competitive" with the business of
the Corporation only if it is located in the United States and is engaged in
the development, manufacture, production, distribution or marketing of
radiopharmaceutical or peptide drugs intended to diagnose or treat diseases
such as infection, cancer and blood clots.
D. In the event a court of competent jurisdiction should find any
provision in this Article NINTH to be unfair or unreasonable, such finding
shall not render such provision unenforceable, but, rather, this provision
shall be modified as to subject matter, time and geographic area so as to
render the entire paragraph valid and enforceable.
TENTH: Indemnification. The Corporation shall indemnify the Executive
to the fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time, for all amounts (including, without
limitation, judgements, fines, settlement payments, expenses and attorney's
fees) incurred or paid by the Executive in connection with any action, suit,
investigation or proceeding arising out of or relating to the performance by
the Executive of services for, or acting by
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the Executive as a director, officer or employee of, the Corporation or any
other person or enterprise at the Corporation's request, and shall to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time, advance all expenses incurred or paid
by the Executive in connection with, and until disposition of any action, suit,
investigation or proceeding arising out of or relating to the performance by
the Executive of services for, or acting by the Executive as a director,
officer or employee of, the Corporation or any other person or enterprise at
the Corporation's request.
ELEVENTH: Insurance. If requested by the Corporation, the Executive
agrees to cooperate with the Corporation in obtaining for the Corporation's
benefit, at the Corporation's expense, life insurance on his life. Such
cooperation shall include completing and signing such forms or applications,
undergoing physical examinations, and such other acts as may be required in
order to obtain such insurance.
TWELFTH: Notices. All notices hereunder shall be in writing and
personally delivered or sent by registered or certified mail, return receipt
requested, or by overnight courier service, and shall be deemed given when so
delivered or when deposited in the mail, postage prepaid, or delivered to such
service and addressed to a party at its address set forth below
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(or at such other address as each party may from time to time
designate):
If to the Corporation, to:
RhoMed Incorporated
__________________________
__________________________
with a copy to:
The Castle Group Ltd.
375 Park Avenue
New York, New York 10152
Attention: Michael S. Weiss, Esq.
If to the Executive, to:
Edward J. Quilty
620 Grindan Drive
Yardly, Pennsylvania 19067
with a copy to:
Rosenman & Colin LLP
575 Madison Ave.
New York, New York 10022
Attention: Eric J. Wallach, Esq.
Any change in address shall be sent by notice as set forth above but
shall be deemed given only upon its receipt.
THIRTEENTH: Entire Agreement; Waivers; Merger. This Agreement
constitutes the entire understanding between the parties with respect to the
subject matter hereof and no waiver, amendment or revision of, or addition to,
the terms hereof shall be valid unless in writing signed by the parties hereto
and only to the extent therein set forth. The failure of a party to insist upon
strict adherence to any term of this Agreement on any
20
<PAGE>
occasion shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement. All prior and contemporaneous agreements and understandings
with respect to the subject matter hereof, whether written or oral, are hereby
terminated and superseded by this Agreement.
FOURTEENTH: Severability. If any provision of this Agreement is
invalid, illegal or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
FIFTEENTH: Binding Effect. This Agreement shall inure to the benefit
of and shall bind the parties hereto and their respective heirs,
administrators, executors, successors, legal representatives and permitted
assigns.
SIXTEENTH: Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York, without
regard to its principles of conflict of laws.
SEVENTEENTH: Survival. The provisions of Articles EIGHTH and NINTH
shall survive the expiration or termination of this Agreement.
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EIGHTEENTH: Section Headings. The section headings herein have been
inserted for convenience of reference only and shall in no way modify, define
or restrict any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day and year first above written.
RhoMed Incorporated
By: /s/ Carl Spana
-----------------------------
Carl Spana
( TITLE )
/s/ Edward J. Quilty
-----------------------------
Edward J. Quilty
22
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 27th day of
September, 1996, is entered into by Palatin Technologies, Inc., a Delaware
corporation with its principal place of business at 214 Carnegie Center, Suite
100, Princeton, New Jersey 08540 (the "Company"), and Carl Spana, residing at
117 Winnebago Road, Yonkers, New York 10710 (the "Employee").
The Company desires to employ the Employee, and the Employee desires to
be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties
hereto, the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the Employee,
and the Employee hereby accepts employment with the Company, upon the terms
set forth in this Agreement, for the period commencing on June 21, 1996 (the
"Commencement Date") and ending on June 21, 1999 (such period, as it may be
extended, the "Employment Period"), unless sooner terminated in accordance
with the provisions of Section 4.
2. Title; Capacity. The Employee shall serve as Executive
Vice President and Chief Technology Officer or in such other
position as the Company or its Board of Directors (the "Board")
may determine from time to time. The Employee shall be based at
the Company's headquarters in Princeton, New Jersey. The
<PAGE>
Employee shall be subject to the supervision of, and shall have such authority
as is delegated to him by, the Board or such officer of the Company as may be
designated by the Board.
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties
and responsibilities as the Board or its designee shall from time to time
reasonably assign to him. The Employee agrees to devote his entire business
time, attention and energies to the business and interests of the Company
during the Employment Period. The Employee agrees to abide by the rules,
regulations, instructions, personnel practices and policies of the Company and
any changes therein which may be adopted from time to time by the Company. The
Employee acknowledges receipt of copies of all such rules and policies
committed to writing as of the date of this Agreement.
3. Compensation and Benefits.
3.1 Salary. The Company shall pay the Employee, in equal
semi-monthly installments or otherwise in accordance with the Company's
standard payroll policies as such policies may exist from time to time (after
withholding and other required deductions), an annual base salary of $150,000
for the one-year period commencing on the Commencement Date. Such salary shall
be subject to adjustment upward thereafter, as determined by the Board, on an
annual basis each year on the anniversary date of the Employee's original date
of employment by the Company (i.e., June 21) (the "Anniversary Date"), but the
Board shall not decrease the Employee's annual base salary at any annual
review.
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3.2 Fringe-Benefits. The Employee shall be entitled to participate
in all bonus and benefit programs that the Company establishes and makes
available to its employees, if any, to the extent that Employee's position,
tenure, salary, age, health and other qualifications make him eligible to
participate. The Employee shall also be entitled to holidays and annual
vacation leave in accordance with the Company's policy as it exists from time
to time.
3.3 Reimbursement of Expenses. The Company shall reimburse the
Employee for all reasonable travel, entertainment and other expenses incurred
or paid by the Employee in connection with, or related to, the performance of
his duties, responsibilities or services under this Agreement, upon
presentation by the Employee of documentation, expense statements, vouchers
and/or such other supporting information as the Company may request, provided,
however, that the amount available for such travel, entertainment and other
expenses may be fixed in advance by the Board.
4. Employment Termination. The employment of the Employee
by the Company pursuant to this Agreement shall terminate upon
the occurrence of any of the following:
4.1 Expiration of the Employment Period in accordance
with Section 1;
4.2 At the election of the Company, for cause, immediately upon
written notice by the Company to the Employee. For the purposes of this
Section 4.2, cause for termination shall be deemed to exist upon (a) a good
faith finding by the Company
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of failure of the Employee to perform his assigned duties for the Company
(which failure continues for thirty (30) days following written notice thereof
to the Employee), dishonesty, negligence or misconduct, (b) the breach by the
Employee of Section 7 of this Agreement or any provision of any
confidentiality, invention and non-disclosure, non-competition or similar
agreement between the Employee and the Company, or (c) the conviction of the
Employee of, or the entry of a pleading of guilty or nolo contendere by the
Employee to, any crime involving moral turpitude or any felony;
4.3 Thirty days after the death or disability of the Employee. As
used in this Agreement, the term "disability" shall mean the inability of the
Employee, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360-day period, to perform the services
contemplated under this Agreement. A determination of disability shall be made
by a physician satisfactory to both the Employee and the Company; provided,
however, that if the Employee and the Company do not agree on a physician, the
Employee and the Company shall each select a physician and these two together
shall select a third physician, whose determination as to disability shall be
binding on all parties;
4.4 At the election of either party, upon not less than thirty
days' prior written notice of termination (the "Notice of Termination").
4
<PAGE>
5. Effect of Termination.
5.1 Termination for Cause or at Election of Either Party. In the
event the Employee's employment is terminated for cause pursuant to Section
4.2, or at the election of the Employee pursuant to Section 4.4, the Company
shall pay to the Employee the compensation and benefits otherwise payable to
him under Section 3 through the last day of his actual employment by the
Company (the "Date of Termination"). In the event the Employee's employment is
terminated at the election of the Company pursuant to Section 4.4, (a) the
Company shall pay the Employee the compensation that would otherwise have been
payable to the Employee, after withholding and other required deductions and
in accordance with standard Company payroll policies and procedures, for a
period of nine months after the Date of Termination and (b) all options to
purchase shares of capital stock of the Company previously granted to the
Employee pursuant to any stock option plan or other employee benefit plan with
the Company which have not vested at such time but which would have vested on
and prior to the next Anniversary Date shall vest and become fully exercisable
to the extent of the Applicable Percentage. As used in this Agreement, the
Applicable Percentage shall be the amount (expressed as a percentage) obtained
by dividing the number of months elapsed from the June of the prior
Anniversary Date to and including the month of such termination by twelve.
5.2 Termination for Death or Disability. If the
Employee's employment is terminated by death or because of
disability pursuant to Section 4.3, (a) the Company shall pay to
5
<PAGE>
the estate of the Employee or to the Employee, as the case may be, the
compensation which would otherwise be payable to the Employee up to the end of
the month in which the termination of his employment because of death or
disability occurs and (b) all options to purchase shares of capital stock of
the Company previously granted to the Employee pursuant to any stock option
plan or other employee benefit plan with the Company which have not vested at
such time but which would have vested on and prior to the next Anniversary
Date shall vest and become fully exercisable to the extent of the Applicable
Percentage.
5.3 Survival. The provisions of Sections 5, 6, 7 and 8 shall
survive the termination of this Agreement.
6. Change in Control.
6.1 Notwithstanding the foregoing, in the event that the Employee's
employment is terminated (i) by the Company pursuant to Section 4.2 or (ii) by
the Employee pursuant to Section 4.4 for Good Reason (as defined in Section
6.4), in either case within 12 months following a Change in Control (as
defined in Section 6.3) of the Company, the Company shall not be required to
pay the Employee the compensation and benefits set forth in Section 5.1, but
instead shall provide the Employee with the following benefits:
(i) the Company shall pay to the Employee (A) the Employee's
full base salary and all other compensation through the Date of Termination at
the rate in effect at the time the Notice of Termination is given, no later
than the fifth full day following the Date of Termination, plus all other
amounts to
6
<PAGE>
which the Employee is entitled under any compensation plan of the Company at
the time such payments are due and (B) if the Employee so elects, in lieu of
his right to continue to receive deferred compensation under any deferred
compensation plan of the Company then in effect, no later than the fifth full
day following the Date of Termination, a lump-sum amount, in cash, equal to
the deferred amounts together with any earnings credited on such amounts under
such plan;
(ii) for a nine-month period after termination, the Company
will pay as severance pay to the Employee an amount equal to the sum of (A)
the higher of (x) the Employee's annual base salary in effect on the Date of
Termination or (y) the Employee's annual base salary in effect immediately
prior to the Change in Control of the Company, plus (B) the higher of (x) the
amount of the cash performance bonuses paid or awarded to the Employee with
respect to the Company's most recent full fiscal year for which such a bonus
was paid or awarded to the Employee or (y) the amount of cash performance
bonuses paid or awarded to the Employee with respect to the Company's last
full fiscal year prior to the Change in Control of the Company for which such
a bonus was paid or awarded to the Employee, in each case after withholding
and other required deductions and in accordance with standard Company payroll
policies and procedures;
(iii) for a nine-month period after termination, the Company
shall arrange to provide the Employee with life, disability, dental, accident,
travel and group health insurance benefits substantially similar to those
which the Employee was
7
<PAGE>
receiving immediately prior to the Notice of Termination. Notwithstanding the
foregoing, the Company shall not provide any benefit otherwise receivable by
the Employee pursuant to this paragraph (iv) if an equivalent benefit is
actually received by the Employee during the 9-month period following his
termination and any such benefit actually received by the Employee shall be
reported to the Company; and
(iv) for a six-month period after termination, the Company
shall reimburse the Employee for reasonable fees and expenses incurred by him
for the purpose of locating employment, including the fees and expenses of
consultants and other persons retained by him for such purpose, promptly upon
receipt by the Company of satisfactory evidence of payment of such fees and
expenses.
6.2 In the event a Change in Control of the Company occurs during
the Employment Period, all options to purchase shares of capital stock of the
Company previously granted to the Employee pursuant to any stock option plan
or other employee benefit arrangement of the Company shall immediately vest
and become fully exercisable in accordance with their terms.
6.3 A "Change in Control" of the Company shall occur or be deemed
to have occurred only if any of the following events occurs: (i) any "person,"
as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (other than the Company, any
trustee or other fiduciary holding securities under an employee benefit plan
of
8
<PAGE>
the Company, or any corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 40% or more of the combined voting
power of the Company's then outstanding securities; (ii) individuals who, as
of the date hereof, constitute the Board (as of the date hereof, the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of
an individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A under the Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or
(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 80% of the combined voting power of the voting
9
<PAGE>
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation or (B) a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or (iv)
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
6.4 "Good Reason" means the occurrence after a Change in Control of
the Company of any of the following circumstances:
(i) any significant diminution in the Employee's
position, duties, responsibilities, title or office as in effect
immediately prior to a Change in Control;
(ii) any reduction in the Employee's annual
compensation as in effect on the date hereof or as the same may
be increased from time to time;
(iii) the failure of the Company to continue in effect any
material compensation or benefit plan in which the Employee participates
immediately prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue the Employee's
participation therein (or in such substitute or alternative plan) on a basis
not materially less favorable, both in terms of the amount of benefits
provided and the level of the
10
<PAGE>
Employee's participation relative to other participants, as existed at the
time of the Change in Control or the failure by the Company to award cash
bonuses to its executives in amounts substantially consistent with past
practice in light of the Company's financial performance;
(iv) the failure by the Company to continue to provide the
Employee with benefits substantially similar to those enjoyed by the Employee
under any of the Company's insurance, medical, health and accident, or
disability plans in which the Employee was participating at the time of the
Change in Control, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits, or the failure
by the Company to provide the Employee with the number of paid vacation days
to which he is entitled in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control or in accordance with
any agreement between the Employee and the company existing at the time of the
Change in Control;
(v) any requirement by the Company or of any person in
control of the Company that the location at which the Employee performs his
principal duties for the Company at the time of the Change in Control (the
"Prior Location") be changed to a new location outside a radius of 50 miles
from such Prior Location;
(vi) any request by the Company or of any person in control of
the Company that the Employee travel on an overnight basis to an extent not
substantially consistent with
11
<PAGE>
his business travel obligations immediately prior to a Change in
Control of the Company;
(vii) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement; or
(viii) any purported termination of the Employee's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 9, which purported termination shall not be effective
for purposes of this Agreement.
7. Non-Compete.
(a) For the purposes of this Agreement:
(i) "Proprietary Information" means all information and
know-how, whether or not in writing, of a private, secret or confidential
nature concerning the Company's business or financial affairs, including,
without limitation, inventions, products, processes, methods, techniques,
formulas, compositions, compounds, projects, developments, plans, research
data, clinical data, financial data, personnel data, computer programs and
customer and supplier lists.
(ii) "Competing Products" means any products or processes of
any person or organization other than the Company in existence or under
development, which are substantially the same, may be substituted for, or
applied to substantially the same end use as the products or processes that
the Company has plans to develop, is developing or has developed or
commercialized during the time of the Employee's employment with the Company.
12
<PAGE>
(iii) "Competing Organization" means any person or
organization engaged in, or about to become engaged in, research or
development, production, distribution, marketing or selling of a Competing
Product.
(b) The Employee understands that information regarding the
Company and its affiliates including, without limitation, Proprietary
Information, is considered confidential to the Company and is of substantial
commercial value to the Company. Any entrusting of such confidential
information to the Employee by the Company is done so in reliance upon the
confidential relationship arising from the terms of his employment with the
Company. Therefore, in consideration of his employment with the Company, the
Employee agrees that he will not render services of any nature, directly or
indirectly, to any Competing Organization in connection with any Competing
Product within such geographical territory as the Company and such Competing
Organization are or would be in actual competition, for a period of nine
months, commencing on the date of termination of his employment. The Employee
understands that services rendered to such Competing Organization may have the
effect of supporting actual competition in various geographic areas, and may
be prohibited by this Agreement regardless of the geographic area in which
such services are physically rendered. The Company may, in its sole
discretion, elect to waive, in whole or in part, the obligation set forth in
the previous sentence, such waiver to be effective only if given in writing by
the Company.
13
<PAGE>
8. Confidentiality and Assignment of Inventions. The Employee
acknowledges that he has, on or prior to the date of this Agreement, executed
and delivered to the Company a Non- Disclosure Agreement (the "Confidentiality
Agreement"). The Employee hereby affirms and ratifies his obligations
thereunder.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or
at such other address or addresses as either party shall designate to the
other in accordance with this Section 9.
10. Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular forms of
nouns and pronouns shall include the plural, and vice versa.
11. Entire Agreement. This Agreement, together with the
Confidentiality Agreement, constitutes the entire agreement
between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject
matter of this Agreement.
12. Amendment. This Agreement may be amended or modified
only by a written instrument executed by both the Company and the
Employee.
13. Governing Law. This Agreement shall be construed,
interpreted and enforced in accordance with the laws of New
Jersey.
14
<PAGE>
14. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business; provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
15. Miscellaneous.
15.1 No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any
right on any other occasion.
15.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope
or substance of any section of this Agreement.
15.3 In case any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability
of the remaining provisions shall in no way be affected or impaired thereby.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
an instrument under seal as of the day and year set forth above.
PALATIN TECHNOLOGIES, INC.
By: /s/ Edward J. Quilty
----------------------------------------
Name: Edward J. Quilty
Title: Chief Executive Officer
EMPLOYEE
/s/ Carl Spana
-------------------------------------------
Carl Spana
16
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 27th day of
September, 1996, is entered into by Palatin Technologies, Inc., a Delaware
corporation with its principal place of business at 214 Carnegie Center, Suite
100, Princeton, New Jersey 08540 (the "Company"), and Charles Putnam, residing
at 11 Woodview Drive, Belle Mead, New Jersey 08502 (the "Employee").
The Company desires to employ the Employee, and the Employee desires to
be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties
hereto, the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the Employee,
and the Employee hereby accepts employment with the Company, upon the terms
set forth in this Agreement, for the period commencing on June 21, 1996 (the
"Commencement Date") and ending on June 21, 1999 (such period, as it may be
extended, the "Employment Period"), unless sooner terminated in accordance
with the provisions of Section 4.
2. Title; Capacity. The Employee shall serve as Executive
Vice President or in such other position as the Company or its
Board of Directors (the "Board") may determine from time to time.
The Employee shall be based at the Company's headquarters in
Princeton, New Jersey. The Employee shall be subject to the
<PAGE>
supervision of, and shall have such authority as is delegated to him by, the
Board or such officer of the Company as may be designated by the Board.
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties
and responsibilities as the Board or its designee shall from time to time
reasonably assign to him. The Employee agrees to devote his entire business
time, attention and energies to the business and interests of the Company
during the Employment Period. The Employee agrees to abide by the rules,
regulations, instructions, personnel practices and policies of the Company and
any changes therein which may be adopted from time to time by the Company. The
Employee acknowledges receipt of copies of all such rules and policies
committed to writing as of the date of this Agreement.
3. Compensation and Benefits.
3.1 Salary. The Company shall pay the Employee, in equal
semi-monthly installments or otherwise in accordance with the Company's
standard payroll policies as such policies may exist from time to time (after
withholding and other required deductions), an annual base salary of $150,000
for the one-year period commencing on the Commencement Date. Such salary shall
be subject to adjustment upward thereafter, as determined by the Board, on an
annual basis each year on the anniversary date of the Employee's original date
of employment by the Company (i.e., June 21) (the "Anniversary Date"), but the
Board shall not decrease the Employee's annual base salary at any annual
review.
2
<PAGE>
3.2 Fringe-Benefits. The Employee shall be entitled to participate
in all bonus and benefit programs that the Company establishes and makes
available to its employees, if any, to the extent that Employee's position,
tenure, salary, age, health and other qualifications make him eligible to
participate. The Employee shall also be entitled to holidays and annual
vacation leave in accordance with the Company's policy as it exists from time
to time.
3.3 Reimbursement of Expenses. The Company shall reimburse the
Employee for all reasonable travel, entertainment and other expenses incurred
or paid by the Employee in connection with, or related to, the performance of
his duties, responsibilities or services under this Agreement, upon
presentation by the Employee of documentation, expense statements, vouchers
and/or such other supporting information as the Company may request, provided,
however, that the amount available for such travel, entertainment and other
expenses may be fixed in advance by the Board.
4. Employment Termination. The employment of the Employee
by the Company pursuant to this Agreement shall terminate upon
the occurrence of any of the following:
4.1 Expiration of the Employment Period in accordance
with Section 1;
4.2 At the election of the Company, for cause, immediately upon
written notice by the Company to the Employee. For the purposes of this
Section 4.2, cause for termination shall be deemed to exist upon (a) a good
faith finding by the Company
3
<PAGE>
of failure of the Employee to perform his assigned duties for the Company
(which failure continues for thirty (30) days following written notice thereof
to the Employee), dishonesty, negligence or misconduct, (b) the breach by the
Employee of Section 7 of this Agreement or any provision of any
confidentiality, invention and non-disclosure, non-competition or similar
agreement between the Employee and the Company, or (c) the conviction of the
Employee of, or the entry of a pleading of guilty or nolo contendere by the
Employee to, any crime involving moral turpitude or any felony;
4.3 Thirty days after the death or disability of the Employee. As
used in this Agreement, the term "disability" shall mean the inability of the
Employee, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360-day period, to perform the services
contemplated under this Agreement. A determination of disability shall be made
by a physician satisfactory to both the Employee and the Company; provided,
however, that if the Employee and the Company do not agree on a physician, the
Employee and the Company shall each select a physician and these two together
shall select a third physician, whose determination as to disability shall be
binding on all parties;
4.4 At the election of either party, upon not less than thirty
days' prior written notice of termination (the "Notice of Termination").
4
<PAGE>
5. Effect of Termination.
5.1 Termination for Cause or at Election of Either Party. In the
event the Employee's employment is terminated for cause pursuant to Section
4.2, or at the election of the Employee pursuant to Section 4.4, the Company
shall pay to the Employee the compensation and benefits otherwise payable to
him under Section 3 through the last day of his actual employment by the
Company (the "Date of Termination"). In the event the Employee's employment is
terminated at the election of the Company pursuant to Section 4.4, (a) the
Company shall pay the Employee the compensation that would otherwise have been
payable to the Employee, after withholding and other required deductions and
in accordance with standard Company payroll policies and procedures, for a
period of nine months after the Date of Termination and (b) all options to
purchase shares of capital stock of the Company previously granted to the
Employee pursuant to any stock option plan or other employee benefit plan with
the Company which have not vested at such time but which would have vested on
and prior to the next Anniversary Date shall vest and become fully exercisable
to the extent of the Applicable Percentage. As used in this Agreement, the
Applicable Percentage shall be the amount (expressed as a percentage) obtained
by dividing the number of months elapsed from the June of the prior
Anniversary Date to and including the month of such termination by twelve.
5.2 Termination for Death or Disability. If the
Employee's employment is terminated by death or because of
disability pursuant to Section 4.3, (a) the Company shall pay to
5
<PAGE>
the estate of the Employee or to the Employee, as the case may be, the
compensation which would otherwise be payable to the Employee up to the end of
the month in which the termination of his employment because of death or
disability occurs and (b) all options to purchase shares of capital stock of
the Company previously granted to the Employee pursuant to any stock option
plan or other employee benefit plan with the Company which have not vested at
such time but which would have vested on and prior to the next Anniversary
Date shall vest and become fully exercisable to the extent of the Applicable
Percentage.
5.3 Survival. The provisions of Sections 5, 6, 7 and 8 shall
survive the termination of this Agreement.
6. Change in Control.
6.1 Notwithstanding the foregoing, in the event that the Employee's
employment is terminated (i) by the Company pursuant to Section 4.2 or (ii) by
the Employee pursuant to Section 4.4 for Good Reason (as defined in Section
6.4), in either case within 12 months following a Change in Control (as
defined in Section 6.3) of the Company, the Company shall not be required to
pay the Employee the compensation and benefits set forth in Section 5.1, but
instead shall provide the Employee with the following benefits:
(i) the Company shall pay to the Employee (A) the Employee's
full base salary and all other compensation through the Date of Termination at
the rate in effect at the time the Notice of Termination is given, no later
than the fifth full day following the Date of Termination, plus all other
amounts to
6
<PAGE>
which the Employee is entitled under any compensation plan of the Company at
the time such payments are due and (B) if the Employee so elects, in lieu of
his right to continue to receive deferred compensation under any deferred
compensation plan of the Company then in effect, no later than the fifth full
day following the Date of Termination, a lump-sum amount, in cash, equal to
the deferred amounts together with any earnings credited on such amounts under
such plan;
(ii) for a nine-month period after termination, the Company
will pay as severance pay to the Employee an amount equal to the sum of (A)
the higher of (x) the Employee's annual base salary in effect on the Date of
Termination or (y) the Employee's annual base salary in effect immediately
prior to the Change in Control of the Company, plus (B) the higher of (x) the
amount of the cash performance bonuses paid or awarded to the Employee with
respect to the Company's most recent full fiscal year for which such a bonus
was paid or awarded to the Employee or (y) the amount of cash performance
bonuses paid or awarded to the Employee with respect to the Company's last
full fiscal year prior to the Change in Control of the Company for which such
a bonus was paid or awarded to the Employee, in each case after withholding
and other required deductions and in accordance with standard Company payroll
policies and procedures;
(iii) for a nine-month period after termination, the Company
shall arrange to provide the Employee with life, disability, dental, accident,
travel and group health insurance benefits substantially similar to those
which the Employee was
7
<PAGE>
receiving immediately prior to the Notice of Termination. Notwithstanding the
foregoing, the Company shall not provide any benefit otherwise receivable by
the Employee pursuant to this paragraph (iv) if an equivalent benefit is
actually received by the Employee during the 9-month period following his
termination and any such benefit actually received by the Employee shall be
reported to the Company; and
(iv) for a six-month period after termination, the Company
shall reimburse the Employee for reasonable fees and expenses incurred by him
for the purpose of locating employment, including the fees and expenses of
consultants and other persons retained by him for such purpose, promptly upon
receipt by the Company of satisfactory evidence of payment of such fees and
expenses.
6.2 In the event a Change in Control of the Company occurs during
the Employment Period, all options to purchase shares of capital stock of the
Company previously granted to the Employee pursuant to any stock option plan
or other employee benefit arrangement of the Company shall immediately vest
and become fully exercisable in accordance with their terms.
6.3 A "Change in Control" of the Company shall occur or be deemed
to have occurred only if any of the following events occurs: (i) any "person,"
as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (other than the Company, any
trustee or other fiduciary holding securities under an employee benefit plan
of
8
<PAGE>
the Company, or any corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 40% or more of the combined voting
power of the Company's then outstanding securities; (ii) individuals who, as
of the date hereof, constitute the Board (as of the date hereof, the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of
an individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A under the Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or
(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 80% of the combined voting power of the voting
9
<PAGE>
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation or (B) a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or (iv)
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
6.4 "Good Reason" means the occurrence after a Change in Control of
the Company of any of the following circumstances:
(i) any significant diminution in the Employee's
position, duties, responsibilities, title or office as in effect
immediately prior to a Change in Control;
(ii) any reduction in the Employee's annual
compensation as in effect on the date hereof or as the same may
be increased from time to time;
(iii) the failure of the Company to continue in effect any
material compensation or benefit plan in which the Employee participates
immediately prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue the Employee's
participation therein (or in such substitute or alternative plan) on a basis
not materially less favorable, both in terms of the amount of benefits
provided and the level of the
10
<PAGE>
Employee's participation relative to other participants, as existed at the
time of the Change in Control or the failure by the Company to award cash
bonuses to its executives in amounts substantially consistent with past
practice in light of the Company's financial performance;
(iv) the failure by the Company to continue to provide the
Employee with benefits substantially similar to those enjoyed by the Employee
under any of the Company's insurance, medical, health and accident, or
disability plans in which the Employee was participating at the time of the
Change in Control, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits, or the failure
by the Company to provide the Employee with the number of paid vacation days
to which he is entitled in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control or in accordance with
any agreement between the Employee and the company existing at the time of the
Change in Control;
(v) any requirement by the Company or of any person in
control of the Company that the location at which the Employee performs his
principal duties for the Company at the time of the Change in Control (the
"Prior Location") be changed to a new location outside a radius of 50 miles
from such Prior Location;
(vi) any request by the Company or of any person in control of
the Company that the Employee travel on an overnight basis to an extent not
substantially consistent with
11
<PAGE>
his business travel obligations immediately prior to a Change in
Control of the Company;
(vii) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement; or
(viii) any purported termination of the Employee's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 9, which purported termination shall not be effective
for purposes of this Agreement.
7. Non-Compete.
(a) For the purposes of this Agreement:
(i) "Proprietary Information" means all information and
know-how, whether or not in writing, of a private, secret or confidential
nature concerning the Company's business or financial affairs, including,
without limitation, inventions, products, processes, methods, techniques,
formulas, compositions, compounds, projects, developments, plans, research
data, clinical data, financial data, personnel data, computer programs and
customer and supplier lists.
(ii) "Competing Products" means any products or processes of
any person or organization other than the Company in existence or under
development, which are substantially the same, may be substituted for, or
applied to substantially the same end use as the products or processes that
the Company plans to
12
<PAGE>
develop, is developing, or has developed or commercialized during the time of
the Employee's employment with the Company.
(iii) "Competing Organization" means any person or
organization engaged in, or about to become engaged in, research or
development, production, distribution, marketing or selling of a Competing
Product.
(b) The Employee understands that information regarding the
Company and its affiliates including, without limitation, Proprietary
Information, is considered confidential to the Company and is of substantial
commercial value to the Company. Any entrusting of such confidential
information to the Employee by the Company is done so in reliance upon the
confidential relationship arising from the terms of his employment with the
Company. Therefore, in consideration of his employment with the Company, the
Employee agrees that he will not render services of any nature, directly or
indirectly, to any Competing Organization in connection with any Competing
Product within such geographical territory as the Company and such Competing
Organization are or would be in actual competition, for a period of nine
months, commencing on the date of termination of his employment. The Employee
understands that services rendered to such Competing Organization may have the
effect of supporting actual competition in various geographic areas, and may
be prohibited by this Agreement regardless of the geographic area in which
such services are physically rendered. The Company may, in its sole
discretion, elect to waive, in whole or in part, the obligation set forth in
13
<PAGE>
the previous sentence, such waiver to be effective only if given
in writing by the Company.
8. Confidentiality and Assignment of Inventions. The Employee
acknowledges that he has, on or prior to the date of this Agreement, executed
and delivered to the Company a Non- Disclosure Agreement (the "Confidentiality
Agreement"). The Employee hereby affirms and ratifies his obligations
thereunder.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or
at such other address or addresses as either party shall designate to the
other in accordance with this Section 9.
10. Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular forms of
nouns and pronouns shall include the plural, and vice versa.
11. Entire Agreement. This Agreement, together with the
Confidentiality Agreement, constitutes the entire agreement
between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject
matter of this Agreement.
12. Amendment. This Agreement may be amended or modified
only by a written instrument executed by both the Company and the
Employee.
14
<PAGE>
13. Governing Law. This Agreement shall be construed,
interpreted and enforced in accordance with the laws of New
Jersey.
14. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business; provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
15. Miscellaneous.
15.1 No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any
right on any other occasion.
15.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope
or substance of any section of this Agreement.
15.3 In case any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability
of the remaining provisions shall in no way be affected or impaired thereby.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
an instrument under seal as of the day and year set forth above.
PALATIN TECHNOLOGIES, INC.
By: /s/ Edward J. Quilty
---------------------------------------
Name: Edward J. Quilty
Title: Chief Executive Officer
EMPLOYEE
/s/ Charles Putnam
------------------------------------------
Charles Putnam
16
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH
TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
RHOMED INCORPORATED
CLASS C WARRANT FOR THE PURCHASE OF
-----------------------------------
SHARES OF COMMON STOCK
----------------------
NO. 1 275,000 SHARES
For value received, RhoMed Incorporated, a New Mexico corporation
(the "COMPANY"), hereby certifies that William I. Franzblau or permitted
assigns, is entitled to purchase from the Company, at any time or from time
to time commencing on June 24, 1996 and prior to 5:00 P.M., New York City
time, on four years from June 24, 1996 (the "TERMINATION DATE"), Two Hundred
and Seventy-Five Thousand (275,000) fully paid and non-assessable shares of
the Common Stock, no par value, of the Company for an aggregate purchase price
of $110,000 (computed on the basis of $.40 per share).
Herein, (i) said Common Stock, together with any other equity
securities which may be issued by the Company with respect thereto or in
substitution therefor, including, but not limited to, such securities as may
be issued pursuant to the Agreement and Plan of Reorganization by and among
Interfilm, Inc., Interfilm Acquisition Corp. and RhoMed Incorporated as of
April 12, 1996, is referred to as the "COMMON STOCK", (ii) the shares of the
Common Stock purchasable hereunder or under any other Warrant (as hereinafter
defined) are referred to as the "WARRANT SHARES", (iii) the aggregate purchase
price payable
Class C Warrant Page 1
<PAGE>
for the Warrant Shares hereunder is referred to as the "AGGREGATE WARRANT
PRICE", (iv) the price payable for each of the Warrant Shares hereunder is
referred to as the "PER SHARE WARRANT PRICE", (v) this Warrant, all similar
Warrants issued on the date hereof and all Warrants hereafter issued in
exchange or substitution for this Warrant or such similar Warrants are
referred to as the "WARRANTS" and (vi) the holder of this Warrant or Warrant
Shares issued upon the exercise of this Warrant is referred to as the "HOLDER"
and the holder of this Warrant and all other Warrants or Warrant Shares issued
upon the exercise of any Warrant are referred to as the "HOLDERS". The
Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant
Price is subject to adjustment as hereinafter provided; in the event of any
such adjustment, the number of Warrant Shares shall be adjusted by dividing
the Aggregate Warrant Price by the Per Share Warrant Price in effect
immediately after such adjustment.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised, in whole at any time or
in part from time to time, commencing on June 24, 1996 and prior to the
Termination Date, unless terminated earlier as set forth in Section 8 hereof,
by the holder by the surrender of this Warrant (with the subscription form at
the end hereof duly executed) at the address set forth in Subsection 10(a)
hereof, together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with payment
for Warrant Shares made by certified or official bank check payable to the
order of the Company; or
(b) If this Warrant is exercised in part, this Warrant must
be exercised for a number of whole shares of the Common Stock and the Holder
is entitled to receive a new Warrant covering the Warrant Shares which have
not been exercised and setting forth the proportionate part of the Aggregate
Warrant Price applicable to such Warrant Shares. Upon surrender of this
Warrant, the Company will (i) issue a certificate or certificates in the name
of the Holder for the largest number of whole shares of the Common Stock to
which the Holder shall be entitled and, if this Warrant is exercised in whole,
in lieu of any fractional share of the Common Stock to which the Holder shall
be entitled, pay to the Holder cash in an amount equal to the fair value of
such fractional share (determined in such reasonable manner as the Board of
Directors of the Company shall determine), and (ii) deliver the other
securities and properties receivable upon the exercise of this Warrant, or the
proportionate part thereof if this Warrant is exercised in part, pursuant to
the provisions of this Warrant.
2. RESERVATION OF WARRANT SHARES; LISTING. The Company
agrees that, prior to the expiration of this Warrant, the Company will at all
times have authorized and in
Class C Warrant Page 2
<PAGE>
reserve, and keep available, solely for issuance and delivery upon the
exercise of this Warrant, the shares of the Common Stock and other securities
and properties as from time to time shall be receivable upon the exercise of
this Warrant, free and clear of all restrictions (other than restrictions
necessary to comply with Federal and state securities laws) on sale or
transfer and free and clear of all preemptive rights and rights of first
refusal.
3. PROTECTION AGAINST DILUTION.
(a) In case the Company shall hereafter (i) pay a dividend
or make a distribution on its capital stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the Per Share Warrant Price shall be
adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Warrant Price and the denominator of which shall be the number of
shares of Common Stock or other capital stock of the Company which he would
have owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this Subsection 3(a)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(b) In case of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), the Holder of this Warrant shall have the
right thereafter to receive on the exercise of this Warrant the kind and
amount of securities, cash or other property which the Holder would have owned
or have been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or
conveyance had this Warrant been exercised immediately prior to the effective
date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as
may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Subsection 3(c) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or
Class C Warrant Page 3
<PAGE>
conveyances. The issuer of any shares of stock or other securities or property
thereafter deliverable on the exercise of this Warrant shall be responsible
for all of the agreements and obligations of the Company hereunder. Notice of
any such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holders of the Warrants not less than 30 days prior to
such event; provided, however, that notice need not been give on account of
transactions provided for in the Agreement and Plan of Reorganization by and
among Interfilm, Inc., Interfilm Acquisition Corp. and RhoMed Incorporated as
of April 12, 1996. A sale of all or substantially all of the assets of the
Company for a consideration consisting primarily of securities shall be deemed
a consolidation or merger for the foregoing purposes.
(c) In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants
representing the right to purchase a majority of the Warrant Shares subject to
all outstanding Warrants may appoint a firm of independent public accountants
of recognized national standing reasonably acceptable to the Company, which
shall give their opinion as to the adjustment, if any, on a basis consistent
with the essential intent and principles established herein, necessary to
preserve the purchase rights represented by the Warrants. Upon receipt of such
opinion, the Company will promptly mail a copy thereof to the Holder of this
Warrant and shall make the adjustments described therein. The fees and
expenses of such independent public accountants shall be borne by the Company.
(d) No adjustment in the Per Share Warrant Price shall be
required unless such adjustment would require an increase or decrease of at
least $0.05 per share of Common Stock; provided, however, that any adjustments
which by reason of this Subsection 3(d) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment; provided,
further, however, that adjustments shall be required and made in accordance
with the provisions of this Section 3 (other than this Subsection 3(d)) not
later than such time as may be required in order to preserve the tax-free
nature of a distribution to the Holder of this Warrant or Common Stock
issuable upon the exercise hereof. All calculations under this Section 3 shall
be made to the nearest cent or to the nearest 1/100th of a share, as the case
may be. Anything in this Section 3 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Per Share Warrant
Price, in addition to those required by this Section 3, as it in its
discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or
securities convertible or exchangeable for stock hereafter made by the Company
to its stockholders shall not be taxable.
Class C Warrant Page 4
<PAGE>
(e) Whenever the Per Share Warrant Price is adjusted as
provided in this Section 3 and upon any modification of the rights of a Holder
of Warrants in accordance with this Section 3, the Company shall promptly
obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company) setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or the effect of
such modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
(f) If the Board of Directors of the Company shall declare
any dividend or other distribution with respect to the Common Stock other than
a cash distribution out of earned surplus, the Company shall mail notice
thereof to the Holders of the Warrants not less than 15 days prior to the
record date fixed for determining stockholders entitled to participate in such
dividend or other distribution.
(g) If, as a result of an adjustment made pursuant to this
Section 3, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price between
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. FULLY PAID STOCK; TAXES. The Company agrees that the
shares of the Common Stock represented by each and every certificate of
Warrant Shares delivered on the exercise of this Warrant be validly issued and
outstanding, fully paid and nonassessable, and not subject to preemptive
rights or rights of first refusal, and the Company will take all such actions
as may be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. The Company further covenants and agrees that it will
pay, when due and payable, any and all Federal and state stamp, original issue
or similar taxes which may be payable in respect of the issue of any Warrant
Share or any certificate thereof.
5. REGISTRATION UNDER SECURITIES ACT OF 1933. The Holder of
this Warrant shall have the registration rights provided in Exhibit A hereto.
Class C Warrant Page 5
<PAGE>
6. LIMITED TRANSFERABILITY. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for such purpose. The Company may treat the registered Holder
of this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or
his duly authorized attorney, upon written request during ordinary business
hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrants. All Warrants issued upon the transfer or
assignment of this Warrant will be dated the same date as this Warrant, and
all rights of the holder thereof shall be identical to those of the Holder.
7. CALL OF WARRANT BY COMPANY. This Warrant automatically
terminates if:
(a) The Common Stock, or any securities into which the
Common Stock has been converted, trades on a national securities exchange, on
the National Association of Security Dealers, Inc. Automated Quotations System
("NASDAQ"), on the NASD Electronic Bulletin Board, or in "pink sheets", and
has, during any consecutive thirty trading day period, had a closing price for
at least twenty trading days equal to or greater than $0.60 per share, said
closing price to be determined on the basis of the initial Per Share Warrant
Price and initial aggregate number of Warrant Shares, making adjustment to the
Per Share Warrant Price and number of Warrant Shares as provided in Section
3(e) (the "TERMINATION EVENT");
(b) Notice of the Termination Event is given to the Holder
at the address and as set forth in Subsection 10(a) hereof; and
(c) The Holder has not, by the close of the thirtieth day
following giving notice of the Termination Event, exercised the Warrant as set
forth in Section 1.
8. LOSS, ETC., OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if
lost, stolen or destroyed, and upon surrender and cancellation of this
Warrant, if mutilated, the Company shall execute and deliver to the Holder a
new Warrant of like date, tenor and denomination.
9. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise
provided herein, this Warrant does not confer upon the Holder any right to
vote or to consent to or
Class C Warrant Page 6
<PAGE>
receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
10. COMMUNICATION. No notice or other communication under
this Warrant shall be effective unless, but any notice or other communication
shall be effective and shall be deemed to have been given if, the same is in
writing and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 214 Carnegie Center, Suite 100,
Princeton, NJ 08540 or such other address as the Company has designated in
writing to the Holder, or
(b) the Holder at 162 Franklin Street, Morristown, NJ 07960,
or such other address as the Holder has designated in writing to the Company.
11. HEADINGS. The headings of this Warrant have been
inserted as a matter of convenience and shall not affect the construction
hereof.
12. APPLICABLE LAW. This Warrant shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to the principles of conflicts of law thereof.
Class C Warrant Page 7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by an Executive Officer and its corporate seal to be hereunto affixed and
attested by its Assistant Secretary this 24th day of June, 1996.
RHOMED INCORPORATED
By: s/ John J. McDonough
-------------------------
John J. McDonough
Vice President and CFO
ATTEST:
s/ Stephen A. Slusher
---------------------
Assistant Secretary
[Corporate Seal]
Class C Warrant Page 8
<PAGE>
SUBSCRIPTION
------------
The undersigned, William I. Franzblau, pursuant to the provisions of
the foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Common Stock, no par value, of RhoMed
Incorporated, covered by said Warrant, and makes payment therefor in full at
the price per share provided by said Warrant.
Dated:_______________ Signature:_____________________
Address:_______________________
ASSIGNMENT
FOR VALUE RECEIVED William I. Franzblau hereby sells, assigns and
transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
RhoMed Incorporated.
Dated:_______________ Signature:_____________________
Address:_______________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED William I. Franzblau, hereby assigns and transfers
unto ____________________ the right to purchase _______ shares of the Common
Stock, no par value per share, of RhoMed Incorporated covered by the foregoing
Warrant, and a proportionate part of said Warrant and the rights evidenced
thereby, and does irrevocably constitute and appoint ____________________,
attorney, to transfer that part of said Warrant on the books of RhoMed
Incorporated.
Dated:_______________ Signature:_____________________
Address:_______________________
Class C Warrant Page 9
<PAGE>
REGISTRATION RIGHTS AGREEMENT
1.1 As used in this Registration Rights Agreement to the Warrant for
the Purchase of Shares of Common Stock ("Registration Rights Agreement"), the
following terms shall have the following meanings:
(a) "Affiliate" shall mean, with respect to any person, any
other person controlling, controlled by or under direct or indirect common
control with such person (for the purposes of this definition "control," when
used with respect to any specified person, shall mean the power to direct the
management and policies of such person, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing).
(b) "Business Day" shall mean a day Monday through Friday on
which banks are generally open for business in New York.
(c) "Holder" and "Holders" has the meaning given in the
Warrant, and any person holding Registrable Securities to whom the rights
under this Registration Rights Agreement have been transferred in accordance
with Section 1.9 hereof.
(d) "Person" shall mean any person, individual, corporation,
partnership, trust or other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local or
otherwise).
(e) The terms "register," "registered" and "registration"
refer to the registration effected by preparing and filing a registration
statement in compliance with the Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) "Registrable Securities" shall mean any Warrant Shares
issued upon exercise of the Warrant; provided, however, that securities shall
only be treated as Registrable Securities if and only for so long as they (i)
have not been disposed of pursuant to a registration statement declared
effective by the Commission, (ii) have not been sold in a transaction exempt
from the registration and prospectus delivery requirements of the Act so that
all transfer restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale, (iii) are not saleable as exempt
securities pursuant to Section 3(a)(10) of the Securities Act of 1933 or (iv)
are held by a Holder or a permitted transferee pursuant to Section 1.9.
(g) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 1.2 hereof, including, without
limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and expenses of counsel for
Exhibit A - Registration Rights - Page 1
<PAGE>
the Company, blue sky fees and expenses (for a reasonable number of states)
and the expense of any special audits incident to or required by any such
registration (but excluding the fees of legal counsel for any Holder).
(h) "Registration Statement" shall have the meaning ascribed
to such term in Section 1.2.
(i) "Registration Period" shall have the meaning ascribed to
such term in Section 1.4.
(j) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities and
all fees and expenses of legal counsel for any Holder.
(k) "Warrant" shall mean the Class C Warrant for the
Purchase of Shares of Common Stock of which this Registration Rights Agreement
is a part.
1.2 The Company agrees that no later than 180 days after (x) the
closing date of the first registration statement for an initial public
offering of the Common Stock of the Company registered under the Act or (y)
the first date on which the Common Stock of the Company (or securities
received in exchange for Common Stock of the Company) trades on a national
securities exchange, on the National Association of Security Dealers, Inc.
Automated Quotations System ("NASDAQ"), on the OTC Electronic Bulletin Board
or in "pink sheets", the Company will file a registration statement (the
"Registration Statement") with the Commission and use its reasonable best
efforts to effect the registration, qualifications or compliances (including,
without limitation, the execution of any required undertaking to file
post-effective amendments, appropriate qualifications under applicable blue
sky or other state securities laws and appropriate compliance with applicable
securities laws, requirements or regulations) as may be so reasonably
requested and as would permit or facilitate the sale and distribution of all
Registrable Securities. Notwithstanding the foregoing, the Company (i) will
not be obligated to enter into any underwriting agreement for the sale of any
of the Registrable Securities and (ii) may delay the filing for a period not
to exceed sixty (60) days if the Company determines in good faith that such
filing would have an adverse effect on the Company or would otherwise be
inadvisable.
1.3 All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 1.2 shall be
borne by the Company. All Selling Expenses relating to the sale of securities
registered by or on behalf of Holders shall be borne by such Holders pro rata
on the basis of the number of securities so registered.
Exhibit A - Registration Rights - Page 2
<PAGE>
1.4 In the case of the registration, qualification or compliance
effected by the Company pursuant to this Registration Rights Agreement, the
Company will, upon reasonable request, inform each Holder as to the status of
such registration, qualification and compliance. At its expense the Company
will:
(a) use its reasonable best efforts to keep such
registration and any qualification or compliance under state securities laws
which the Company determines to obtain, continuously effective until the
Holders have completed the distribution described in the Registration
Statement. The period of time during which the Company is required hereunder
to keep the Registration Statement effective is referred to herein as the
"Registration Period." Notwithstanding the foregoing, at the Company's
election the Company may cease to keep such registration, qualification or
compliance effective with respect to any Registrable Securities, and the
registration rights of a Holder shall expire, at such time as the Holder may
sell under Rule 144 under the Act (or other exemption from registration
acceptable to the Company) in a three-month period all Registrable Securities
then held by such Holder; and
(b) advise the Holders:
(i) when the Registration Statement or any
amendment thereto has been filed with the Commission and
when the registration statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the Commission for
amendments or supplements to the Registration Statement or
the prospectus included therein or for additional
information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for such
purpose;
(iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Registrable Securities included therein
for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the
making of any changes in the Registration Statement or the
prospectus so that, as of such date, the statements therein
are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the
Exhibit A - Registration Rights - Page 3
<PAGE>
statements therein (in the case of the prospectus, in the
light of the circumstances under which they were made) not
misleading;
(c) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of any Registration Statement at the
earliest possible time;
(d) furnish to each Holder, without charge, at least one
copy of such Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests
in writing, all exhibits (including those incorporated by reference) in the
form filed with the Commission;
(e) during the Registration Period, deliver to each Holder,
without charge, as many copies of the prospectus included in such Registration
Statement and any amendment or supplement thereto as such Holder may
reasonably request; and the Company consents to the use, consistent with the
provisions hereof, of the prospectus or any amendment or supplement thereto by
each of the selling Holders of Registrable Securities in connection with the
offering and sale of the Registrable Securities covered by the prospectus or
any amendment or supplement thereto. In addition, upon the reasonable request
of the Subscriber and subject in all cases to confidentiality protections
reasonably acceptable to the Company, the Company will meet with a Subscriber
or a representative thereof at the Company's headquarters to discuss all
information relevant for disclosure in the Registration Statement covering the
Registrable Securities, and will otherwise cooperate with any Subscriber
conducting an investigation for the purpose of reducing or eliminating such
Subscriber's exposure to liability under the Act, including the reasonable
production of information at the Company's headquarters;
(f) during the Registration Period, deliver to each Holder,
without charge, (i) as soon as practicable (but in the case of the annual
report of the Company to its stockholders, within 120 days after the end of
each fiscal year of the Company) one copy of: (A) its annual report to its
stockholders (which annual report shall contain financial statements audited
in accordance with generally accepted accounting principles in the United
States of America by a firm of certified public accountants of recognized
standing); (B) if not included in substance in its annual report to
stockholders, its annual report on Form 10-K (or similar form); (C) each of
its quarterly reports to its stockholders, and, if not included in substance
in its quarterly reports to stockholders, its quarterly report on Form 10-Q
(or similar form), and (D) a copy of the full Registration Statement (the
foregoing, in each case, excluding exhibits); and (ii) upon reasonable
request, all exhibits excluded by the parenthetical to the immediately
preceding clause (D), and all other information that is generally available to
the public;
Exhibit A - Registration Rights - Page 4
<PAGE>
(g) prior to any public offering of Registrable Securities
pursuant to any Registration Statement, register or qualify for offer and sale
under the securities or blue sky laws of such jurisdictions as any such
Holders reasonably request in writing, provided that the Company shall not for
any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction, and do any and
all other acts or things necessary or advisable to enable the offer and sale
in such jurisdictions of the Registrable Securities covered by such
Registration Statement;
(h) cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to be sold pursuant to any Registration Statement free of any restrictive
legends to the extent not required at such time and in such denominations and
registered in such names as Holders may request at least three business days
prior to sales of Registrable Securities pursuant to such Registration
Statement;
(i) upon the occurrence of any event contemplated by Section
1.4(b)(v) above, the Company shall promptly prepare a post-effective amendment
to the Registration Statement or a supplement to the related prospectus, or
file any other required document so that, as thereafter delivered to
purchasers of the Registrable Securities included therein, the prospectus will
not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(j) use its reasonable efforts to comply with all applicable
rules and regulations of the Commission, and will make generally available to
the Holders not later than 45 days (or 90 days if the fiscal quarter is the
fourth fiscal quarter) after the end of its fiscal quarter in which the first
anniversary date of the effective date of the Registration Statement occurs,
an earnings statement satisfying the provisions of Section 11(a) of the Act.
1.5 The Holders shall have no right to take any action to restrain,
enjoin or otherwise delay any registration pursuant to Section 1.2 hereof as a
result of any controversy that may arise with respect to the interpretation or
implementation of this Registration Rights Agreement.
1.6
(a) To the extent permitted by law, the Company will
indemnify each Holder, each underwriter of the Registrable Securities and each
person controlling such Holder within the meaning of Section 15 of the Act,
with respect to which any registration, qualification or compliance has been
effected pursuant to this Registration Rights Agreement, against all claims,
losses, damages and liabilities (or action in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened (subject
Exhibit A - Registration Rights - Page 5
<PAGE>
to Section 4.6(c) below), arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus or offering circular, or any amendment or supplement
thereof, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in light of the circumstances in which they were made, and will
reimburse each Holder, each underwriter of the Registrable Securities and each
person controlling such Holder, for reasonable legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action as incurred, provided that the
Company will not be liable in any such case to the extent that any untrue
statement or omission or allegation thereof is made in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of such Holder and stated to be specifically for use in preparation of such
registration statement, prospectus or offering circular; provided that the
Company will not be liable in any such case where the claim, loss, damage or
liability arises out of or is related to the failure of the Holder to comply
with the covenants and agreements contained in this Registration Rights
Agreement respecting sales of Registrable Securities, and except that the
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any such untrue statement or alleged untrue statement or omission
or alleged omission made in the preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the Securities and Exchange
Commission at the time the registration statement becomes effective or in the
amended prospectus filed with the Commission pursuant to Rule 424(b) or in the
prospectus subject to completion and term sheet under Rule 434 of the Act,
which together meet the requirements of Section 10(a) of the Act (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
such Holder, any such underwriter or any such controlling person, if a copy of
the Final Prospectus was not furnished to the person or entity asserting the
loss, liability, claim or damage at or prior to the time such furnishing is
required by the Act.
(b) Each Holder will severally, if Registrable Securities
held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers, each underwriter of the
Registrable Securities and each person who controls the Company within the
meaning of Section 15 of the Act, against all claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened (subject to
Section 4.6(c) below), arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus or offering circular, or any amendment or supplement
thereof, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in light of the circumstances in which they were made, and will
reimburse the Company, such directors and officers, each underwriter of the
Exhibit A - Registration Rights - Page 6
<PAGE>
Registrable Securities and each person controlling the Company for reasonable
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action
as incurred, in each case to the extent, but only to the extent, that such
untrue statement or omission or allegation thereof is made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of the Holder and stated to be specifically for use in preparation of
such registration statement, prospectus or offering circular; provided that
the indemnity shall not apply to the extent that such claim, loss, damage or
liability results from the fact that a current copy of the prospectus that was
made available to the Holder was not sent or given to the person asserting any
such claim, loss, damage or liability at or prior to the written confirmation
of the sale of the Registrable Securities confirmed to such person if such
current copy of the prospectus would have cured the defect giving rise to such
loss, claim, damage or liability. Notwithstanding the foregoing, in no event
shall a Holder be liable for any such claims, losses, damages or liabilities
in excess of the proceeds received by such Holder in the offering, except in
the event of fraud by such Holder.
(c) Each party entitled to indemnification under this
Section 1.6 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld), and the Indemnified Party may participate in
such defense at such Indemnified Party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Registration
Rights Agreement, unless such failure is prejudicial to the Indemnifying Party
in defending such claim or litigation. An Indemnifying Party shall not be
liable for any settlement of an action or claim effected without its written
consent (which consent will not be unreasonably withheld).
(d) If the indemnification provided for in this Section 1.6
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or omissions
which resulted in such loss, liability, claim, damage or expense as well as
any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a
Exhibit A - Registration Rights - Page 7
<PAGE>
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
1.7
(a) Each Holder agrees that, upon receipt of any notice from
the Company of the happening of any event requiring the preparation of a
supplement or amendment to a prospectus relating to Registrable Securities so
that, as thereafter delivered to the Holders, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, each Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement contemplated by Section 1.2
until its receipt of copies of the supplemented or amended prospectus from the
Company and, if so directed by the Company, each Holder shall deliver to the
Company all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
(b) Each Holder agrees to suspend, upon request of the
Company, any disposition of Registrable Securities pursuant to the
registration statement and prospectus contemplated by Section 4.2 during (A)
any period not to exceed two 30-day periods within any one 12-month period the
Company requires in connection with a primary underwritten offering of equity
securities (or such longer period as required by the underwriter of such
offering) and (B) any period, not to exceed one 60-day period per circumstance
or development, when the Company determines in good faith that offers and
sales pursuant thereto should not be made by reason of the presence of
material undisclosed circumstances or developments with respect to which the
disclosure that would be required in such a prospectus is premature, would
have an adverse effect on the Company or is otherwise inadvisable.
(c) As a condition to the inclusion of its Registrable
Securities, each Holder shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may request in writing or as shall be required in connection with any
registration, qualification or compliance referred to in this Registration
Rights Agreement.
(d) Each Holder hereby covenants with the Company (1) not to
make any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Act to be satisfied, and (2) if
such Registrable Securities are to be sold by any method or in any transaction
other than on NASDAQ (or other national securities exchange), in the
over-the-counter market, in privately negotiated transactions, or in a
Exhibit A - Registration Rights - Page 8
<PAGE>
combination of such methods, to notify the Company at least five business days
prior to the date on which the Holder first offers to sell any such
Registrable Securities
(e) Each Holder acknowledges and agrees that the Registrable
Securities sold pursuant to the registration statement described in this
Section are not transferable on the books of the Company unless the stock
certificate submitted to the transfer agent evidencing such Shares is
accompanied by a certificate reasonably satisfactory to the Company to the
effect that (A) the Registrable Securities have been sold in accordance with
such registration statement and (B) the requirement of delivering a current
prospectus has been satisfied.
(f) Each Holder agrees not to take any action with respect
to any distribution deemed to be made pursuant to such registration statement,
that constitutes a violation of Rule 10(b)-6 under the Exchange Act or any
other applicable rule, regulation or law.
(g) At the end of the period during which the Company is
obligated to keep the registration statement current and effective as
described above, the Holders of Registrable Securities included in the
registration statement shall discontinue sales of Registrable Securities
pursuant to such Registration Statement upon receipt of notice from the
Company of its intention to remove from registration the Registrable
Securities covered by such Registration Statement which remain unsold, and
such Holders shall notify the Company of the number of Registrable Securities
registered which remain unsold immediately upon receipt of such notice from
the Company.
1.8 With a view to making available to the Holders the benefits of
certain rules and regulations of the Commission which at any time permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Act, at all times;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Exchange Act; and
(c) so long as a Holder owns any unregistered Registrable
Securities, furnish to such Holder upon any reasonable request a written
statement by the Company as to its compliance with Rule 144 under the Act, and
of the Exchange Act, a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents of
Exhibit A - Registration Rights - Page 9
<PAGE>
the Company as such Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
1.9 The rights to cause the Company to register Registrable
Securities granted to the Holders by the Company under Section 1.2 may be
assigned in full by a Holder, provided, that: (i) such transfer may otherwise
be effected in accordance with applicable securities laws; (ii) such transfer
involves not less than the lesser of all of such Holder's Registrable
Securities or 100,000 Shares (or the amount of Registrable Securities issued
in replacement of 100,000 Shares) of Common Stock, as defined in the Warrant;
(iii) such Holder gives prior written notice to the Company; and (iv) such
transferee agrees to comply with the terms and provisions of this Warrant and
Registration Rights Agreement, and such transfer is otherwise in compliance
with this Registration Rights Agreement and the Warrant. Except as
specifically permitted by this Section 1.9, the rights of a Holder with
respect to Registrable Securities as set out herein shall not be transferable
to any other Person, and any attempted transfer shall cause all rights of such
Holder therein to be forfeited.
1.10 With the written consent of the Company and the Holders holding
at least a majority of the Registrable Securities that are then outstanding,
any provision of this Registration Rights Agreement may be waived (either
generally or in a particular instance, either retroactively or prospectively
and either for a specified period of time or indefinitely) or amended. Upon
the effectuation of each such waiver or amendment, the Company shall promptly
give written notice thereof to the Holders, if any, who have not previously
received notice thereof or consented thereto in writing.
1.11 If the Company files a registration statement with the
Commission in connection with a public offering of the Company's securities,
the Subscriber, by accepting this Registration Rights Agreement, agrees, if so
requested by the Company, that such Subscriber will not directly or indirectly
sell, make any short sale of, grant any option for the purchase of, or
otherwise dispose of any capital stock of the Company during the 30-day period
ending, and the 180-day period beginning (or any such other period as is
required by the underwriter of such offering) on the first date of the
effectiveness of such registration statement. Upon request, the Subscriber
will sign an agreement in reasonable form to such effect with the underwriter
of such an offering.
Exhibit A - Registration Rights - Page 10
LICENSE AGREEMENT
BETWEEN
RHOMED INCORPORATED
AND
ROUGIER BIO-TECH LIMITED
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS..................................................Page 2
"Group A Patents"...............................................Page 2
"Group B Patents"...............................................Page 2
"Patent Rights".................................................Page 2
"Field of Use" .................................................Page 2
"Licensed Processes"............................................Page 3
"Licensed Product"..............................................Page 3
"Affiliates"....................................................Page 3
"Net Sales".....................................................Page 3
"Technology"....................................................Page 3
ARTICLE 2 - GRANT OF LICENSES............................................Page 4
ARTICLE 3 - PAYMENTS UNDER THE LICENSE...................................Page 5
ARTICLE 4 - REMITTANCES UNDER THE LICENSE................................Page 6
ARTICLE 5 - RECORDS UNDER THE LICENSE....................................Page 7
ARTICLE 6 - MARKING OF PRODUCTS..........................................Page 8
ARTICLE 7 - INVALIDITY OR NON-ISSUANCE OF LICENSED
PATENTS.........................................................Page 8
ARTICLE 8 - ENFORCEMENT OF LICENSED PATENTS..............................Page 9
ARTICLE 9 - PERFORMANCE CRITERIA........................................Page 10
ARTICLE 10 - TERMS OF LICENSE; TERMINATION..............................Page 11
ARTICLE 11 - COMMUNICATION AND NOTICES..................................Page 12
ARTICLE 12 - MISCELLANEOUS..............................................Page 13
APPENDIX A..............................................................Page 16
APPENDIX B..............................................................Page 17
<PAGE>
LICENSE AGREEMENT
THIS AGREEMENT is effective as of the first day of May, 1992, by and
between RhoMed Incorporated, a New Mexico corporation whose principal place of
business is 4261 Balloon Park Road N.E., Albuquerque, New Mexico 87109 U.S.A.
(hereinafter referred to as "Licensor") and Rougier Bio-Tech Limited, a
Canadian corporation whose principal place of business is 8480 Blvd.
St-Laurent, Montreal, Quebec H2P 2M6 Canada (hereinafter referred to as
"Licensee").
W I T N E S S E T H:
WHEREAS, Buck A. Rhodes, formerly of the College of Pharmacy at
the University of New Mexico ("UNM") was one of two inventors of Method for
Labelling Immunoglobulins with Tc-99m, which invention was issued United States
Patent No. 4,424,200 and Canadian Patent No. 1,177,393 (hereinafter referred to
as "Group A Patents");
WHEREAS, UNM received an undivided interest in Group A Patents
derived from Rhodes, which undivided interest is owned by USET, Incorporated
("USET"), successor to University Patents Incorporated under its Servicing
Agreement with UNM;
WHEREAS, under a License Agreement effective 1 May 1988, and amended
effective 1 September 1988 and 1 April 1992, USET granted to RhoMed a
worldwide, exclusive license, subject to a pre-existing nonexclusive license
to Summa Medical Corporation, under UNM's undivided one-half interest in Group
A Patents, with right to sublicense;
WHEREAS, Licensor is the owner in the entire right, title and
interest in certain technology for radiolabeling antibodies and other proteins
with Technetium-
Page 1
<PAGE>
99m and other radionuclides, and in the inventions and patents relating
thereto (hereinafter referred to as "Group B Patents"; the technology
comprising Group A Patents and Group B Patents is hereinafter sometimes
referred to collectively as the "Inventions");
WHEREAS, Licensee is desirous of obtaining an exclusive license with
the right to sublicense, and limited to a specified field of use, to
manufacture, use, and sell products and/or services relating to the
Inventions; and
WHEREAS, Licensor is desirous of granting such a license to Licensee
in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises recitals,
and based on the mutual promises and benefits herein contained, and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 "Group A Patents" shall mean the patents and patent applications
listed under the heading "Group A Patents" in Appendix A and any divisions,
continuations, and continuation-in-part applications, or reissues thereof, and
all know-how and technology relating thereto.
1.2 "Group B Patents" shall mean the patents and patent applications
listed under the heading "Group B Patents" in Appendix A and any divisions,
continuations, and continuation-in-part applications, or reissues thereof, and
all know-how and technology relating thereto.
1.3 "Patent Rights" shall mean Group A Patents and Group B Patents.
1.4 "Field of Use" shall mean the use of any radiolabeled antibody or
fragment thereof, including any single antibody chain or fragment thereof and
recombinant antibody or fragment thereof, with specificity for myosin or any
cross-
Page 2
<PAGE>
reacting structure, for gamma ray scintigraphic imaging of myocardial or
skeletal muscle necrosis and for gamma ray scintigraphic imaging of any tissue
expressing myosin or any cross-reacting structure.
1.5 "Licensed Processes" shall mean the processes claiming or
utilizing Patent Rights or some portion thereof.
1.6 "Licensed Product" or "Licensed Products" shall mean products
claimed in Patent Rights, including products containing one or more substances
radiolabeled or to be radiolabeled by a method claimed in Patent Rights, or
products made in accordance with or by means of Licensed Processes or products
made utilizing any substance, device, apparatus, method or process which
embodies or is protected by Patent Rights.
1.7 "Affiliates" shall mean any company, corporation, or business in
which Licensee owns or controls at least fifty percent (50%) of the voting
stock.
1.8 "Net Sales" shall mean the amount billed or invoiced on sales of
Licensed Products less:
1.8.1 Customary trade, quantity or cash discounts and
non-affiliated brokers' or agents' commissions actually allowed and
taken and all applicable taxes; and/or
1.8.2 Amounts repaid or credited by reason of rejection or
return.
If Licensed Products are sold in transactions which are not bona fide
arm's-length transactions (including transactions between entities which are
affiliated or have related interests), Net Sales shall be determined by the
most recent commercial sale to an independent party.
1.9 "Technology" shall mean any and all information or Patent Rights
supplied by Licensor to Licensee.
Page 3
<PAGE>
ARTICLE 2 - GRANT OF LICENSES
2.1 Group A Patents License. Licensor hereby grants to Licensee and
Licensee accepts, subject to the terms and conditions hereof, a non-exclusive
world-wide license as to Group A Patents, limited to the Field of Use, to make
and have made, manufacture and have manufactured, use and have used, to sell
and have sold, and distribute and have distributed Licensed Products and to
practice Licensed Processes (hereinafter the "License").
2.2 Group B Patents License. Licensor hereby grants to Licensee and
Licensee accepts, subject to the terms and conditions hereof, an exclusive
world-wide license as to Group B Patents, limited to the Field of Use, to make
and have made, manufacture and have manufactured, use and have used, to sell
and have sold, and distribute and have distributed Licensed Products and to
practice Licensed Processes (hereinafter the "License").
2.3 Right to Sublicense. The license granted shall include the right
of Licensee to grant written sublicenses for the manufacture and sale of
Licensed Products and the practice of Licensed Processes, all pursuant to the
Group A Patents License and the Group B Patents License; provided, that
Licensee shall require terms and conditions at least co-extensive with this
Agreement, and shall include all sales of Licensed Products and Licensed
Processes by all sublicensees in its statements to Licensor and shall pay
royalties thereon as though all of such sales of sublicensees were in fact
made by Licensee hereunder. Licensee will deliver to Licensor a true and
correct copy of each and every sublicense entered into by Licensee within
thirty (30) days after execution thereof and shall promptly advise Licensor in
writing of any modification (and supply same) or termination of each
sublicense. Upon termination of this Agreement for any cause, any and all
existing sublicenses hereunder shall thereupon be assigned to Licensor. This
shall be made a condition of any such sublicense that may be granted by
License.
Page 4
<PAGE>
2.4 No License Other Than Licensed Patents. No license is granted by
Licensor to Licensee, either directly or by implication, estoppel or
otherwise, under any patents other than the Group A Patents and the Group B
Patents.
2.5 Assignment. This agreement shall not be assignable by Licensee
without the prior written consent of Licensor except to a successor in
ownership of all or substantially all of the business assets of Licensee,
which successor shall expressly assume in writing the performance of all the
terms and conditions of this agreement to be performed by Licensee. This
agreement may be assigned without restriction by Licensor.
2.6 Group A Patents License Assignment. Upon termination for any
cause of the Agreement between RhoMed Incorporated and USET, Incorporated in
which RhoMed Incorporated licenses Group A Patents, this Agreement shall, as
to Group A Patents, thereupon be assigned to USET, Incorporated. The Licensor
herein warrants that USET has agreed to accept all terms of this Agreement and
to continue the Agreement with the Licensee as to Group A Patents under the
same terms and conditions herein set forth if the Agreement is assigned to
USET by the Licensor.
ARTICLE 3 - PAYMENTS UNDER THE LICENSE
3.1 License Fee. Licensee agrees to pay Licensor Forty-Five Thousand
Dollars ($45,000.00) as a license fee, with payments made as shown on the
schedule in Appendix B.
3.2 Production Royalties. Licensee shall pay to Licensor a production
royalty of six percent (6%) based on the total Net Sales.
One-half of the total production royalty (3%) will be attributed to
royalties on Group A Patents, and one-half of the total production royalty
(3%) will be attributed to royalties on Group B Patents.
Page 5
<PAGE>
3.3 Minimum Royalties. Annual production royalties due and payable by
Licensee to Licensor shall equal or exceed, or Licensee shall pay to Licensor,
a minimum annual royalty of Seven Thousand Five Hundred Dollars ($7,500.00)
commencing with the third license year and each subsequent year thereafter.
Any minimum annual royalty paid to the Licensor by the Licensee prior to the
commencement of sales by the Licensee shall be credited against royalties due
to the Licensor after the commencement of sales and on amounts exceeding the
minimum royalty for each subsequent year(s) until the Licensee has recovered
the minimum royalty payments made to the Licensor prior to commencement of
sales.
3.4 Licensed Processes. In the event Licensee performs Licensed
Processes for profit without using Licensed Product made by Licensee, Licensee
shall pay to RhoMed a royalty for each Licensed Process performed based upon
the Net Sales price of Licensed Products required to perform such Licensed
Process.
ARTICLE 4 - REMITTANCES UNDER THE LICENSE
4.1 Accrual. Royalties shall accrue when Licensed Products are first
used, sold, billed out, distributed or otherwise transferred, but excluding
products transferred at no cost for clinical testing purposes.
4.2 Payments. Payments of accrued royalties shall be made to Licensor
in U.S. dollars on a quarterly calendar basis for all Licensed Products used,
sold, distributed, billed out, or otherwise transferred during that quarter.
Such payment shall be made within sixty (60) days following the end of such
calendar quarter and shall be accompanied by a statement which shall show the
total quantity and Net Sales of Licensed Products for which royalties have
accrued during such quarter. Quarterly royalty reports, certified to by an
officer of Licensee, shall give sufficient information from which to calculate
the amount of royalties due hereunder, including, but not limited to, the
total quantity and Net Sales of goods for which royalty has accrued
Page 6
<PAGE>
during the preceding calendar quarter, and shall be made whether or not there
are sales of Licensed Products during such quarter. The identity of the
Licensee's customers shall remain confidential to the Licensor.
4.3 Royalty Payments on Sales Outside United States. Royalty payments
which accrue outside the United States shall be paid in U. S. Dollars in the
United States at the rates of exchange published in The Wall Street Journal on
the last day of the accounting period in which the royalty accrues. Royalties
shall be paid to Licensor free and clear of all foreign taxes, including
withholding and turnover taxes, except such taxes which Licensee may be
required to withhold by a foreign country and for which Licensor is entitled
to receive a tax credit by treaty or otherwise.
4.4 Minimum Royalties. Licensee agrees that the minimum royalty shall
become a present obligation of Licensee to Licensor on the anniversary date of
this Agreement, as long as the Agreement is in force, and that such minimum
amount is to be paid to Licensor together with the remittance made for the
accounting period ending twelve months after the anniversary date of this
Agreement, in the event earned production royalties for such year do not reach
the minimum amount set forth.
ARTICLE 5 - RECORDS UNDER THE LICENSE
Licensee shall report to Licensor the date of first sale of Licensed
Products within thirty (30) days of occurrence. Licensee shall keep, and shall
require its Affiliates to keep, records in sufficient detail to permit the
determination of royalties payable hereunder. Such records shall be retained
for at least three (3) years following a given reporting period. They shall be
available during normal business hours for inspection at the expense of
Licensor by a Certified Public Accountant selected by Licensor and approved by
Licensee for the sole purpose of verifying
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<PAGE>
reports and payments hereunder. The accountant may have access to Licensee's
customer lists and identity, to the extent the accountant determines that such
information is necessary or useful in verifying reports and payments
hereunder. Such accountant shall not disclose to Licensor any information
other than information relating to the accuracy of reports and payments made
under this agreement. In the event that such inspection shows an
underreporting and underpayment in excess of five percent (5%) for any twelve
(12) month reporting period, then Licensee shall pay the costs of such
examination.
ARTICLE 6 - MARKING OF PRODUCTS
Licensee agrees to mark every Licensed Product manufactured and/or
sold by it, under this agreement, and all brochures and advertising materials,
as to patents pending, or patents issued where patent coverage is obtained, in
accordance with the laws of the United States and foreign countries.
ARTICLE 7 - INVALIDITY OR NON-ISSUANCE OF LICENSED PATENTS
7.1 Technology and Know-How License. It is agreed and understood that
this agreement is, in part, a license of the technology and know-how
incorporated into the Inventions and Licensed Products. In the event that
Patent Rights are subsequently held to be invalid by a court of the United
States or any foreign country or countries, such failure to issue or holding
of invalidity shall not render this agreement invalid; provided, the royalties
shall be diminished by fifty percent (50%) in territory of the invalid patent
rights.
7.2 Validity. Except to the extent prohibited by law, Licensee agrees
that it shall not question or challenge, directly or indirectly, the validity
of the patent or any reissue or extension thereof, or assist any other person
in doing so. The parties shall promptly notify each other of a challenge to
validity or enforceability of the Patent of
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which the parties are to become aware. In the event of a lawsuit relating to
validity or enforceability of the Patent, the Licensor shall have the right to
defend such validity and/or to appeal. If no defense is lodged and the
patent(s) is declared invalid, the royalties shall be diminished by fifty
percent (50%) in the territory of the invalidated patent(s).
ARTICLE 8 - ENFORCEMENT OF LICENSED PATENTS
8.1 Enforcement. In the event Licensee becomes aware of any actual or
threatened infringement of a Licensed Patent in the Field of Use licensed
herein, Licensee shall promptly notify Licensor in writing, and will supply
Licensor with any available evidence pertaining to the infringement. Licensor,
at its own expense, can take whatever steps are necessary to stop the
infringement and recover damages therefor, and will be entitled to retain all
damages so recovered to pay its out-of-pocket expenses to recover such
damages, and any surplus in damages awarded shall be equally divided between
Licensee and Licensor; provided, that Licensee shall recover no more than its
loss in earnings due to the infringement. If Licensor does not proceed to
enforcement the Patent Rights within one hundred eighty (180) days of notice,
Licensee, after notifying Licensor in writing, shall be entitled to take
proceedings against such infringer at its own expense; provided, that Licensee
may suspend payment of earned royalties under the patent in suit in the
country of such action to the extent of any out-of-pocket costs actually
incurred in such action.
The party conducting such suit shall have full control over its
conduct. In either event, Licensee and Licensor shall assist one another and
cooperate in any such litigation upon request and without expense to the
requestee.
8.2 Defense. In the event a third party brings an action to obtain a
declaration of patent invalidity (a "DJ Action") against Licensor and/or
Licensee:
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8.2.1 The named defendant shall have the first right to
defend said action at its own cost and expense and to control ensuing
litigation;
8.2.2 If the named defendant elects not to defend the DJ
Action, the other Party may elect to defend the DJ Action at its own
cost and expense and to control the ensuing litigation;
8.2.3 If a litigating Party finally prevails, it shall
retain all damages which it may collect.
ARTICLE 9 - PERFORMANCE CRITERIA
9.1 Best Effort. Licensee shall use its best effort to effect
introduction of Licensed Products into the commercial market as soon as
practicable, consistent with sound and reasonable business practices and
judgment, and thereafter, until the expiration of this agreement. Licensee
shall endeavor to keep Licensed Products reasonably available to the public.
9.2 Rendering License Non-Exclusive. Licensor shall have the right to
render this License non-exclusive for any country or countries if, in
Licensor's reasonable judgment, Licensee or its sub-licensee(s):
9.2.1 has not within seven (7) years from the date of
License secured government approvals and put the licensed subject
matter into commercial use in the countries or countries where
licensed, directly or through a sublicense, and is not keeping the
Licensed Products reasonably available to the public; or
9.2.2 is not within four (4) years from the date of License
demonstrably engaged in product development and clinical trials
necessary for product acceptance in countries of intended use.
In making this determination, Licensor shall take into account the normal
course of such programs conducted with sound and reasonable business practices
and judgment
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and shall take into account the reports provided hereunder by Licensee.
9.3 Field of Use. The licenses granted to Licensee by Licensor
hereunder are limited to the Field of Use as defined above. A license in any
other field or for any other antibody in such other field shall be the subject
of a separate agreement and shall require Licensee's submission of evidence
demonstrating its willingness and ability to develop and commercialize the
kinds of products or processes likely to be encompassed in such other field.
If Licensor has non-exclusively licensed in such other field prior to
Licensee's request, Licensor shall grant to Licensee a non-exclusive license
under terms and conditions at least as favorable as this agreement.
ARTICLE 10 - TERMS OF LICENSE; TERMINATION
10.1 Term. The term of this Agreement shall be from the date first
written above until the expiration of the last of the Patent Rights to expire
or become abandoned, and covering the process(es) and/or product(s) being
commercialized by the Licensee.
10.2 Termination by Licensee. Licensee may terminate this Agreement:
10.2.1 At the end of any License Year; or
10.2.2 For cause; or
10.2.3 If the Invention is finally determined by an Agency
of the United States to be deleterious to man, animals, or the
environment--and its use is proscribed.
10.3 Default. If Licensee shall at any time default in any obligation
under this Agreement, included but not limited to failing to make any report,
pay any royalties, or permit the inspection of its books and records as
hereinabove required, and such default shall not be cured within sixty (60)
days after written notice from Licensor to Licensee specifying the nature of
the default, then Licensor shall have the right to terminate the license
granted to Licensee hereunder and such termination shall
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become effective at the close of business on the sixtieth (60th) day after
giving such notice.
10.4 Rights and Obligations. Any termination pursuant hereto shall
not relieve Licensee or Licensor of any obligation or liability accrued
hereunder prior to such termination, nor rescind or give rise to any right to
rescind anything done or any payments made or other consideration given
hereunder prior to the time of such termination and shall not affect in any
manner any rights of either party arising out of this Agreement prior to such
termination.
10.5 Waiver. A waiver by either Party hereto of any violation of or
default in any provision of this Agreement shall not constitute a waiver of
any repeated violation of or default in the same provision, or any violation
of or default in any other provision of this Agreement.
ARTICLE 11 - COMMUNICATION AND NOTICES
Any payment, notice, or other communication required or permitted to
be made or given to either Party hereto pursuant to this Agreement shall be
sufficiently made or given on the date of mailing if sent to such Party by
certified or registered mail, postage prepaid, addressed to it at its address
set forth or to such other address as it shall designate by written notice to
the other Party as follows:
In the case of Licensor:
President
RhoMed Incorporated
4261 Balloon Park Road, N.E.
Albuquerque, New Mexico 87109
U.S.A.
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<PAGE>
In the case of Licensee:
President
Rougier Bio-Tech Ltd.
8480 Blvd. St-Laurent
Montreal, Quebec H2P 2M6
Canada
ARTICLE 12 - MISCELLANEOUS
12.1 Execution and Amendment. This Agreement will not be binding upon
the Parties until it has been signed hereinbelow by or on behalf of each
Party, in which event it shall be effective as of the date first above
written. No amendment or modification hereof shall be valid or binding upon
the Parties unless made in writing and signed as aforesaid.
12.2 Construction. This Agreement embodies the entire understanding
of the Parties and shall supersede all previous communications,
representations or undertakings, either verbal or written between the Parties
relating to the subject matter hereof.
12.3 Indemnification. Licensee agrees to indemnify and hold harmless
Licensor and the Inventors from and against any and all claims, damages and
liabilities asserted by third parties (private and governmental) arising from
Licensee's manufacture, use, distribution or sale of Licensed Products and/or
the purchaser's use thereof.
12.4 Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
12.5 Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled in the United
States by arbitration, in accordance with the rules then obtaining, of the
American Arbitration Association.
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If the subject of the arbitration involves an intellectual property matter, as
determined by the Association, then the arbitrator(s) should have had
experience in that subject. The Association is authorized to make arrangements
for this arbitration, to be held under these rules in any locality in the
United States agreed upon by the parties or as designated by the Association.
This agreement shall be enforceable and judgment upon any award rendered by
all or a majority of the arbitrators may be entered in any court of any
country having jurisdiction.
12.6 Jurisdiction. This Agreement shall be construed, and the legal
relations between the Parties determined, in accordance with the laws of the
United States of America and the State of New Mexico.
12.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each of the Parties hereto and except as otherwise
provided herein, their respective legal successors and assigns.
12.8 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
---
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be duly executed as of the date first above written.
LICENSOR:
RhoMed Incorporated
By: /S/ Buck A. Rhodes
--------------------
Buck A. Rhodes
President
LICENSEE:
ROUGIER BIO-TECH LIMITED
By: /S/
-------------------
Name:
Title:
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APPENDIX A
GROUP A PATENTS
U.S. Patent No. 4,424,200 and Canadian Patent No. 1,177,393
Method for Labelling Immunoglobulins with Tc-99m;
and any divisions, continuations, and continuation-in-part applications, or
reissues thereof.
GROUP B PATENTS
U.S. Patent No. 5,078,985,
Radiolabeling Antibodies and Other Proteins with Technetium or Rhenium by
Regulated Reduction;
U.S. Patent No. 5,102,990,
Direct Radiolabeling of Antibodies and Other Proteins with Technetium or
Rhenium;
International Application PCT/US90/04461,
Direct Radiolabeling of Antibodies and Other Proteins with Technetium or
Rhenium;
U.S. Patent Application 07/815,122,
Composition for Radiolabeling Antibodies and Other Proteins by Regulated
Reduction;
U.S. Patent Application 07/815,123,
Method for Radiolabeling Antibodies and Other Proteins by Regulated Reduction;
U.S. Patent Application 07/816,477,
Direct Labeling of Antibodies and Other Proteins with Metal Ions;
and any divisions, continuations, and continuation-in-part applications, or
reissues thereof.
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APPENDIX B
SCHEDULE OF PAYMENTS
Group A Patents Group B Patents Total
On Execution
of Agreement $1,000 $14,000 $15,000
June 1, 1992 800 5,200 6,000
July 1, 1992 800 5,200 6,000
August 1, 1992 800 5,200 6,000
September 1, 1992 800 5,200 6,000
October 1, 1992 800 5,200 6,000
------ ------- -------
TOTAL $5,000 $40,000 $45,000
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LICENSE AGREEMENT
BETWEEN
RHOMED INCORPORATED
AND
STERLING WINTHROP INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS.................................................Page 2
"Group A Patents"..............................................Page 2
"Group B Patents"..............................................Page 2
"Patent Rights"................................................Page 2
"Diagnostic Imaging Field of Use"..............................Page 3
"Therapeutic Field of Use".....................................Page 3
"License Year".................................................Page 3
"Licensed Processes"...........................................Page 3
"Licensed Product".............................................Page 3
"Affiliates"...................................................Page 4
"Valid Claim"..................................................Page 4
"Net Sales"....................................................Page 5
"Licensed Technology"..........................................Page 5
"Development Agreement"........................................Page 6
"Commercial Sale"..............................................Page 6
ARTICLE 2 - GRANT OF LICENSES...........................................Page 6
ARTICLE 3 - OPTION TO ACQUIRE LICENSE...................................Page 8
ARTICLE 4 - PAYMENTS UNDER THE LICENSE.................................Page 10
ARTICLE 5 - REMITTANCES UNDER THE LICENSE..............................Page 12
ARTICLE 6 - RECORDS UNDER THE LICENSE..................................Page 13
ARTICLE 7 - MARKING OF PRODUCTS........................................Page 13
ARTICLE 8 - INVALIDITY OR NON-ISSUANCE OF LICENSED
PATENTS............................................................Page 14
<PAGE>
ARTICLE 9 - ENFORCEMENT OF LICENSED PATENTS............................Page 14
ARTICLE 10 - TERMS OF LICENSE; TERMINATION.............................Page 15
ARTICLE 11 - COMMUNICATION AND NOTICES.................................Page 16
ARTICLE 12 - MISCELLANEOUS.............................................Page 17
APPENDIX A.............................................................Page 20
APPENDIX B.............................................................Page 22
<PAGE>
LICENSE AGREEMENT
THIS AGREEMENT is effective as of the 2nd day of November, 1992, by
and between RhoMed Incorporated, a New Mexico corporation whose principal
place of business is 4261 Balloon Park Road N.E., Albuquerque, New Mexico
87109 U.S.A. (hereinafter referred to as "Licensor") and Sterling Winthrop
Inc., a Delaware corporation with a place of business at 1250 South
Collegeville Road, Collegeville, Pennsylvania 19426 U.S.A. (hereinafter
referred to as "Licensee").
W I T N E S S E T H:
WHEREAS, Buck A. Rhodes, formerly of the College of Pharmacy at the
University of New Mexico ("UNM") was one of two inventors of Method for
Labelling Immunoglobulins with Tc-99m, which invention was issued United
States Patent No. 4,424,200 and Canadian Patent No. 1,177,393 (hereinafter
referred to as "Group A Patents");
WHEREAS, UNM received an undivided interest in Group A Patents
derived from Rhodes, which undivided interest is owned by USET, Incorporated
("USET"), successor to University Patents Incorporated under its Servicing
Agreement with UNM;
WHEREAS, under a License Agreement effective 1 May 1988, and amended
effective 1 September 1988 and 1 April 1992, USET granted to RhoMed a
worldwide, exclusive license, subject to a pre-existing nonexclusive license
to Summa Medical Corporation, under UNM's undivided one-half interest in Group
A Patents, with right to sublicense;
WHEREAS, Licensor is the owner in the entire right, title and
interest in certain technology for radiolabeling antibodies, peptides and
other proteins with
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Technetium-99m, isotopes of Rhenium and other radionuclides, and in the
inventions and patents relating thereto (hereinafter referred to as "Group B
Patents"; the technology comprising Group A Patents and Group B Patents is
hereinafter sometimes referred to collectively as the "Inventions");
WHEREAS, Licensee is desirous of obtaining a non-exclusive license to
manufacture, use, and sell products and/or services relating to the
Inventions; and
WHEREAS, Licensor is desirous of granting such a license to Licensee
in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises recitals,
and based on the mutual promises and benefits herein contained, and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
ARTICLE
1 - DEFINITIONS
1.1 "Group A Patents" shall mean the patents and patent applications
listed under the heading "Group A Patents" in Appendix A and any divisions,
continuations, continuation-in-part applications, reissues, reexaminations,
extensions and/or renewals and improvements.
1.2 "Group B Patents" shall mean the patents and patent applications
listed under the heading "Group B Patents" in Appendix A and any divisions,
continuations,continuation-in-part applications, reissues, reexaminations,
extensions and /or renewals and improvements .
1.3 "Patent Rights" shall mean the rights granted to Licensee by
Licensor under the patents and patent applications listed in Appendix A and
all future U.S. or foreign patents or patent applications covering or related
to all inventions or improvements which fall within know-how and technology
relating thereto, including
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<PAGE>
all divisions, continuations, continuations-in-part, extensions and/or
renewals of any such applications; and all patents which shall issued based on
such applications, divisions, continuations, continuations-in-part, extensions
and/or renewals and any reissues and improvements of any of the foregoing
patents.
1.4 "Diagnostic Imaging Field of Use" shall mean the use of any
radiometals, except for:
1.4.1 radiolabeled antibodies or fragments thereof with
specificity for myosin or any cross-reacting
structure;
1.4.2 gamma ray scintigraphic imaging of myocardial or
skeletal muscle necrosis:
1.4.3 for gamma ray scintigraphic imaging of any tissue
expressing myosin or any cross-reacting structure;
and
1.4.4 radiolabeled antibodies, antibody fragments or
peptides for the detection of the site or sites of
infection or inflammation.
1.5 "Therapeutic Field of Use" shall mean the use of any radiolabeled
protein, polypeptide or peptide, including any radiolabeled antibody or
fragment thereof, including any single antibody chain or fragment thereof and
recombinant antibody or fragment thereof, for any therapeutic application. Any
protein, polypeptide or peptide radiolabeled with an isotope which permits
both diagnostic imaging and therapy shall be within the Therapeutic Field of
Use, and shall not be within the definition of Diagnostic Imaging Field of
Use, notwithstanding that such radiolabeled product may be used for diagnostic
imaging.
1.6 "License Year" shall mean the calendar year.
1.7 "Licensed Processes" shall mean the processes claiming or
utilizing Patent Rights or some portion thereof.
1.8 "Licensed Product" or "Licensed Products" shall mean products
claimed
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in Patent Rights, including products containing one or more substances
radiolabeled or to be radiolabeled by a method claimed in Patent Rights, or
products made in accordance with or by means of Licensed Processes or products
made utilizing any substance, device, apparatus, method or process which
embodies or is protected by Patent Rights which substance, device, apparatus,
method or process of a Licensed Patent Right, or any product based on
"Licensed Technology", except for the license rights granted herein, would
infringe a "Valid Claim".
1.9 "Affiliates" shall mean with respect to a corporation,
association, partnership, individual, trust, unincorporated organization or
other entity, any other corporation, association, partnership, individual,
trust unincorporated organization or other entity that directly or indirectly
controls, is controlled by, or is under common control with such corporation,
association, partnership, individual, trust, unincorporated organization or
other entity. The term "control" herein shall mean the possession, direct or
indirect, of more than fifty percent (50%) of the voting stock, equity or
income interest of such corporation, association, partnership, trust,
unincorporated organizations or other entity. With respect to Licensee, an
"Affiliate" also includes: (a) a corporation, association, partnership, trust,
unincorporated organization or other entity in which Licensee or its
Affiliates own, directly or indirectly, at least twenty percent (20%) of the
voting stock, equity or income interest and Elf Sanofi, S.A. or its Affiliates
own, directly or indirectly, at least twenty percent (20%) of such voting
stock, equity or income interest; or (b) any corporation, association,
partnership, trust, unincorporated organization or other entity which is
formed or created pursuant to or in furtherance of the joint venture
agreements between Elf Sanofi S.A. and Licensee.
1.10 "Valid Claim" shall mean a claim of an issued patent, or of a
patent application that is not pending more than ten (10) years after the
earliest filing date, covering Licensed Technology, which patent or
application has not lapsed or become
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<PAGE>
abandoned and which claim has not been declared or rendered invalid by
reexamination, reissue, disclaimer or an unappealable final judgment of a
court of a court of competent jurisdiction.
1.11 "Net Sales" shall mean the amount billed or invoiced on sales of
Licensed Products less:
1.11.1 Customary trade, quantity or cash discounts and
non-affiliated brokers' or agents' commissions
actually allowed and taken and all applicable
taxes; and/or
1.11.2 Amounts repaid or credited by reason of rejection
or return.
If Licensed Products are sold in transactions which are not bona fide
arm's-length transactions (including transactions between entities which are
affiliated or have related interests), Net Sales shall be determined by the
most recent commercial sale to an independent party. If Licensed Products are
sold in which there are two or more biologically active radiolabeled
components, such as in a radiolabeled antibody cocktail product, and one or
more biologically active radiolabeled components are radiolabeled by a means
other than by means claimed under Patent Rights, then the Net Sales for such
Licensed Product shall be reduced by the proportion that the biologically
active radiolabeled components radiolabeled by means other than by means
claimed under Patent Rights bears to the total number of biologically active
radiolabeled components.
1.12 "Licensed Technology" shall mean any and all data, information,
technology, know-how, process, technique, method, skill, proprietary
information, trade secret, development, discovery, and invention, including
improvements on such an invention, whether patentable or not, which relate to
Patent Rights supplied by Licensor to Licensee.
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<PAGE>
1.13 "Development Agreement" shall mean that certain agreement
entitled "Development Agreement" between the parties hereto and executed
effective as of the same date as this License Agreement.
1.14 "Commercial Sale" shall mean any transaction which transfers to
a purchaser physical possession and title to each Licensed Product, after
which transfer seller has no right or power to determine purchaser's resale
price, if any. Transfer of possession and title to an Affiliate shall not
constitute a Commercial Sale, except where the Affiliate is an end user of a
Licensed Product.
ARTICLE 2 - GRANT OF LICENSES
2.1 Group A Patents License. Licensor hereby grants to Licensee and
Licensee accepts, subject to the terms and conditions hereof, a non-exclusive
world-wide license as to Group A Patents, limited to the Diagnostic Imaging
Field of Use, to make and have made, manufacture and have manufactured, use
and have used, to sell and have sold, and distribute and have distributed
Licensed Products and to practice Licensed Processes (hereinafter the
"License").
2.2 Group B Patents License. Licensor hereby grants to Licensee and
Licensee accepts, subject to the terms and conditions hereof, a non-exclusive
world-wide license as to Group B Patents, limited to the Diagnostic Imaging
Field of Use, to make and have made, manufacture and have manufactured, use
and have used, to sell and have sold, and distribute and have distributed
Licensed Products and to practice Licensed Processes (hereinafter the
"License").
2.3 License from Third Party. Licensor will be responsible for paying
all underlying royalties for any licenses which are necessary to fully
practice the Licensed Patents and Licensed Technology under this License
Agreement.
2.4 Right to Sublicense. The license granted shall include the right
of Licensee to grant written sublicenses for the manufacture and sale of
Licensed
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<PAGE>
Products and the practice of Licensed Processes, all pursuant to the Group A
Patents License and the Group B Patents License; provided, that Licensee shall
require terms and conditions at least co-extensive with this Agreement, and
shall include all sales of Licensed Products and Licensed Processes by all
sublicensees in its statements to Licensor and shall pay royalties thereon as
though all of such sales of sublicensees were in fact made by Licensee
hereunder. Licensee will deliver to Licensor a true and correct copy of each
and every sublicense entered into by Licensee within thirty (30) days after
execution thereof and shall promptly advise Licensor in writing of any
modification (and supply same) or termination of each sublicense. Upon
termination of this Agreement for any cause, any and all existing sublicenses
hereunder shall thereupon be assigned to Licensor. This shall be made a
condition of any such sublicense that may be granted by License.
2.5 No License Other Than Licensed Patents. No license is granted by
Licensor to Licensee, either directly or by implication, estoppel or
otherwise, under any patents other than the Group A Patents and the Group B
Patents.
2.6 Assignment. This agreement shall not be assignable by Licensee
without the prior written consent of Licensor except to a successor in
ownership of all or substantially all of the business assets of Licensee,
which successor shall expressly assume in writing the performance of all the
terms and conditions of this agreement to be performed by Licensee. This
agreement may be assigned without restriction by Licensor.
2.7 Group A Patents License Assignment. Upon termination for any
cause of the Agreement between RhoMed Incorporated and USET, Incorporated in
which RhoMed Incorporated licenses Group A Patents, this Agreement shall, as
to Group A Patents, thereupon be assigned to USET, Incorporated. The Licensor
herein warrants that USET has agreed to accept all terms of this Agreement and
to continue the Agreement with the Licensee as to Group A Patents under the
same terms and
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<PAGE>
conditions herein set forth if the Agreement is assigned to USET by the
Licensor.
2.8 Affiliates. Licensor hereby grants to Licensee the right to
extend the License granted herein, and the license in Article 3 on exercise of
the option, to an Affiliate subject to the terms and conditions hereof.
ARTICLE 3 - OPTION TO ACQUIRE LICENSE
3.1 Group B Patents License Option. Licensor hereby grants to
Licensee and Licensee accepts, subject to the terms and conditions hereof, an
option to acquire a non-exclusive world-wide license as to Group B Patents,
limited to the Therapeutic Field of Use, to make and have made, manufacture
and have manufactured, use and have used, to sell and have sold, and
distribute and have distributed Licensed Products and to practice Licensed
Processes (hereinafter the "License Option").
3.2 Option Payments. During the term of this option, Licensee agrees
to pay Licensor an annual option fee of Fifty Thousand Dollars ($50,000.00),
said amount due within thirty (30) days of the end of each License Year,
unless Licensee shall have agreed to Work Orders pursuant to the Development
Agreement having a value, during the License Year, of at least One Hundred
Thousand Dollars ($100,000.00).
3.3 License from Third Party. Licensor will be responsible for paying
all underlying royalties for any licenses which are necessary to fully
practice the Licensed Patents and Licensed Technology under this License
Agreement.
3.4 License Exercise Fee. Licensee agrees to pay Licensor One Hundred
Fifty Thousand Dollars ($150,000.00) as a License Exercise Fee for the
Therapeutic Field of Use License, which license shall be effective immediately
upon receipt of the license fee by Licensor. No part of the License Exercise
Fee is to be credited against
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<PAGE>
any royalties due or payable under this License Agreement or any Milestone
Payments due or payable under this License Agreement, and no part of the
License Exercise Fee is in any event repayable to Licensee by Licensor.
3.5 Exercise of Option. Licensee may exercise its option by giving
notice to Licensor of its intent to exercise the option, accompanied by the
License Exercise Fee specified in Article 3.3. Licensee shall exercise its
option hereunder prior to use in any human being, whether experimental,
investigational or otherwise, of any Licensed Product in the Therapeutic Field
of Use.
3.6 Right to Sublicense after Exercise of Option. The license granted
upon exercise of the License Option shall include the right of Licensee to
grant written sublicenses for the manufacture and sale of Licensed Products
and the practice of Licensed Processes, all pursuant to the Group B Patents
License; provided, that Licensee shall require terms and conditions at least
co-extensive with this Agreement, and shall include all sales of Licensed
Products and Licensed Processes by all sublicensees in its statements to
Licensor and shall pay royalties thereon as though all of such sales of
sublicensees were in fact made by Licensee hereunder. Licensee will deliver to
Licensor a true and correct copy of each and every sublicense entered into by
Licensee within thirty (30) days after execution thereof and shall promptly
advise Licensor in writing of any modification (and supply same) or
termination of each sublicense. Upon termination of this Agreement for any
cause, any and all existing sublicenses hereunder shall thereupon be assigned
to Licensor. This shall be made a condition of any such sublicense that may be
granted by License.
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ARTICLE 4 - PAYMENTS UNDER THE LICENSE
4.1 License Fee. Licensee agrees to pay Licensor One Hundred Twenty-
Five Thousand Dollars ($125,000.00) as a License Fee for the Diagnostic
Imaging Field of Use License, as set forth in Articles 2.1 and 2.2, upon
execution of this Agreement, and to, upon exercise of the License Option set
forth in Article 3.1, to pay the License Exercise Fee set forth in Article
3.3.
4.2 Milestone Payments. For each Licensed Product for which Licensee
uses Patent Rights, either under the License or the License Option, Licensee
shall, for each Licensed Product, upon the first happening of each of the
following in the United States, Japan, the United Kingdom, France, Germany,
Italy or Spain, make the following payments:
Upon filing of an Investigational New Drug application, or its
equivalent under the laws of any of the foregoing countries, for a Licensed
Product in the Diagnostic Imaging Field of Use, One Hundred Thousand Dollars
($100,000.00);
Upon filing of an Investigational New Drug application, or its
equivalent under the laws of any of the foregoing countries, for a Licensed
Product in the Therapeutic Field of Use, Two Hundred Thousand Dollars
($200,000.00);
Upon filing of an Product License Application, or its equivalent
under the laws of any of the foregoing countries, for a Licensed Product in
the Diagnostic Imaging Field of Use, One Hundred Fifty Thousand Dollars
($150,000.00);
Upon filing of an Product License Application, or its equivalent
under the laws of any of the foregoing countries, for a Licensed Product in
the Therapeutic Field of Use, Three Hundred Fifty Thousand Dollars
($350,000.00);
Upon approval of Licensed Product for commercial sales under the laws
of any of the foregoing countries, for a Licensed Product in the Diagnostic
Imaging Field of Use, Two Hundred Fifty Thousand Dollars ($250,000.00); and,
Upon approval of Licensed Product for commercial sales under the laws of any
of the
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<PAGE>
foregoing countries, for a Licensed Product in the Therapeutic Field of Use,
Seven Hundred Thousand Dollars ($700,000.00).
4.3 Production Royalties. Licensee shall pay to Licensor a production
royalty as set forth below:
For Net Sales of up to Twenty-Five Million Dollars ($25,000,000.00)
in any License Year, for each Licensed Product in either the Diagnostic
Imaging Field of Use or Therapeutic Field of Use, five percent (5%) of such
Net Sales;
For Net Sales of between Twenty-Five Million Dollars ($25,000,000.00)
and Fifty Million Dollars ($50,000.000.00) in any License Year, for each
Licensed Product in either the Diagnostic Imaging Field of Use or Therapeutic
Field of Use, seven percent (7%) of such Net Sales; and
For Net Sales of over Fifty Million Dollars ($50,000,000.00) in any
License Year, for each Licensed Product in either the Diagnostic Imaging Field
of Use or Therapeutic Field of Use, ten percent (10%) of such Net Sales.
The production royalties shall be attributed to Group A Patents and
Group B Patents as set forth in Schedule B.
4.4 Credit for Development Support. Licensee shall receive a credit
for all payments to Licensor under the Development Agreement, provided that
the maximum credit taken in any one calendar quarter under Article 5.2 shall
not reduce the royalty payment to RhoMed by more than twenty-five percent
(25%) of the amount otherwise due.
4.5 Licensed Processes. In the event Licensee performs Licensed
Processes for profit without producing Licensed Product, Licensee shall pay to
Licensor a royalty for each Licensed Process performed as if such Licensed
Process were used to produce Licensed Product, said royalty to be applied as
stated under Article 4.3.
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<PAGE>
ARTICLE 5 - REMITTANCES UNDER THE LICENSE
5.1 Accrual. Royalties shall accrue when Licensed Products are first
used, sold, billed out, distributed or otherwise transferred, but excluding
products transferred at no cost for clinical testing purposes.
5.2 Payments. Payments of accrued royalties shall be made to Licensor
in U.S. dollars on a quarterly calendar basis for all Licensed Products used,
sold, distributed, billed out, or otherwise transferred during that quarter.
Such payment shall be made within sixty (60) days following the end of such
calendar quarter and shall be accompanied by a statement which shall show the
total quantity and Net Sales of Licensed Products for which royalties have
accrued during such quarter. Quarterly royalty reports, certified to by an
officer of Licensee, shall give sufficient information from which to calculate
the amount of royalties due hereunder, including, but not limited to, the
total quantity and Net Sales of goods for which royalty has accrued during the
preceding calendar quarter, and shall be made whether or not there are sales
of Licensed Products during such quarter. The identity of the Licensee's
customers shall remain confidential to the Licensor.
5.3 Royalty Payments on Sales Outside United States. Royalty payments
which accrue outside the United States shall be paid in U. S. Dollars in the
United States at the rates of exchange published in The Wall Street Journal on
the last business day of the accounting period in which the royalty accrues.
Royalties shall be paid to Licensor free and clear of all foreign taxes,
including withholding and turnover taxes, except such taxes which Licensee may
be required to withhold by a foreign country and for which Licensor is
entitled to receive a tax credit by treaty or otherwise.
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<PAGE>
ARTICLE 6 - RECORDS UNDER THE LICENSE
Licensee shall report to Licensor the date of first sale of Licensed
Products within thirty (30) days of occurrence. Licensee shall keep, and shall
require its Affiliates to keep, records in sufficient detail to permit the
determination of royalties payable hereunder. Such records shall be retained
for at least three (3) years following a given reporting period. They shall be
available during normal business hours for inspection at the expense of
Licensor by a Certified Public Accountant selected by Licensor and approved by
Licensee for the sole purpose of verifying reports and payments hereunder. The
accountant may have access to Licensee's customer lists and identity, to the
extent the accountant determines that such information is necessary or useful
in verifying reports and payments hereunder. Such accountant shall not
disclose to Licensor any information other than information relating to the
accuracy of reports and payments made under this agreement. In the event that
such inspection shows an underreporting and underpayment in excess of five
percent (5%) for any twelve (12) month reporting period, then Licensee shall
pay the costs of such examination.
ARTICLE 7 - MARKING OF PRODUCTS
7.1 Patents. Licensee agrees to mark every Licensed Product
manufactured and/or sold by it, under this agreement, and all brochures and
advertising materials (and to so require its sublicensees), as to patents
pending, or patents issued where patent coverage is obtained, in accordance
with the laws of the United States and foreign countries.
7.2 Trademarks. Notwithstanding anything in the License Agreement to
the contrary, any Trademark used by Licensee in connection with Licensed
Product or Licensed Technology shall be solely the property of Licensee.
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<PAGE>
ARTICLE 8 - INVALIDITY OR NON-ISSUANCE OF LICENSED PATENTS
8.1 Technology and Know-How License. It is agreed and understood that
this agreement is, in part, a license of the technology and know-how
incorporated into the Inventions and Licensed Products. In the event that
Patent Rights are subsequently held to be invalid by a court of the United
States or any foreign country or countries, such failure to issue or holding
of invalidity shall not render this agreement invalid; provided, the royalties
shall be diminished by fifty percent (50%) in territory of the invalid patent
rights.
8.2 Validity. Except to the extent prohibited by law, Licensee agrees
that it shall not question or challenge, directly or indirectly, the validity
of the patent or any reissue or extension thereof, or assist any other person
in doing so. The parties shall promptly notify each other of a challenge to
validity or enforceability of the Patent of which the parties are to become
aware. In the event of a lawsuit relating to validity or enforceability of the
Patent, the Licensor shall have the right to defend such validity and/or to
appeal. If no defense is lodged and the patent(s) is declared invalid, the
royalties shall be diminished by fifty percent (50%) in the territory of the
invalidated patent(s).
ARTICLE 9 - ENFORCEMENT OF LICENSED PATENTS
9.1 Enforcement. In the event Licensee becomes aware of any actual or
threatened infringement of a Licensed Patent in the Field of Use licensed
herein, Licensee shall promptly notify Licensor in writing, and will supply
Licensor with any available evidence pertaining to the infringement. Licensor,
at its own expense, can take whatever steps are necessary to stop the
infringement and recover damages therefor, and will be entitled to retain all
damages so recovered to pay its out-of-pocket expenses to recover such
damages, and any surplus in damages awarded shall be equally divided between
Licensee and Licensor; provided, that Licensee shall
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<PAGE>
recover no more than its loss in earnings due to the infringement. If Licensor
does not proceed to enforcement the Patent Rights within one hundred eighty
(180) days of notice, Licensee, after notifying Licensor in writing, shall be
entitled to take proceedings against such infringer at its own expense;
provided, that Licensee may suspend payment of earned royalties under the
patent in suit in the country of such action to the extent of any
out-of-pocket costs actually incurred in such action.
9.2 The party conducting such suit shall have full control over its
conduct. In either event, Licensee and Licensor shall assist one another and
cooperate in any such litigation upon request and without expense to the
requestee.
9.2 Defense. In the event a third party brings an action to obtain a
declaration of patent invalidity (a "DJ Action") against Licensor and/or
Licensee:
9.2.1 The named defendant shall have the first right to
defend said action at its own cost and expense and
to control ensuing litigation;
9.2.2 If the named defendant elects not to defend the DJ
Action, the other Party may elect to defend the DJ
Action at its own cost and expense and to control
the ensuing litigation;
9.2.3 If a litigating Party finally prevails, it shall
retain all damages which it may collect.
ARTICLE 10 - TERMS OF LICENSE; TERMINATION
10.1 Patents. The term of this Agreement shall be from the date first
written above until the expiration of the last of the Patent Rights to expire
or become abandoned, and covering the process(es) and/or product(s) being
commercialized by the Licensee, or for ten (10) years from first Commercial
Sale, whichever is longer, on a country-by-country basis; provided, however,
that after the expiration of Licensee's Patent Rights or after ten (10) years
from first Commercial Sale, whichever
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is longer, Licensee may freely use Licensed Technology, without any royalty
obligations to Licensor.
10.2 Default. If Licensee shall at any time default in any obligation
under this Agreement, included but not limited to failing to make any report,
pay any royalties, or permit the inspection of its books and records as
hereinabove required, and such default shall not be cured within sixty (60)
days after written notice from Licensor to Licensee specifying the nature of
the default, then Licensor shall have the right to terminate the license
granted to Licensee hereunder and such termination shall become effective at
the close of business on the sixtieth (60th) day after giving such notice.
10.3 Termination by Licensee. Licensee may terminate this License
Agreement at any time, with or without cause, upon sixty (60) days written
notice to Licensor.
10.4 Rights and Obligations. Any termination pursuant hereto shall
not relieve Licensee or Licensor of any obligation or liability accrued
hereunder prior to such termination, nor rescind or give rise to any right to
rescind anything done or any payments made or other consideration given
hereunder prior to the time of such termination and shall not affect in any
manner any rights of either party arising out of this Agreement prior to such
termination.
10.5 Waiver. A waiver by either Party hereto of any violation of or
default in any provision of this Agreement shall not constitute a waiver of
any repeated violation of or default in the same provision, or any violation
of or default in any other provision of this Agreement.
ARTICLE 11 - COMMUNICATION AND NOTICES
Any payment, notice, or other communication required or permitted to
be made or given to either Party hereto pursuant to this Agreement shall be
sufficiently made
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<PAGE>
or given on the date of mailing if sent to such Party by certified or
registered mail, postage prepaid, addressed to it at its address set forth or
to such other address as it shall designate by written notice to the other
Party as follows:
In the case of Licensor:
President
RhoMed Incorporated
4261 Balloon Park Road, N.E.
Albuquerque, New Mexico 87109
In the case of Licensee:
Sterling Winthrop Inc.
1250 South Collegeville Road
P. O. Box 5000
Collegeville, Pennsylvania 19426-0900
Attn: President, Pharmaceutical Research Division
and
Sterling Winthrop Inc.
90 Park Avenue
New York, NY 10016
Attn: General Counsel
ARTICLE 12 - MISCELLANEOUS
12.1 Execution and Amendment. This Agreement will not be binding upon
the Parties until it has been signed hereinbelow by or on behalf of each
Party, in which event it shall be effective as of the date first above
written. No amendment or modification hereof shall be valid or binding upon
the Parties unless made in writing and signed as aforesaid.
12.2 Construction. This Agreement embodies the entire understanding
of the Parties and shall supersede all previous communications,
representations or undertakings, either verbal or written between the Parties
relating to the subject matter hereof.
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<PAGE>
12.3 Indemnification. Licensee agrees to indemnify and hold harmless
Licensor and the Inventors from and against any and all claims, damages and
liabilities asserted by third parties (private and governmental) arising from
Licensee's manufacture, use, distribution or sale of Licensed Products and/or
the purchaser's use thereof.
12.4 Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
12.5 Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled in the United
States by arbitration, in accordance with the rules then obtaining, of the
American Arbitration Association. If the subject of the arbitration involves
an intellectual property matter, as determined by the Association, then the
arbitrator(s) should have had experience in that subject. The Association is
authorized to make arrangements for this arbitration, to be held under these
rules in any locality in the United States agreed upon by the parties or as
designated by the Association. This agreement shall be enforceable and
judgment upon any award rendered by all or a majority of the arbitrators may
be entered in any court of any country having jurisdiction.
12.6 Jurisdiction. This Agreement shall be construed, and the legal
relations between the Parties determined, in accordance with the laws of the
United States of America and the State of New Mexico.
12.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each of the Parties hereto and except as otherwise
provided herein, their respective legal successors and assigns.
12.8 Force Majeure. Neither of the parties hereto shall be liable in
damages or have the right to cancel this Agreement for any delay or default in
performing
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<PAGE>
hereunder if such delay or default is caused by conditions beyond its control,
including acts of God, government restrictions, wars and insurrections.
12.9 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be duly executed as of the date first above written.
LICENSOR:
RhoMed Incorporated
By:/S/ Buck A. Rhodes
-------------------------------------------
Buck A. Rhodes
President
LICENSEE:
STERLING WINTHROP INC.
By:/S/ E.C. Bradley
----------------------------------------------
Name: E.C. Bradley
Title: Vice President, Oncology
STERLING WINTHROP INC.
By: /S/ Paul Baehr
----------------------------------------------
Name: Paul Baehr
Title: President, Technology & Development
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<PAGE>
APPENDIX A
GROUP A PATENTS
U.S. Patent No. 4,424,200 and Canadian Patent No. 1,177,393
Method for Labelling Immunoglobulins with Tc-99m;
and any divisions, continuations, continuation-in-part applications, reissues,
reexaminations, extensions and/or renewals and improvements thereof.
GROUP B PATENTS
U.S. Patent No. 5,078,985,
Radiolabeling Antibodies and Other Proteins with Technetium or Rhenium by
Regulated Reduction;
U.S. Patent No. 5,102,990,
Direct Radiolabeling of Antibodies and Other Proteins with Technetium or
Rhenium;
International Application PCT/US90/04461,
Direct Radiolabeling of Antibodies and Other Proteins with Technetium or
Rhenium (pending in Canada, Japan, Australia, and the following European
countries: Austria, Belgium, Switz/Lit, Germany, Denmark, Great Britain,
Italy, Netherlands, Sweden, Spain and France);
U.S. Patent Application 07/815,122,
Composition for Radiolabeling Antibodies and Other Proteins by Regulated
Reduction;
U.S. Patent Application 07/815,123,
Method for Radiolabeling Antibodies and Other Proteins by Regulated Reduction;
U.S. Patent Application 07/816,477,
Direct Labeling of Antibodies and Other Proteins with Metal Ions
U.S. Patent Application 07/840,077,
Peptide-Metal Ion Pharmaceutical Preparation and Method
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<PAGE>
U.S. Patent Application 07/864,470,
Direct Radiolabeling of Substrates Containing Monosulfides or Disulfide Bonds
with Radionuclides
and any divisions, continuations, continuation-in-part applications, reissues,
reexaminations, extensions and/or renewals and improvements thereof.
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<PAGE>
APPENDIX B
ALLOCATION OF PATENT ROYALTIES
All License Fees under Article 4.1 for a concurrent license to both
Group A Patents and Group B Patents shall be allocated 12.5 % to Group A
Patents, and 87.5 % to Group B Patents.
All Milestone Payments under Article 4.2 for any Licensed Product for
which Licensee uses Patent Rights which, except for the license rights granted
herein, would infringe a Valid Claim of Group A Patents and a Valid Claim of
Group B Patents, shall be allocated 12.5 % to Group A Patents, and 87.5 % to
Group B Patents.
All Production Royalties under Article 4.3 for any Licensed Product
for which Licensee uses Patent Rights which, except for the license rights
granted herein, would infringe a Valid Claim of Group A Patents and a Valid
Claim of Group B Patents, shall be allocated 50% to Group A Patents and 50% to
Group B Patents.
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ASSIGNMENT AND ASSUMPTION
-------------------------
(License Agreement with RhoMed Inc.)
This Assignment and Assumption, dated January 21, 1994, by
Sterling Winthrop Inc., a Delaware corporation ("Seller"), and by Burroughs
Wellcome Co., a North Carolina corporation ("Buyer").
WHEREAS, Seller and Buyer are parties to an Asset Purchase
Agreement dated as of January 11, 1994 (the "APA"), pursuant to which Seller
has agreed to sell to Buyer and Buyer has agreed to purchase certain Assets
and assume certain Liabilities, as defined therein, of Seller used in the
business of the Sterling Winthrop Immunoconjugate Division of Seller ("SWIC");
and
WHEREAS, the Assets include all of the rights of Seller in,
to and under the contract set forth on Schedule A hereto (the "Contract"); and
WHEREAS, pursuant to the terms of the APA, Seller desires to
assign and delegate, and Buyer desires to assume, certain rights and
obligations of Seller under the Contract.
NOW THEREFORE, in consideration of the premises and for
other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, and intending to be legally bound hereby:
1. Assignment. Seller hereby sells, grants, assigns
and conveys to Buyer all of Seller's right, title and interest in and to the
Contract that arise on or after the date hereof.
2. Assumption. Buyer hereby assumes and agrees to
perform all of those obligations of Seller under and pursuant to the
Contract that arise on or after the date hereof.
3. Successors and Assigns. This Assignment and
Assumption binds, inures to the benefit of, and is enforceable by the
successors and assigns of the parties.
4. Governing Law. This Assignment and Assumption
shall be governed by, construed and enforced in accordance with New
York law, without regard to principles of conflicts of law applicable in
such jurisdiction.
5. Counterparts. This Assignment and Assumption
may be executed in any number of counterparts and either party hereto
may execute any such counterpart, each of which when executed and
delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Assignment
and Assumption to be executed on their behalf by their duly authorized
officers on the date first above written.
BURROUGHS WELLCOME CO.
By: /S/David Barry
---------------
David Barry
Vice President-Research,
Development and Medical
STERLING WINTHROP INC.
By: /S/George Doherty
------------------
George Doherty
Vice President Business
Development
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Option Agreement") is entered into by and
between The Wistar Institute of Anatomy and Biology of Philadelphia,
Pennsylvania (hereafter "Wistar"), and RhoMed Incorporated of Albuquerque, New
Mexico (hereafter "RhoMed"), this 22nd day of August 1996.
WHEREAS, RhoMed and Wistar were parties to an option agreement, dated
June 29, 1987, that gave RhoMed an option to obtain an exclusive license to
use monoclonal antibody cell line MCA-480 for purposes of making human
diagnostic imaging products (the "Prior Option Agreement");
WHEREAS, the Prior Option Agreement, as extended, expired on July 31,
1993, without execution of a license agreement;
WHEREAS, RhoMed and Wistar renewed licensing discussions during the
previous six months and have exchanged draft license terms; and
WHEREAS, as an expression of good faith, RhoMed desires to secure an
exclusive option for a limited period of time to facilitate continued
negotiation of a license to the cell line.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound, Wistar and RhoMed agree as
follows:
1. Option Grant. Wistar hereby grants to RhoMed an exclusive option
for the period of sixty (60) days from the date of this Option Agreement (the
"Option Term") to enter into a license agreement for the cell line MCA-480. In
order to exercise this option, RhoMed shall sign and deliver to Wistar prior
to the sixty-first day after the date of this Option Agreement a license
agreement acceptable to Wistar. Wistar and RhoMed will engage in good faith
negotiations to complete a license agreement during the Option Term.
2. Consideration for Option. In consideration of this option, RhoMed
shall pay Wistar the nonrefundable sum of ten thousand dollars ($10,000) upon
execution of this Option Agreement, by check made payable to "The Wistar
Institute of Anatomy and Biology." The entire sum of ten thousand dollars
($10,000) will be fully credited against any license initiation fee (however
called) required under a license agreement between the parties for the cell
line MCA-480, but shall not be creditable against any other sums (including
without limitation, royalties on sales of product) payable by RhoMed to Wistar
thereunder.
<PAGE>
3. Termination of Option. Should Wistar and RhoMed fail to reach
agreement on a license agreement for the cell line MCA- 480 prior to the end
of the Option Term, this Option Agreement shall terminate without action of
the parties and they shall have no further obligation to one another under
this Option Agreement or otherwise.
4. Governing Law. The laws of the Commonwealth of Pennsylvania shall
govern this Option Agreement.
5. Entire Agreement. This Option Agreement embodies the entire
understanding of the parties relating to the subject matter hereof and
supersedes all prior understandings and agreements. No modification or
amendment of this Option Agreement shall be valid and binding except by a
writing signed by each of the parties.
6. Notices. Any notices to be given by either party under this Option
Agreement shall be given by overnight courier service or by registered or
certified mail, addressed as follows:
If to Wistar:
The Wistar Institute of Anatomy and Biology
3601 Spruce Street
Philadelphia, Pennsylvania 19104
Attn: Executive Vice President of Administration
If to RhoMed:
RhoMed, Inc.
4261 Balloon Park Road N.E.
Albuquerque, New Mexico 87109-5802
Attn: Vice President
or such other address as the parties shall designate in writing. Such notice
shall be deemed to have been given when received as indicated on the postal or
courier receipt.
IN WITNESS WHEREOF, the parties hereto have duly executed this Option
Agreement as of the date first above written.
THE WISTAR INSTITUTE OF
ANATOMY AND BIOLOGY RHOMED INC.
By: /S/ By: /S/ Charles L. Putnam
-------------------- ---------------------------
Title: President Title: Executive Vice President
----------------- ------------------------
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of March 7, 1996 between RhoMed
Incorporated, a New Mexico corporation (the "Corporation"), and Buck A. Rhodes
(the "Consultant").
W I T N E S S E T H :
WHEREAS, the Corporation wishes to engage the Consultant,
and the Consultant wishes to be retained by the Corporation, on
the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. Position and Responsibilities.
1.1. The Corporation hereby appoints the Consultant, and the Consultant
hereby accepts such appointment, to act as a consultant to the Corporation,
and to perform for the Corporation duties and functions as reasonably assigned
from time to time by the Chief Executive Officer or any person designated by
the Chief Executive Officer.
1.2. The Consultant shall devote at least 21 hours per week and his
best efforts to the business and affairs of the Corporation and to the
promotion of its interests.
<PAGE>
2. Term.
2.1. The term of this Agreement shall commence on the date hereof
and shall terminate on the second anniversary of the date hereof, unless
sooner terminated as provided in this Agreement (the "Term").
2.2 The Corporation shall have the right to terminate this
Agreement for Cause (as hereinafter defined) or the Consultant's Disability
(as hereinafter defined), such termination to be effective on the date on
which notice is given or as of such later date otherwise specified in the
notice (the "Termination Date").
2.3 For purposes of this Agreement, the term "Cause" shall mean
fraud or dishonesty or acts of gross negligence in the course of providing the
Consultant's services herein; misrepresentation to directors; failure to
comply with a written direction of the Chief Executive Officer of the
Corporation or any person designated by the Chief Executive Officer to assign
duties and functions to the Consultant, which shall not be cured within 10
days after written notice of such failure; a material breach of this
Agreement; or the commission of a felony. Any dispute, controversy or claim
relating to the determination that the Corporation had Cause to terminate the
Consultant's appointment shall be finally settled under the rules of the
American Arbitration Association (the "AAA") in effect from time to time. A
single arbitrator shall be appointed by agreement between the parties or,
failing such agreement, by the AAA. The arbitrator may grant any remedy that
he deems just and equitable
2
<PAGE>
within the scope of this Agreement, including specific performance. The award
of the arbitrator shall be final and binding and judgement thereon may be
entered in any court having jurisdiction. The costs and expenses (including
reasonable attorney's fees) of the prevailing party shall be borne and paid by
the party that the arbitrator determines is the non-prevailing party.
3. Compensation.
3.1. The Corporation, subject to Article 4, shall pay to the
Consultant for the services to be rendered by the Consultant hereunder
$82,000.00 per annum. The fee shall be payable in equal monthly installments
of $6,833.33 each, commencing after the expiration of the "Revocation Period"
(as hereinafter defined).
3.2 The Corporation, in addition to the fee provided for in
Section 3.1, shall pay to the Consultant on or before July 1, 1996, the sum of
$51,023.41, such payment representing unpaid salary that accrued prior to the
date hereof.
3.3 The Corporation shall pay the Consultant the sum of $36,000
if the Consultant resigns from the Board of Directors of the Corporation on or
before May 15, 1996, such payment representing severance compensation for such
resignation.
3.4 The Corporation shall reimburse the Consultant for one-half
of all premiums incurred by the Consultant to maintain the $1 million key-man
life insurance policy issued on June 6, 1995, procured from Allied Life
Insurance Company.
3
<PAGE>
3.5 During the Term, the Consultant shall be entitled to
participate in any medical insurance program available to employees of the
Corporation if he is eligible under the terms and conditions thereof. If the
Consultant is not eligible to participate in such insurance program and elects
to continue his medical insurance coverage for 18 months pursuant to the COBRA
law, the Consultant shall be reimbursed for the cost of such medical insurance
coverage, in an amount equal to the cost to the Corporation of providing
medical insurance coverage for an employee in such insurance program for the
period represented by such reimbursement, for 18 months from the date of this
Agreement. After such 18 month period has expired and until the end of the
Term, the Corporation shall reimburse the Consultant for the expenses of
obtaining medical insurance in a maximum amount equal to and on the basis as
the last reimbursement to the Consultant for medical insurance coverage
pursuant to the Cobra law as set forth in the preceding sentence.
3.6 The Corporation shall reimburse the Consultant for all
documented business expenses reasonably and necessarily incurred by the
Consultant in the performance of his duties hereunder, including business
travel expenses.
3.7 The Consultant shall be entitled to appropriate office space
and secretarial assistance.
4. Payments Upon Termination.
4.1 If prior to the second anniversary of the date
hereof, the Corporation terminates the Consultant other than for
4
<PAGE>
Cause or for the Consultant's Disability (as hereinafter defined), the
Corporation shall continue to pay the Consultant pursuant to Section 3.1 until
the second anniversary of the date hereof as if such termination had not
occurred, but shall have no other obligations under any other provision of
Article 3. If such termination is for Cause or for the Consultant's Disability
(as hereinafter defined), the Corporation's obligations under Article 3 cease
as of the Termination Date.
4.2 If the Consultant dies prior to the second anniversary of the
date hereof, the Corporation's obligations under Article 3 cease as of the
date of the Consultant's death.
4.2 "Disability" as used herein shall mean any condition whereby
the Consultant is unable to substantially perform his duties hereunder by
reason of illness, accident or other physical or mental disability for an
aggregate period of 180 days during any continuous twelve-month period.
5. Confidential Information.
5.1. The Consultant shall not (during the Term or
after the termination hereof) directly or indirectly divulge, furnish, use,
publish or make accessible to any person or entity any Confidential
Information (as hereinafter defined). Any records of Confidential Information
prepared by the Consultant or which come into the Consultant's possession
during the Term are and remain the property of the Corporation and upon
termination of this Agreement all such records, including Confidential
5
<PAGE>
Information and copies thereof, shall be returned to the Corporation.
5.2. The term "Confidential Information" shall mean information
disclosed to the Consultant or known, learned, created or observed by him as a
consequence of or through this Agreement, not generally known or available
from published sources in the relevant trade or industry, about the
Corporation's business activities, services and processes, including but not
limited to information concerning advertising, sales promotion, publicity,
sales data, medical research, trade secrets, confidential know-how,
techniques, systems, software programs, works of authorship, specifications,
data, drawings, sketches, documentation, formulas, discoveries, designs,
finances, accounting, methods, processes, business plans, client or supplier
lists and records, potential client or supplier lists, and client or supplier
billing.
6. Non-Compete.
6.1. So long as the Corporation continues to pay the Consultant
under Section 3.1 and, to the extent applicable, for the period specified in
Section 6.2, the Consultant shall not, without the prior written approval of
the Board, for any reason whatsoever, directly or indirectly:
i) Own, manage, operate, join or control, or
participate in the ownership, management, operation or control
of, or be a director, officer or employee of, or a consultant to,
any business enterprise which may be deemed "competitive" (as
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hereinafter defined) with any business engaged in by the Corporation. Nothing
in this paragraph shall preclude the Consultant from holding an interest of
less than 5% of a publicly owned company or business entity.
6.2. If the Corporation terminates this Agreement for Cause, the
provisions of Section 6.1 shall be applicable for twelve months after the date
of such termination.
6.3. A business shall be considered "competitive" with the
business of the Corporation if it is located anywhere in the world and is
engaged in the development, manufacture, production, distribution or marketing
of radiopharmaceutical or peptide drugs intended to diagnose or treat
diseases, including, without limitation, infection, cancer and blood clots.
7. Proprietary Rights and Information in Respect of
Inventions, etc.
7.1 In consideration of the Consultant's appointment to act as a
consultant to the Corporation and of the compensation provided for herein the
Consultant for his services in the course of such appointment and for being
permitted access to information pertaining to the Corporation's business, the
Consultant hereby agrees:
(A) To promptly disclose in detail and in writing to the
Corporation, each Invention (as hereinafter defined) that the Consultant alone
or with others makes or conceives during the Term whether or not made or
conceived during working hours, which pertains to the Corporation's business
or its actual or
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<PAGE>
demonstrably anticipated research or development or is aided by the use of
time, materials or facilities of the Corporation and the Consultant will
without further consideration other than reimbursement of his expenses to the
extent hereinafter provided, assign (and does hereby assign) to the
Corporation or its nominee, all right, title and interest in each such
Invention and will, at all times, whether during or after the Term, execute,
acknowledge and deliver such assignment affidavits and other instruments
prepared by the Corporation or its nominee and do such other things as will
assist the Corporation or its nominee to obtain patents on each such Invention
and Inventions developed by the Consultant which pertain to the Corporation's
business or its actual or demonstrably anticipated research and development,
or that were developed with the aid of use of time, materials or facilities of
the Corporation, in any and all countries. The expenses for which the
Corporation or its nominees shall be obligated to reimburse the Consultant
shall be limited to mailing charges and notary fees and to such payments to
others that the Corporation or its nominee has given the Consultant prior
written authorization to mail. The Corporation shall have no right of
ownership in an Invention, and no assignment to the Corporation in accordance
with this paragraph is required, if it is determined that such Invention is:
an Invention for which no equipment, supplies, facility, or trade secret
information of the Corporation was used and which was developed entirely on
the Consultant's own time, and (a) which does not relate (1) to the
Corporation's business or (2) to the Corporation's actual or
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demonstrably anticipated research or development or (b) which does not result
from any work permitted by the Consultant for the Corporation.
(B) To assign to the Corporation all of the Consultant, right,
title and interest in and to all work that pertains to the Corporation's
business or demonstrably anticipated research or development of the
Corporation or that is aided by the use of time, material or facilities of the
Corporation, unless the Corporation expressly waives, in writing, its right,
title and interest to such work.
(C) To make and maintain adequate and current written records of
all Inventions, in the form of note sketches, drawings, or reports relating
thereto, which records shall be and remain the property of and available to
the Corporation at all times.
(D) At the Corporation's expense, to assist the Corporation in
every proper way to obtain and to help the Corporation enforce any and all
patents, copyrights, and other legal protection for the Corporation's
Inventions in any and all countries and to execute any documents that the
Corporation may reasonably request for use in enforcing such patents,
copyrights and other legal protection. The Consultant acknowledges that all
original works of authorship that are made by him (solely or jointly with
others) within the scope of his services to the Corporation, and that are
protectable by copyright are "works for hire," as that term is defined in the
United States Copyright Act (17 U.S.C. Section 101), subject to the good faith
negotiation of
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fair market royalty payments to the Consultant by the Corporation
for such work.
(E) Not to disclose or utilize in work at the Corporation any
confidential information of third parties, including prior employers, or any
Inventions or copyrightable work of the Consultant which are not within the
scope of this Consulting Agreement.
(F) To notify the Corporation in writing before the Consultant
makes any disclosure or performs or causes to be performed any work for or on
behalf of the Corporation which appears to threaten or conflict with:
(1) rights the Consultant claims in any Invention or idea (a)
conceived by the Consultant or others prior to the Consultant's "Prior
Employment" (as hereinafter defined) by the Corporation, or (b) otherwise
outside the scope of this Consulting Agreement, or
(2) rights of others arising out of obligations incurred by the
Consultant, (a) prior to this Consulting Agreement, or (b) otherwise outside
the scope of this Consulting Agreement. In the event of the Consultant's
failure to give notice under the circumstances specified in (1) of the
foregoing, the Corporation may assume that no conflicting invention or idea
exists, and the Consultant agrees that the Consultant will make no claim
against the Corporation with respect to the use of any such Invention or idea
in any work or live product of any work which the Consultant
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<PAGE>
performs or causes to be performed for or on behalf of the Cor-
poration;
7.2 For purposes hereof, the term "the Corporation's business"
shall include the business of developing, manufacturing, producing,
distributing and marketing radiopharmaceutical and peptide drugs intended to
treat diseases, including, without limitation, infection, cancer and blood
clots.
7.3 As used herein, "Inventions" shall mean any and all
inventions and discoveries, technological innovations including improvements,
original works of authorship, designs, formulae, processes, computer programs,
databases, and trade secrets and related proprietary information and
materials, in each case regardless of whether patented or unpatented.
8. Acknowledgment Release.
8.1. The Consultant acknowledges that on March 7, 1996, he
resigned his employment as President of the Corporation (the "Prior
Employment"). As a material inducement to the Corporation to enter into this
Agreement and to give him the payments and benefits described above, the
Consultant forever releases and discharges the Corporation and each of the
Corpora- tion's stockholders, predecessors, successors, assigns, agents,
directors, officers, employees, representatives, attorneys, parent companies,
divisions, subsidiaries, affiliates (and agents, directors, officers,
employees, representatives and attorneys of such parent companies, divisions,
subsidiaries and affiliates), and all persons acting by, through, under or in
11
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concert with any of them, from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, damages,
actions, causes of action, suits, rights, demands, costs, losses, debts and
expenses (including attorneys' fees and costs actually incurred) of any nature
whatsoever, in law or equity, known or unknown, suspected or unsuspected, that
the Consultant, his issue, heirs, representatives, successors, agents,
executors, administrators or assigns, ever had, now has or hereafter can,
shall or may have, for, upon, or by reason of any matter, cause or thing
whatsoever from the beginning of the world to the date of this Agreement,
including but not limited to, claims arising out of his Prior Employment by
the Corporation and the termination of such employment, including any claims
for unpaid wages, back pay, commissions, vacation pay, severance or other
compensation, or any claims for alleged violation of any contracts, express or
implied, or any covenant of good faith and fair dealing, express or implied,
or any tort, or any legal restrictions on the Corporation's right to terminate
employees, and any federal, state or other governmental statute, regulation,
or ordinance, including without limitation: Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act of 1967, the Americans with
Disabilities Act, the Equal Pay Act, and the Rehabilitation Act of 1973,
excluding, however, any matter relating to the expiration of the Consultant's
stock options to purchase shares of the Corporation's common stock. This
covenant shall not apply to actions for breach of this Agreement.
12
<PAGE>
8.2. The Consultant, for himself, his heirs, assigns and legal
representatives, hereby covenants and represents that he has not instituted,
and will not institute, any complaints, claims, charges or lawsuits, with any
governmental agency or any court, against the Corporation, by reason of any
claim present or future, known or unknown, arising from or related in any way
to his Prior Employment with the Corporation or the termination of such
employment, or any relationship, association, or transaction to date between
the parties hereto or any of their predecessors or their respective agents,
employees or officers, excluding, however, any matter relating to the
expiration of the Consultant's stock options to purchase shares of the
Corporation's common stock. This covenant shall not apply to actions for
breach of this Agreement.
8.3 The Consultant has 21 days from the date on which a copy of
this Agreement has been delivered to him to consider whether to sign it. In
addition, if the Consultant returns to the Corporation a signed copy of this
Agreement, he has 7 days following the date of such return (the "Revocation
Period") to deliver to the Corporation a notice of revocation. This Agreement
will not be effective or enforceable until the expiration of the Revocation
Period.
9. Relationship. The Consultant shall be an
independent contractor and not an employee of the Corporation.
Nothing herein shall serve to create a relationship of
partnership or joint venture between the parties. The Consultant
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<PAGE>
shall not be an agent of the Corporation and shall have no power to bind or
otherwise obligate the Corporation in any manner without the prior consent of
the Corporation.
10. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Consultant shall not
assign or transfer this Agreement or its rights or obligations hereunder
without the Corporation's prior consent.
11. No Third Party Beneficiaries. This Agreement
does not create, and shall not be construed as creating, any
rights enforceable by any person not a party to this Agreement,
except as provided in Section 6 hereof.
12. Headings. The headings of the sections hereof
are inserted for convenience only and shall not be deemed to
constitute a part hereof nor to affect the meaning thereof.
13. Interpretation. In case any one or more of the
provisions contained in this Agreement, including, without
limitation, the provisions of Article 6, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, and this Agreement shall
be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. If, moreover, any one
or more of the provisions contained in this Agreement, including,
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<PAGE>
without limitation, the provisions of Article 5, shall for any reason be held
to be excessively broad as to duration, geographical scope, activity or
subject, it shall be construed by limiting and reducing it, so as to be
enforceable to the extent compatible with the applicable law as it shall then
appear.
14. Notices. All notices and consents under this Agreement shall
be in writing and shall be deemed to have been given at the time when mailed
by registered or certified mail or when delivered by hand or recognized
overnight courier service, addressed to the address below stated of the party
to which notice is given, or to such changed address as such party may have
fixed by notice:
To the Corporation:
Edward J. Quilty
RhoMed Incorporated
214 Carnegie Center, Suite 100
Princeton, New Jersey 08540
with a copy to
Eric J. Wallach, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
To the Consultant:
Buck A. Rhodes
3212 Rio Grande Boulevard, N.E.
Albuquerque, New Mexico 87107
provided, however, that any notice of change of address shall be effective
only upon receipt.
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15. Waivers. If any party should waive any breach
of any provision of this Agreement, it shall not thereby be
deemed to have waived any preceding or succeeding breach of the
same or any other provision of this Agreement.
16. Complete Agreement; Prior Agreement; Amendments.
The foregoing is the entire agreement of the parties with respect
to the subject matter hereof and may not be amended,
supplemented, canceled or discharged except by written instrument
executed by the parties hereto.
17. Governing Law. This Agreement is to be
governed by and construed in accordance with the laws of New York
without giving effect to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
RHOMED INCORPORATED
By: /s/ Edward J. Quilty
----------------------------
Edward J. Quilty
By: /s/ Buck A. Rhodes
----------------------------
Buck A. Rhodes
16
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER
MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
RHOMED INCORPORATED
Warrant for the Purchase of Shares of
Common Stock
No. ______ _______ Shares
FOR VALUE RECEIVED, RHOMED INCORPORATED, a New Mexico
corporation (the "COMPANY"), hereby certifies that _____________________ or his
permitted assigns, is entitled to purchase from the Company, at any time or
from time to time commencing on August __ , 1995 and prior to 5:00 P.M., New
York City time, on ten years from August __ , 1995 (the "TERMINATION DATE"),
_______________ thousand ( _________ ) fully paid and non-assessable shares of
the Common Stock, no par value, of the Company for an aggregate purchase price
of $ ____ (computed on the basis of $.01 per share). (Hereinafter, (i) said
Common Stock, together with any other equity securities which may be issued by
the Company with respect thereto or in substitution therefor, is referred to as
the "COMMON STOCK", (ii) the shares of the Common Stock purchasable hereunder
or under any other Warrant (as hereinafter defined) are referred to as the
"WARRANT SHARES", (iii) the aggregate purchase price payable for the Warrant
Shares hereunder is referred to as the "AGGREGATE WARRANT PRICE", (iv) the
price payable for each of the Warrant Shares hereunder is referred to as the
"PER SHARE WARRANT PRICE", (v) this Warrant, all similar Warrants issued on the
date hereof and all Warrants hereafter issued in exchange or substitution for
this Warrant or such similar Warrants are referred to as the "WARRANTS" and
(vi) the holder of this Warrant is referred to as the "HOLDER" and the holder
of this Warrant and all other Warrants or Warrant Shares issued upon the
Warrant Page 1
<PAGE>
exercise of any Warrant are referred to as the "HOLDERS"). The Aggregate
Warrant Price is not subject to adjustment. The Per Share Warrant Price is
subject to adjustment as hereinafter provided; in the event of any such
adjustment, the number of Warrant Shares shall be adjusted by dividing the
Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on August __ , 1995, and prior to
the Termination Date, by the holder by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address set forth in
Subsection 9(a) hereof, together with proper payment of the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in part,
with payment for Warrant Shares made by certified or official bank check
payable to the order of the Company; or
(b) If this Warrant is exercised in part, this
Warrant must be exercised for a number of whole shares of the Common Stock and
the Holder is entitled to receive a new Warrant covering the Warrant Shares
which have not been exercised and setting forth the proportionate part of the
Aggregate Warrant Price applicable to such Warrant Shares. Upon surrender of
this Warrant, the Company will (i) issue a certificate or certificates in the
name of the Holder for the largest number of whole shares of the Common Stock
to which the Holder shall be entitled and, if this Warrant is exercised in
whole, in lieu of any fractional share of the Common Stock to which the Holder
shall be entitled, pay to the Holder cash in an amount equal to the fair value
of such fractional share (determined in such reasonable manner as the Board of
Directors of the Company shall determine), and (ii) deliver the other
securities and properties receivable upon the exercise of this Warrant, or the
proportionate part thereof if this Warrant is exercised in part, pursuant to
the provisions of this Warrant.
2. RESERVATION OF WARRANT SHARES; LISTING. The
Company agrees that, prior to the expiration of this Warrant, the Company will
at all times (a) after 60 days from the date hereof, have authorized and in
reserve, and keep available, solely for issuance and delivery upon the exercise
of this Warrant, the shares of the Common Stock and other securities and
properties as from time to time shall be receivable upon the exercise of this
Warrant, free and clear of all restrictions (other than restrictions necessary
to comply with Federal and state securities laws) on sale or transfer and free
and clear of all preemptive rights and rights of first refusal; and (b) if the
Company hereafter lists its Common Stock on any national securities exchange,
keep the shares of Common Stock
Warrant Page 2
<PAGE>
receivable upon exercise of this Warrant authorized for listing on such
exchange upon notice of issuance.
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the
date of this Warrant, the Company shall issue or distribute to the holders of
shares of Common Stock evidence of its indebtedness, any other securities of
the Company or any cash, property or other assets (excluding a subdivision,
combination or reclassification, or dividend or distribution payable in shares
of Common Stock, referred to in Subsection 3(b), and also excluding cash
dividends or cash distributions paid out of net profits legally available
therefor in the full amount thereof, together with the value of other dividends
and distributions made substantially concurrently therewith or pursuant to a
plan which includes payment thereof, is equivalent to not more than 5% of the
Company's net worth) (any such non-excluded event being herein called a
"SPECIAL DIVIDEND"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price of the Common Stock
less the fair market value (as determined in good faith by the Company's Board
of Directors) of the evidence of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend applicable to one
share of Common Stock and the denominator of which shall be the then current
Market Price of the Common Stock. An adjustment made pursuant to this
Subsection 3(a) shall become effective immediately after the record date of any
such Special Dividend.
(b) In case the Company shall hereafter (i) pay a
dividend or make a distribution on its capital stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the Per Share Warrant Price shall be
adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Warrant Price and the denominator of which shall be the number of
shares of Common Stock or other capital stock of the Company which he would
have owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this Subsection 3(b)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) Except as provided in Subsections 3(a) and 3(d),
in case the Company shall hereafter issue or sell any Common Stock, any
securities convertible into
Warrant Page 3
<PAGE>
Common Stock or any rights, options or Warrants to purchase Common Stock or
securities convertible into Common Stock, in each case for a price per share or
entitling the holders thereof to purchase Common Stock at a price per share
(determined by dividing (i) the total amount, if any, received or receivable by
the Company in consideration of the issuance or sale of such securities plus
the total consideration, if any, payable to the Company upon exercise or
conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number of additional
shares of Common Stock issuable upon exercise or conversion of such securities)
less than the then current Per Share Warrant Price in effect on the date of
such issuance or sale, the Per Share Warrant Price shall be adjusted as of the
date of such issuance or sale so that the same shall equal the price determined
by dividing (i) the sum of (A) the number of shares of Common Stock outstanding
on the date of such issuance or sale multiplied by the Per Share Warrant Price
plus (B) the Total Consideration by (ii) the number of shares of Common Stock
outstanding on the date of such issuance or sale plus the maximum number of
additional shares of Common Stock issuable upon exercise or conversion of such
securities.
(d) No adjustment in the Per Share Warrant Price
shall be required in the case of the issuance by the Company of Common Stock
pursuant to the exercise of any Warrant.
(e) In case of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount of
securities, cash or other property which the Holder would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
Subsection 3(e) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The issuer of any shares of stock or other securities or property
thereafter deliverable on the
Warrant Page 4
<PAGE>
exercise of this Warrant shall be responsible for all of the agreements and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders
of the Warrants not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(f) In case any event shall occur as to which the
other provisions of this Section 3 are not strictly applicable but as to which
the failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants representing
the right to purchase a majority of the Warrant Shares subject to all
outstanding Warrants may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price
shall be required unless such adjustment would require an increase or decrease
of at least $0.05 per share of Common Stock; provided, however, that any
adjustments which by reason of this Subsection 3(g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment;
provided, further, however, that adjustments shall be required and made in
accordance with the provisions of this Section 3 (other than this Subsection
3(g)) not later than such time as may be required in order to preserve the
tax-free nature of a distribution to the Holder of this Warrant or Common Stock
issuable upon the exercise hereof. All calculations under this Section 3 shall
be made to the nearest cent or to the nearest 1/100th of a share, as the case
may be. Anything in this Section 3 to the contrary notwithstanding, the Company
shall be entitled to make such reductions in the Per Share Warrant Price, in
addition to those required by this Section 3, as it in its discretion shall
deem to be advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted
as provided in this Section 3 and upon any modification of the rights of a
Holder of Warrants in accordance with this Section 3, the Company shall
promptly obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by
Warrant Page 5
<PAGE>
the Board of Directors (who may be the regular auditors of the Company) setting
forth the Per Share Warrant Price and the number of Warrant Shares after such
adjustment or the effect of such modification, a brief statement of the facts
requiring such adjustment or modification and the manner of computing the same
and cause copies of such certificate to be mailed to the Holders of the
Warrants.
(i) If the Board of Directors of the Company shall
declare any dividend or other distribution with respect to the Common Stock
other than a cash distribution out of earned surplus, the Company shall mail
notice thereof to the Holders of the Warrants not less than 15 days prior to
the record date fixed for determining stock holders entitled to participate in
such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant
to this Section 3, the Holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other capital stock of the Company,
the Board of Directors (whose determination shall be conclusive and shall be
described in a written notice to the Holder of any Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per Share Warrant
Price between or among shares or such classes of capital stock or shares of
Common Stock and other capital stock.
4. FULLY PAID STOCK; TAXES. The Company agrees
that the shares of the Common Stock represented by each and every certificate
of Warrant Shares delivered on the exercise of this Warrant be validly issued
and outstanding, fully paid and nonassessable, and not subject to preemptive
rights or rights of first refusal, and the Company will take all such actions
as may be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. The Company further covenants and agrees that it will pay,
when due and payable, any and all Federal and state stamp, original issue or
similar taxes which may be payable in respect of the issue of any Warrant Share
or any certificate thereof.
5. REGISTRATION UNDER SECURITIES ACT OF 1933. The
Holder of this Warrant shall have the same registration rights as provided in
Section 4 of the Unit Purchase Agreement dated as of the date hereof between
the Company and such Holder (or such Holder's predecessor in interest).
Warrant Page 6
<PAGE>
6. LIMITED TRANSFERABILITY. This Warrant may not
be sold, transferred, assigned or hypothecated by the Holder (a) except in
compliance with the provisions of the Act and the applicable state securities
"blue sky" laws, and is so transferable only upon the books of the Company
which it shall cause to be maintained for such purpose. The Company may treat
the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request
during ordinary business hours, to inspect and copy or make extracts from its
books showing the registered holders of Warrants. All Warrants issued upon the
transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the holder thereof shall be identical to those of
the Holder.
7. LOSS, ETC., OF WARRANT. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and of indemnity reasonably satisfactory to the
Company, if lost, stolen or destroyed, and upon surrender and cancelation of
this Warrant, if mutilated, the Company shall execute and deliver to the Holder
a new Warrant of like date, tenor and denomination.
8. WARRANT HOLDER NOT SHAREHOLDER. Except as
otherwise provided herein, this Warrant does not confer upon the Holder any
right to vote or to consent to or receive notice as a stockholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a stockholder, prior to the exercise hereof.
9. COMMUNICATION. No notice or other communication
under this Warrant shall be effective unless, but any notice or other
communication shall be effective and shall be deemed to have been given if, the
same is in writing and is mailed by first-class mail, postage prepaid,
addressed to:
(a) the Company at 4261 Balloon Park Road NE,
Albuquerque, NM 87109-5802 or other address as the Company has
designated in writing to the Holder, or
(b) the Holder at the address indicated on the signature
page to the Unit Purchase Agreement, or other such address as the
Holder has designated in writing to the Company.
Warrant Page 7
<PAGE>
10. HEADINGS. The headings of this Warrant have
been inserted as a matter of convenience and shall not affect the construction
hereof.
11. APPLICABLE LAW. This Warrant shall be governed
by and construed in accordance with the law of the State of New York without
giving effect to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant
to be signed by its President and its corporate seal to be hereunto affixed and
attested by its Secretary this ___ day of August, 1995.
RHOMED INCORPORATED
By: ___________________________
Buck A. Rhodes
President
ATTEST:
- --------------------
Stephen A. Slusher
Secretary
[Corporate Seal]
Warrant Page 8
<PAGE>
SUBSCRIPTION
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and
purchase ____________________ shares of the Common Stock, no par value, of
RhoMed Incorporated, covered by said Warrant, and makes payment therefor in
full at the price per share provided by said Warrant.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns
and transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
RhoMed Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of the
Common Stock, no par value per share, of RhoMed Incorporated covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of RhoMed Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
Warrant Page 9
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER
MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
RHOMED INCORPORATED
Warrant for the Purchase of Shares of
Common Stock
No. Shares
FOR VALUE RECEIVED, RHOMED INCORPORATED, a New Mexico
corporation (the "COMPANY"), hereby certifies that [] or his permitted assigns,
is entitled to purchase from the Company, at any time or from time to time
commencing on July __, 1995 and prior to 5:00 P.M., New York City time, on ten
years from [Insert Final Closing Date] (the "TERMINATION DATE"), [Insert Number
of Shares] ([]) fully paid and non-assessable shares of the Common Stock, no
par value, of the Company for an aggregate purchase price of $[] (computed on
the basis of $.01 per share). (Hereinafter, (i) said Common Stock, together
with any other equity securities which may be issued by the Company with
respect thereto or in substitution therefor, is referred to as the "COMMON
STOCK", (ii) the shares of the Common Stock purchasable hereunder or under any
other Warrant (as hereinafter defined) are referred to as the "WARRANT SHARES",
(iii) the aggregate purchase price payable for the Warrant Shares hereunder is
referred to as the "AGGREGATE WARRANT PRICE", (iv) the price payable for each
of the Warrant Shares hereunder is referred to as the "PER SHARE
<PAGE>
WARRANT PRICE", (v) this Warrant, all similar Warrants issued on the date
hereof and all Warrants hereafter issued in exchange or substitution for this
Warrant or such similar Warrants are referred to as the "WARRANTS" and (vi) the
holder of this Warrant is referred to as the "HOLDER" and the holder of this
Warrant and all other Warrants or Warrant Shares issued upon the exercise of
any Warrant are referred to as the "HOLDERS"). The Aggregate Warrant Price is
not subject to adjustment. The Per Share Warrant Price is subject to adjustment
as hereinafter provided; in the event of any such adjustment, the number of
Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the
Per Share Warrant Price in effect immediately after such adjustment.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on [Insert Final Closing Date]
and prior to the Termination Date, by the holder by the surrender of this
Warrant (with the subscription form at the end hereof duly executed) at the
address set forth in Subsection 9(a) hereof, together with proper payment of
the Aggregate Warrant Price, or the proportionate part thereof if this Warrant
is exercised in part, with payment for Warrant Shares made by certified or
official bank check payable to the order of the Company; or
(b) If this Warrant is exercised in part, this
Warrant must be exercised for a number of whole shares of the Common Stock and
the Holder is entitled to receive a new Warrant covering the Warrant Shares
which have not been exercised and setting forth the proportionate part of the
Aggregate Warrant Price applicable to such Warrant Shares. Upon surrender of
this Warrant, the Company will (i) issue a certificate or certificates in the
name of the Holder for the largest number of whole shares of the Common Stock
to which the Holder shall be entitled and, if this Warrant is exercised in
whole, in lieu of any fractional share of the Common Stock to which the Holder
shall be entitled, pay to the Holder cash in an amount equal to the fair value
of such fractional share (determined in such reasonable manner as the Board of
Directors of the Company shall determine), and (ii) deliver the other
securities and properties receivable upon the exercise of this Warrant, or the
proportionate part thereof if this Warrant is exercised in part, pursuant to
the provisions of this Warrant.
(c) By the surrender of this Warrant (with the
cashless exercise form at the end hereof duly executed) (a "CASHLESS EXERCISE")
at the address set forth in Subsection 9(a) hereof. Such presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay the
Aggregate Warrant Price, or the proportionate part thereof if this Warrant is
exercised in part. In the event of a Cashless Exercise, the Holder shall
exchange its Warrant for that number of Warrant Shares subject to such Cashless
Exercise multiplied by a fraction, the numerator of which shall be the
difference between the then current Market Price per share (as hereinafter
defined) of Common Stock and the Per Share Warrant Price, and the denominator
of which shall be the then current Market Price per share of Common Stock. For
purposes of any computation under this Section 1(c), the then current market
price per share of the Common Stock at any date (the "MARKET PRICE") shall be
deemed to be the last sale price of the Common Stock on the business day prior
to the date of the Cashless Exercise or, in case no such reported sales take
place on such day, the average of the last reported bid and asked prices of the
Common Stock on such day, in either case on the principal national securities
exchange on which the Common Stock is admitted to trading or listed, or if not
listed or admitted to trading on any such exchange, the representative closing
bid price of the Common Stock as reported by NASDAQ, or other similar
organization if NASDAQ is no longer reporting such information, or on the OTC
Electronic
-2-
<PAGE>
Bulletin or in the "Pink Sheets," or if not so available, the fair market price
of the Common Stock as determined in good faith by the Board of Directors.
2. RESERVATION OF WARRANT SHARES; LISTING. The
Company agrees that, prior to the expiration of this Warrant, the Company will
at all times (a) have authorized and in reserve, and will keep available,
solely for issuance or delivery upon the exercise of this Warrant, the shares
of the Common Stock and other securities and properties as from time to time
shall be receivable upon the exercise of this Warrant, free and clear of all
restrictions on sale or transfer and free and clear of all preemptive rights
and rights of first refusal; and (b) if the Company hereafter lists its Common
Stock on any national securities exchange, keep the shares of Common Stock
receivable upon exercise of this Warrant authorized for listing on such
exchange upon notice of issuance.
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the
date of this Warrant, the Company shall issue or distribute to the holders of
shares of Common Stock evidence of its indebtedness, any other securities of
the Company or any cash, property or other assets (excluding a subdivision,
combination or reclassification, or dividend or distribution payable in shares
of Common Stock, referred to in Subsection 3(b), and also excluding cash
dividends or cash distributions paid out of net profits legally available
therefor in the full amount thereof, together with the value of other dividends
and distributions made substantially concurrently therewith or pursuant to a
plan which includes payment thereof, is equivalent to not more than 5% of the
Company's net worth) (any such non-excluded event being herein called a
"SPECIAL DIVIDEND"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price of the Common Stock
less the fair market value (as determined in good faith by the Company's Board
of Directors) of the evidence of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend applicable to one
share of Common Stock and the denominator of which shall be the then current
Market Price of the Common Stock. An adjustment made pursuant to this
Subsection 3(a) shall become effective immediately after the record date of any
such Special Dividend.
(b) In case the Company shall hereafter (i) pay a
dividend or make a distribution on its capital stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the Per Share Warrant Price shall be
adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Warrant Price and the denominator of which shall be the number of
shares of Common Stock or other capital stock of the Company which he would
have owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this Subsection 3(b)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) Except as provided in Subsections 3(a) and 3(d),
in case the Company shall hereafter issue or sell any Common Stock, any
securities convertible into Common Stock or any rights, options or Warrants to
purchase Common Stock or securities convertible into
-3-
<PAGE>
Common Stock, in each case for a price per share or entitling the holders
thereof to purchase Common Stock at a price per share (determined by dividing
(i) the total amount, if any, received or receivable by the Company in
consideration of the issuance or sale of such securities plus the total
consideration, if any, payable to the Company upon exercise or conversion
thereof (the "TOTAL CONSIDERATION") by (ii) the number of additional shares of
Common Stock issuable upon exercise or conversion of such securities) less than
the then current Per Share Warrant Price in effect on the date of such issuance
or sale, the Per Share Warrant Price shall be adjusted as of the date of such
issuance or sale so that the same shall equal the price determined by dividing
(i) the sum of (A) the number of shares of Common Stock outstanding on the date
of such issuance or sale multiplied by the Per Share Warrant Price plus (B) the
Total Consideration by (ii) the number of shares of Common Stock outstanding on
the date of such issuance or sale plus the maximum number of additional shares
of Common Stock issuable upon exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price
shall be required in the case of the issuance by the Company of Common Stock
pursuant to the exercise of any Warrant.
(e) In case of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount of
securities, cash or other property which the Holder would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
Subsection 3(e) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The issuer of any shares of stock or other securities or property
thereafter deliverable on the exercise of this Warrant shall be responsible for
all of the agreements and obligations of the Company hereunder. Notice of any
such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holders of the Warrants not less than 30 days prior to
such event. A sale of all or substantially all of the assets of the Company for
a consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
(f) In case any event shall occur as to which the
other provisions of this Section 3 are not strictly applicable but as to which
the failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the
-4-
<PAGE>
essential intent and principles hereof then, in each such case, the Holders of
Warrants representing the right to purchase a majority of the Warrant Shares
subject to all outstanding Warrants may appoint a firm of independent public
accountants of recognized national standing reasonably acceptable to the
Company, which shall give their opinion as to the adjustment, if any, on a
basis consistent with the essential intent and principles established herein,
necessary to preserve the purchase rights represented by the Warrants. Upon
receipt of such opinion, the Company will promptly mail a copy thereof to the
Holder of this Warrant and shall make the adjustments described therein. The
fees and expenses of such independent public accountants shall be borne by the
Company.
(g) No adjustment in the Per Share Warrant Price
shall be required unless such adjustment would require an increase or decrease
of at least $0.05 per share of Common Stock; provided, however, that any
adjustments which by reason of this Subsection 3(g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment;
provided, further, however, that adjustments shall be required and made in
accordance with the provisions of this Section 3 (other than this Subsection
3(g)) not later than such time as may be required in order to preserve the
tax-free nature of a distribution to the Holder of this Warrant or Common Stock
issuable upon the exercise hereof. All calculations under this Section 3 shall
be made to the nearest cent or to the nearest 1/100th of a share, as the case
may be. Anything in this Section 3 to the contrary notwithstanding, the Company
shall be entitled to make such reductions in the Per Share Warrant Price, in
addition to those required by this Section 3, as it in its discretion shall
deem to be advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted
as provided in this Section 3 and upon any modification of the rights of a
Holder of Warrants in accordance with this Section 3, the Company shall
promptly obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company) setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or the effect of
such modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
(i) If the Board of Directors of the Company shall
declare any dividend or other distribution with respect to the Common Stock
other than a cash distribution out of earned surplus, the Company shall mail
notice thereof to the Holders of the Warrants not less than 15 days prior to
the record date fixed for determining stockholders entitled to participate in
such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant
to this Section 3, the Holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other capital stock of the Company,
the Board of Directors (whose determination shall be conclusive and shall be
described in a written notice to the Holder of any Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per Share Warrant
Price between
-5-
<PAGE>
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. FULLY PAID STOCK; TAXES. The Company agrees
that the shares of the Common Stock represented by each and every certificate
of Warrant Shares delivered on the exercise of this Warrant be validly issued
and outstanding, fully paid and nonassessable, and not subject to preemptive
rights or rights of first refusal, and the Company will take all such actions
as may be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. The Company further covenants and agrees that it will pay,
when due and payable, any and all Federal and state stamp, original issue or
similar taxes which may be payable in respect of the issue of any Warrant Share
or any certificate thereof.
5. REGISTRATION UNDER SECURITIES ACT OF 1933. The
Holder of this Warrant shall have the same registration rights as provided in
Section 4 of the Unit Purchase Agreement dated as of the date hereof between
the Company and such Holder (or such Holder's predecessor in interest).
6. LIMITED TRANSFERABILITY. This Warrant may not
be sold, transferred, assigned or hypothecated by the Holder (a) except in
compliance with the provisions of the Act and the applicable state securities
"blue sky" laws, and is so transferable only upon the books of the Company
which it shall cause to be maintained for such purpose. The Company may treat
the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request
during ordinary business hours, to inspect and copy or make extracts from its
books showing the registered holders of Warrants. All Warrants issued upon the
transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the holder thereof shall be identical to those of
the Holder.
7. LOSS, ETC., OF WARRANT. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and of indemnity reasonably satisfactory to the
Company, if lost, stolen or destroyed, and upon surrender and cancellation of
this Warrant, if mutilated, the Company shall execute and deliver to the Holder
a new Warrant of like date, tenor and denomination.
8. WARRANT HOLDER NOT SHAREHOLDER. Except as
otherwise provided herein, this Warrant does not confer upon the Holder any
right to vote or to consent to or receive notice as a stockholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a stockholder, prior to the exercise hereof.
9. COMMUNICATION. No notice or other communication
under this Warrant shall be effective unless, but any notice or other
communication shall be effective and shall be deemed to have been given if, the
same is in writing and is mailed by first-class mail, postage prepaid,
addressed to:
(a) the Company at 4261 Balloon Park Road NE,
Albuquerque, NM 87109-5802 or other address as the Company has
designated in writing to the Holder, or
-6-
<PAGE>
(b) the Holder at the address indicated on the signature
page to the Unit Purchase Agreement, or other such address as the
Holder has designated in writing to the Company.
10. HEADINGS. The headings of this Warrant have
been inserted as a matter of convenience and shall not affect the construction
hereof.
11. APPLICABLE LAW. This Warrant shall be governed
by and construed in accordance with the law of the State of New York without
giving effect to the principles of conflicts of law thereof.
-7-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
to be signed by its President and its corporate seal to be hereunto affixed and
attested by its Secretary this ___ day of __________, 1995.
RHOMED INCORPORATED
By: ___________________________
President
ATTEST:
- --------------------
Secretary
[Corporate Seal]
-8-
<PAGE>
SUBSCRIPTION
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and
purchase ____________________ shares of the Common Stock, no par value, of
RhoMed Incorporated, covered by said Warrant, and makes payment therefor in
full at the price per share provided by said Warrant.
Dated:_______________ Signature:____________________
Address:______________________
CASHLESS EXERCISE
The undersigned ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exchange its Warrant for
___________________ shares of Common Stock, no par value, of RhoMed
Incorporated pursuant to the Cashless Exercise provisions of the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns
and transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
RhoMed Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of the
Common Stock, no par value per share, of RhoMed Incorporated covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of RhoMed Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
EXHIBIT B
-9-
<PAGE>
WARRANT RECEIPT
[Address of Warrant Holder]
Dear Sirs:
Pursuant to Section 2(d) of the Placement Agency
Agreement dated July __, 1995, between RhoMed Incorporated and Paramount
Capital, Inc., we are delivering herewith a warrant in your name to purchase
[ ] shares of Common Stock, no par value (the "Common Stock") of the Company.
We hereby acknowledge receipt of $________ representing
payment in full for the warrant in an amount equal to $.001 per share.
Very truly yours,
RHOMED INCORPORATED
By______________________________
Name:
Title:
I hereby acknowledge receipt of a warrant to purchase [] shares of Common
Stock.
- -------------------------------
[ ]
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<PAGE>
EXHIBIT C
ORDER TO ISSUE PLACEMENT AGENT'S WARRANTS
RhoMed Incorporated
4261 Balloon Park Road NE
Albuquerque, NM 87109-5802
Dear Sirs:
Pursuant to Section 2(d) of the Placement Agency
Agreement dated July __, 1995, between RhoMed Incorporated and Paramount
Capital, Inc., we hereby request that you issue warrants to purchase [ ] shares
of Common Stock, in an amount equal to $.001 per share, in the names and
denominations as set forth below:
Name Denominations
Very truly yours,
PARAMOUNT CAPITAL, INC.
By______________________________
Name: Wayne Rubin
Title: Chief Financial Officer
-11-
8/3/95
UNIT PURCHASE AGREEMENT
UNIT PURCHASE AGREEMENT (this "Agreement") made as of the
date set forth on the signature page hereof between RhoMed Incorporated, a New
Mexico corporation with its principal offices at 4261 Balloon Park Road NE,
Albuquerque, New Mexico 87109 ("RhoMed" or the "Corporation") and the
undersigned (the "Subscriber").
W I T N E S S E T H:
WHEREAS, the Corporation desires to issue an aggregate of up
to a maximum $1,000,000 of senior bridge notes (the "Notes") in a private
placement offering (the "Offering") in Units (the "Units"), each Unit
consisting of (a) $25,000 face amount of Notes and (b) Class A Warrants (the
"Warrants") to purchase 75,000 shares of Common Stock, no par value, of the
Corporation (the "Common Stock") and the Subscriber desires to purchase that
number of Units set forth on the signature page hereof on the terms and
conditions hereinafter set forth (the Notes, the Warrants, and the shares of
Common Stock issuable upon exercise of the Warrants being sometimes referred to
collectively herein as the "Securities").
NOW, THEREFORE, in consideration of the premises and the
mutual representations and covenants hereinafter set forth, the parties hereto
do hereby agree as follows:
ARTICLE I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY
SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set
forth, the Subscriber hereby subscribes for and agrees to purchase from the
Corporation such number of Units or fractions thereof as is set forth upon the
signature page hereof at a price equivalent to $25,000 per Unit and the
Corporation agrees to sell such Units to the Subscriber for said purchase
price. The terms of the Notes are set forth in the form of Senior Bridge Note
attached hereto as Exhibit A and the terms of the Warrants are set forth in the
form of warrant attached hereto as Exhibit B. The purchase price for the Units
is payable by personal or business check, wire transfer of immediately
available funds or money order made payable to "RhoMed Incorporat ed"
contemporaneously with the execution and delivery of this Agreement. The Units
will be delivered by the Corporation in accordance with the terms set forth in
Article III hereof.
1.2 The Subscriber recognizes that the purchase of Units
involves a high degree of risk in that (i) the Corporation may not have the
funds necessary to pay the principal of, and interest on, the Notes, (ii) the
Corporation remains a development stage business with limited operating history
and requires substantial funds in addition to the proceeds of the Offering;
(iii) an investment in the Corporation is highly speculative, and only
investors who can afford the loss of their entire investment should consider
investing in the Corporation and the Notes; (iv)
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<PAGE>
the Subscriber may not be able to liquidate his investment; (v) transferability
of the Securities is extremely limited; and (vi) in the event of a disposition,
the Subscriber could sustain the loss of his entire investment.
1.3 The Subscriber acknowledges that Subscriber must be an
"accredited investor", as described herein, in order to qualify for the
purchase of Units, and that Subscriber must be able to bear the economic risk
of an investment in the Units.
1.4 The Subscriber represents that Subscriber is an
"accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Act"), as
indicated by his responses to the questions contained in Article VII hereof,
and that Subscriber is able to bear the economic risk of an investment in the
Units.
1.5 The Subscriber hereby acknowledges and represents that
(i) Subscriber has prior investment experience, including investment in
non-listed and unregistered securities, or Subscriber has employed the services
of an investment advisor, attorney and/or accountant to read all of the
documents furnished or made available by the Corporation both to Subscriber and
to all other prospective investors in the Units and to evaluate the merits and
risks of such an investment on Subscriber's behalf; (ii) Subscriber recognizes
the highly speculative nature of this investment; and (iii) Subscriber is able
to bear the economic risk which Subscriber hereby assumes.
1.6 The Subscriber hereby represents that the Subscriber
either (i) has a preexisting personal or business relationship with the
Corporation or its officers or directors or (ii) by reason of the Subscriber's
business or financial experience or the business or financial experience of the
Subscriber's professional advisors (who are unaffiliated with and who are not
compensated by the Corporation or any affiliate or selling agent of the
Corporation, including the Placement Agent, directly or indirectly) has the
capacity to protect the Subscriber's own interests in connection with the
transaction contemplated hereby.
1.7 The Subscriber hereby represents that (i) Subscriber has
read this Agreement and all attachments and Exhibits to it, including the
Schedule of Exceptions; (ii) Subscriber has been furnished by the Corporation
during the course of this transaction with all information regarding the
Corporation which Subscriber has requested or desired to know; (iii) Subscriber
has been afforded the opportunity to ask questions of and receive answers from
duly authorized officers or other representatives of the Corporation concerning
the terms and conditions of the Offering; (iv) Subscriber has received any
additional information which Subscriber had requested; and (v) Subscriber is
not subscribing to purchase the Units as a result of or pursuant to any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
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1.8 The Subscriber hereby acknowledges that the offering of
Units have not been reviewed by the United States Securities and Exchange
Commission (the "Commission") or any state regulatory authority, since the
Offering is intended to be exempt from the registra tion requirements of
Section 5 of the Act pursuant to Regulation D promulgated under the Act. The
Subscriber agrees that Subscriber will not sell or otherwise transfer the
Securities unless they are registered under the Act or unless an exemption from
such registration is available and until such Subscriber complies with the
transfer restrictions set forth in Paragraph 1.10 hereof.
1.9 The Subscriber understands that none of the Securities
have been registered under the Act or any state securities or "blue sky" laws
and are being sold in reliance on exemp tions from the registration
requirements of such Act and such laws and agrees that the Securities will not
be resold or transferred except as permitted under such Act and such laws
pursuant to registration or exemption therefrom. The Subscriber hereby
represents that Subscriber is purchasing the Units for Subscriber's own account
for investment and not with a view toward the resale or distribution of the
Units.
1.10 The Subscriber understands that there is no market for
the Units or any of the Securities comprising the Units and that no market may
develop for the Units or any of the Securities comprising the Units. The
Subscriber understands that even if a public market develops for the Units or
any of the Securities comprising the Units, Rule 144 (the "Rule 144")
promulgated under the Act requires, among other conditions, a two-year holding
period prior to the resale (in limited amounts) of securities acquired in a
non-public offering without having to satisfy the registration requirements
under the Act. The Subscriber understands that the Corporation is not obligated
to comply with any reporting requirements under the Securities Exchange Act of
1934, as amended, and that the Corporation makes no representation or war ranty
that it will disseminate to the public any current financial or other
information concerning the Corporation, as is required by Rule 144 as one of
the conditions of its availability. The Subscriber understands and hereby
acknowledges that the Corporation is under no obligation to register any of the
Units or any of the Securities comprising the Units under the Act or any state
securities or "blue sky" laws other than as set forth in Article IV. The
Subscriber agrees to hold the Corporation and its directors, officers, agents,
shareholders and controlling persons and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses (including reasonable legal fees) incurred
by them as a result of or arising out of (i) any misrepresentation made by such
Subscriber contained herein or in the Confidential Investor Questionnaire
contained in Article VII hereof, (ii) any sale or distribution by the
undersigned Subscriber in violation of the Act or any applicable state
securities or "blue sky" laws or (iii) any untrue statement or alleged untrue
statement of a material fact made by the Subscriber and contained herein.
1.11 The Subscriber consents to the placement of a legend on
any certificate or other document evidencing the Securities that such
Securities have not been registered under the Act or any state securities or
"blue sky" laws and setting forth or referring to the
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restrictions on transferability and sale thereof contained in this Agreement.
The Subscriber is aware that the Corporation will make a notation in its
appropriate records with respect to the restrictions on the transferability of
such Securities.
1.12 The Subscriber understands that the Corporation will
review this Agreement and is hereby given authority by the Subscriber to call
Subscriber's bank or place of employment or otherwise review the financial
standing of the Subscriber; and it is further agreed that the Corporation
reserves the unrestricted right to reject or limit any subscription, to accept
subscriptions for fractional Units and to close the Offering to the Subscriber
at any time.
1.13 The Subscriber hereby represents that the address of the
Subscriber furnished by Subscriber on the signature page hereof is the
Subscriber's principal residence if Subscriber is an individual or its
principal business address if it is a corporation or other entity.
1.14 Subscriber represents that he or it has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Units and the Securities. This Agreement
constitutes the legal, valid and binding obligation of subscriber, enforceable
against Subscriber in accordance with its terms.
1.15 If the subscriber is a corporation, company, trust,
employee benefit plan, individual retirement account, Keogh Plan, or other
tax-exempt entity, it is authorized and qualified to become an investor in the
Corporation and the person signing this Agreement on behalf of such entity has
been duly authorized by such entity to do so.
ARTICLE II. REPRESENTATIONS BY AND COVENANTS OF RHOMED.
RhoMed hereby represents and warrants to each Subscriber that, as of
April 20, 1995, unless otherwise set forth on the "Schedule of Exceptions"
attached hereto which specifically identifies the relevant subparagraph hereof,
which exceptions shall be deemed to be representa tions and warranties as if
made hereunder:
2.1 Organization, Good Standing and Qualification. RhoMed is
a corporation duly organized, validly existing and in good standing under the
laws of the State of New Mexico and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. RhoMed is duly qualified to transact business and is in good
standing in New Mexico and all other jurisdictions in which the failure so to
qualify would have a material adverse effect on its business or properties.
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2.2 Capitalization and Voting Rights. The authorized Capital
Stock of RhoMed consists of 15,000,000 shares of common stock, no par value
(the "Common Stock"), of which 6,914,140 were outstanding as of April 20, 1995,
and 5,000,000 shares of preferred stock, no par value, of which none were
outstanding as of April 20, 1995. There were 9,735,492 shares of Common Stock
issued or issuable as of April 20, 1995, including shares issuable upon the
exercise or conversion of all outstanding options, warrants, convertible notes
and other securities convertible into Common Stock. All of the outstanding
shares of Capital Stock of the Corporation have been duly and validly
authorized, and are fully paid and non assessable. The Notes and Warrants to be
issued and sold by the Corporation as contemplated hereby and all shares of
Common Stock issuable upon exercise of the Warrants, have been duly and validly
authorized and, when issued (and, in the case of the Notes and Warrants, paid
for as contemplated herein), will be validly issued, fully paid and
nonassessable. A sufficient number of shares of Common Stock will, within sixty
days of the date hereof, be authorized and reserved for issuance (i) upon
exercise of the Warrants and (ii) upon the exercise of all outstanding options,
warrants and other rights to purchase or subscribe for any shares of Common
Stock, and RhoMed will, at all times that the Warrants are outstanding, have
autho rized and reserved a sufficient number of shares of Common Stock to
provide for exercise of the Warrants. Except as set forth in Schedule 2.2,
there are no outstanding options, warrants, agreements, conversion rights,
preemptive rights or other rights to subscribe for or to purchase any shares of
Capital Stock of the Corporation. Except as set forth in Schedule 2.2 and as
otherwise required by law, there are no restrictions upon the voting or
transfer of any shares of the Corporation's Capital Stock pursuant to the
Corporation's Articles of Incorporation, ByLaws or other governing documents or
any agreement or other instruments to which the Corporation is a party or by
which the Corporation is bound.
2.3 Authorization; Enforceability. RhoMed has the corporate
power to execute, deliver and perform the terms and provisions of each of the
Unit Purchase Agreements, Notes and Warrants (together, the "Transaction
Documents") to which it is a party, and has taken prior to the date hereof all
necessary corporate action to authorize the execution, delivery and performance
by it of each of the Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby. No other corporate
proceedings on the part of RhoMed are necessary for the issuance of the Notes
and Warrants. RhoMed has duly executed and delivered this Agreement and each of
the Trans action Documents to which it is a party. This Agreement constitutes,
and each of the other Transaction Documents, when executed and delivered by
RhoMed, assuming due execution by the other parties hereto and thereto, will
constitute the legal, valid and binding obligations of RhoMed enforceable
against RhoMed in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
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2.4 Governmental Consents.
(i) The execution, delivery and performance by
RhoMed of this Agreement and the other Transaction Documents to which it is a
party and the consummation of the transactions contemplated hereby and thereby
(i) does not and will not contravene the applicable provisions of any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority to or by which RhoMed is bound, (ii) will not
violate, result in a breach of or constitute (with due notice or lapse of time
or both) a default under any contract, lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
RhoMed is a party or by which it is bound or to which any of its properties or
assets is subject, nor result in the creation or imposition of any lien upon
any of the properties or assets of RhoMed, and (iii) will not violate any
provision of the Articles of Incorporation or By-Laws of RhoMed.
(ii) No consent, authorization or order of, or
filing or registration with, any court or U.S. governmental authority or other
person is required to be obtained or made by RhoMed for the execution, delivery
and performance of this Agreement or any of the other Transaction Documents to
which it is a party, or the consummation of any of the transactions
contemplated hereby or thereby, except for (i) those consents or authorizations
previously obtained and those filings previously made, and (ii) any post-sale
filings required under applicable securities or blue sky laws.
(iii) RhoMed holds and is operating in
compliance with all licenses, permits, authorizations, approvals and
certificates from governmental authorities, including, without limitation, all
applicable approvals and authorizations of the Food and Drug Administration,
which are necessary to the conduct of its business as currently contemplated.
2.5 Litigation. Except as disclosed in Schedule 2.5, there is
no action, suit, proceeding or investigation pending or, to the best knowledge
of RhoMed, currently threatened against RhoMed which questions the validity of
this Agreement or any of the Transaction Documents or the right of RhoMed to
enter into it, or to consummate the transactions contemplated hereby or
thereby, or which might result, either individually or in the aggregate, in any
changes in the assets, condition, affairs or prospects of RhoMed which are
materially adverse to RhoMed taken as a whole, financially or otherwise, or any
change in the current equity ownership of RhoMed. The foregoing includes,
without limitation, actions pending or threatened involving the use in RhoMed's
business of any information or techniques allegedly proprietary to any of its
former employers or their obligations under any agreements with prior
employers. RhoMed is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality.
2.6 Patents and Trademarks. Schedule 2.6 hereto lists all
patents, trademarks, service marks, trade names, corporate names, and all
applications and registrations therefor,
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owned or licensed to or by RhoMed. Except as described in the Schedule of
Exceptions, RhoMed owns and possesses all right, title, and interest or holds a
valid license in and to all patents, copyrights, trademarks, service marks,
trade names, corporate names, and all applica tions and registrations therefor,
and to all mask works, licenses, inventions, trade secrets, know how and other
intellectual property rights necessary for the conduct of its business as
presently contemplated (collectively, the "Intellectual Property Rights").
RhoMed has taken all necessary action to protect all the Intellectual Property
Rights. Except as set forth in the Schedule of Exceptions, RhoMed has not
received any notice of, and there are not any facts known to RhoMed which
indicate the likelihood of, any infringement or misappropriation by any third
party of any of the Intellectual Property Rights; RhoMed has not received any
notice of, and there are not any facts known to RhoMed which indicate a
likelihood of, any claim by a third party contesting the validity of any of the
Intellectual Property Rights; RhoMed has not received any notice of any
infringement, misappropriation or violation by RhoMed or any of its employees
of any intellectual property rights of third parties, and, to the best of
RhoMed's knowledge, neither RhoMed nor any of its employees has infringed,
misappropriated or otherwise violated any intellectual property rights of any
third parties; and, to the best of RhoMed's knowledge, no infringement, illicit
copying, misappropriation or violation of any intellectual property rights of
any third party has occurred or will occur with respect to any products
currently being sold by RhoMed or with respect to any products currently under
development by RhoMed or with respect to the conduct of RhoMed's business as
currently contemplated. Except as described in the Schedule of Exceptions,
RhoMed is not aware that any of its employees are obligated under any contract
(including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his best efforts to
promote the interests of RhoMed or that would conflict with RhoMed's business
as proposed to be conducted. To the best of RhoMed's knowledge, neither the
execution nor delivery of this Agreement, nor the carrying on of RhoMed's
business by the employees of RhoMed, nor the conduct of RhoMed's business, as
proposed, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated.
2.7 Compliance with Other Instruments. Except as set forth in
Schedule 2.7 hereto, RhoMed is not in violation or default of any provisions of
its Restated Articles of Incorporation or Bylaws or of any instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound or, to its knowledge, of any provision of federal or state statute,
rule or regulation applicable to RhoMed. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or be in conflict
with or constitute, with or without the passage of time and giving of notice,
either a default under any such provision, instrument, judgment, order, writ,
decree or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of RhoMed.
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2.8 Agreements; Action. The performance of this Agreement and
the consummation of the transactions contemplated hereby will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under or conflict with, any inden ture, mortgage, deed of trust, voting
trust agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, material lease, contract or other agreement or
instrument to which RhoMed is a party or by which RhoMed or any of its property
is bound, or under the Restated Articles of Incorporation or By-Laws of RhoMed
or under any statute or under any order, rule or regulation applicable to
RhoMed or its business or property nor is the approval of any court or other
governmental agency or body required for the consummation by RhoMed of the
transactions on its part herein contemplated.
(i) Registration Rights. Except as provided in
Article IV below, or as disclosed in the Schedule of Exceptions, RhoMed has not
granted or agreed to grant any registration rights, including piggyback rights,
to any person or entity.
2.9 Corporate Documents. Except for amendments necessary to
satisfy representations and warranties or conditions contained herein (the form
of which amendments has been attached hereto as Exhibit E), the By-Laws and
Articles of Incorporation of RhoMed are, in all material respects, in the form
attached hereto as Exhibits C and D respectively.
2.10 Title to Property and Assets. Except as disclosed in
Schedule 2.10 hereto, RhoMed owns its properties and assets free and clear of
all mortgages, liens, loans and encumbrances, except such encumbrances and
liens which arise in the ordinary course of business and do not materially
impair RhoMed's ownership or use of such properties or assets. With respect to
the properties and assets it leases, RhoMed is in compliance with such leases
and holds a valid leasehold interest free of any liens, claims or encumbrances.
2.11 Financial Statements. RhoMed has delivered to the
Subscriber its unaudited financial statements at August 31, 1994 for the fiscal
year ended on such date. To the best of RhoMed's knowledge the Financial
Statements (i) are complete and correct in all material respects and, to the
best of RhoMed's knowledge, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated and with each other and (ii) accurately set forth and
describe in all material respects the financial condition and operating results
of RhoMed as of the dates, and for the periods, indicated therein. To the best
of RhoMed's knowledge, except as set forth in the Financial Statements, this
Agreement or the Schedule of Exceptions, RhoMed has no liabilities, contingent
or otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to September 1, 1994 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, indi vidually or in the aggregate, are not
material to the financial condition or operating results of RhoMed. RhoMed
agrees that it will use reasonable efforts promptly to establish and hereafter
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maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.12 Changes. Except as set forth in Schedule 2.12 hereto,
since September 1, 1994, to the best of RhoMed's knowledge there has not been:
(i) any change in the consolidated assets,
liabilities, financial condition or operating results of RhoMed from that
reflected in the Financial Statements, except changes in the ordinary course of
business which have not been, in the aggregate, materially adverse;
(ii) any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the assets,
properties, financial condition, operating results, prospects or business of
RhoMed (as such business is presently conducted and as it is proposed to be
conducted);
(iii) any waiver by RhoMed of a valuable right or
of a material debt owed to it;
(iv) any satisfaction or discharge of any lien,
claim or encumbrance or payment of any obligation by RhoMed, except in the
ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of RhoMed taken
as a whole (as such business is presently conducted and as it is proposed to be
conducted);
(v) any change or amendment to a contract or
arrangement by which RhoMed or any of its assets or properties is bound or
subject which is material to RhoMed taken as a whole;
(vi) any material change in any compensation
arrangement or agreement with any employee; or
(vii) any other event or condition of any
character which might materially and adversely affect the consolidated assets,
properties, financial condition, operating results or business of RhoMed (as
such business is presently conducted and as it is proposed to be conducted).
2.13 Tax Returns, Payments and Elections. RhoMed has filed
all tax returns and reports as required by law. These returns and reports are
true and correct in all material respects and RhoMed has paid all taxes and
other assessments due in accordance with such re turns. The provision for taxes
of RhoMed as shown in the Financial Statements is adequate for taxes due or
accrued as of the date thereof.
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2.14 Minute Book. The minute book of RhoMed contains the
minutes of all meetings of directors and shareholders since the time of
RhoMed's incorporation and reflects all transactions referred to in such
minutes accurately in all material respects.
2.15 ERISA. Except as set forth in Schedule 2.15 hereto,
RhoMed does not have any "employee welfare benefit plans" or "employee pension
benefit plans" as defined in Section 3 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). RhoMed has made all required
contributions and has complied in all material respects with all laws
applicable to any of its employee benefit plans, including, without limitation,
ERISA. RhoMed does not participate in any single employer or multiemployer
pension plan subject to Title IV of ERISA. RhoMed does not provide any medical
or other welfare-type benefits to any retiree, except as required by law.
2.16 Investment Company Act; Other Regulations. RhoMed is
not, and immediately following the consummation of the transactions
contemplated hereby will not be, an "investment company", or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act. Except for the Securities Act, the Exchange Act and state
securities and "blue sky" laws, RhoMed is not subject to any federal or state
law or regulation limiting its ability to issue and perform its obligations
under or in connection with the issuance and sale of the Securities.
2.17 Environmental Matters. Except as set forth on Schedule
2.17 hereto, (a) the operations, properties, and facilities owned, leased, or
otherwise controlled by RhoMed (i) are, and to the best of RhoMed's knowledge
have been, in compliance with all Environmental Laws, (ii) are not contaminated
with any "Hazardous Material" (as defined below), (iii) are not now being and,
to the best of RhoMed's knowledge, were never used as a landfill, dump, or
other storage or disposal area for Hazardous Materials, (iv) are not now being
and, to the best of RhoMed's knowledge, were never used for military,
industrial or manufacturing purposes or as a gasoline service station, and (v)
do not contain any underground or aboveground storage tanks (whether or not
currently in use) and, to the best of RhoMed's knowledge, no such tank has been
removed therefrom; (b) the operations, properties and facilities presently or
previously owned, leased or otherwise controlled by RhoMed are not the subject
of any United States federal or state or Canadian federal or provincial
investigation, demand or proceeding, including, without limitation, any civil,
criminal and/or administrative proceeding, of which RhoMed has knowledge,
whether or not seeking costs, damages, expenses, penalties or injunctive
relief, in connection with the enforcement or any purported violation of any
Environmental Laws or evaluating whether any remedial action is required or
purported to be required pursuant to any Environmental Laws to respond to any
release or threatened release, whether intentional or unintentional, of any
Hazardous Material into the environment; (c) Hazardous Materials have not been
generated, treated, manufactured, processed, stored, transported or disposed of
by RhoMed in violation of, or in a manner or to a location which could
reasonably be expected to give rise to liability under, nor has RhoMed
generated, treated,
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manufactured, processed, stored, transported or disposed of at or under any of
its presently or previously owned, leased or controlled operations, properties
or facilities any Hazardous Material in violation of, or that could reasonably
be expected to give rise to liability under, any Environmental Law; (d) RhoMed
has not received written notice to the effect that it is or may be liable to
any person (including, without limitation, any individual or government,
whether federal, state, provincial, or local) in connection with, or as a
result of, any release or threatened release, whether intentional or
unintentional, of any Hazardous Material into the environment; and (e) RhoMed
has not commissioned any reviews, audits, reports or other analyses regarding
the environmental condition of any operation, property or facility presently or
previously owned, leased or otherwise controlled by RhoMed, nor has RhoMed
received any documents or correspondence from, nor has RhoMed sent any
documents or correspondence to, the United States Environmental Protection
Agency, or any state, county or local environmental or health agency
concerning, the environmental condition of any operation, property or facility
presently or previously owned, leased or otherwise controlled by RhoMed.
For purposes of this Paragraph 2.17: "Environmental Laws"
means any and all federal, state or local laws, statutes, codes, ordinances,
rules, regulations, policies, judgments, orders, decrees, permits, licenses, or
other governmental restrictions or requirements relating to pollution or
protection of public or employee health or safety or the environment,
including, but not limited to, CERCLA, SARA, RCRA, CWA, CAA, FIFRA, TSCA (each,
as defined below), and any comparable state, county or local Environmental Law.
"Hazardous Material" means (i) any hazardous substance, pollutant or
contaminant as now or hereafter defined in, or regulated under, CERCLA and its
implementing regulations, any toxic, carcinogenic, infectious, mutagenic,
radioactive, explosive or otherwise dangerous substance, hazardous or other
waste, hazardous constituent, petroleum and petroleum products, including crude
oil and any fraction thereof, asbestos, polychlorinated biphenyls,
urea-formaldehyde insulation, and any other chemical, material or substance now
or hereafter regulated under any Environmental Law and (ii) any substance, the
presence of which on or under the operations, properties, and facilities now
and, as appropriate, previously owned, leased, or otherwise controlled by
RhoMed threatens to cause a nuisance to, could constitute a trespass by RhoMed
upon, or poses a health or safety hazard to persons on or about, any adjacent
property or facility. "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986 ("SARA") 42 U.S.C. ss.ss. 9601-9675; "RCRA"
means the Resource Conservation and Recovery Act of 1976 42 U.S.C. ss.
6901-6991; "CWA" means the Clean Water Act 33 U.S.C. ss. 1321 et seq; "CAA"
means the Clean Air Act 42 U.S.C. ss.ss. 7401 et seq; "FIFRA" means the Federal
Insecticide, Fungicide and Rodenticide Act 7 U.S.C. ss. 136 et seq; "TSCA"
means the Toxic Substances Control Act 15 U.S.C. ss.ss. 2601-2671; in each
case, as amended from time to time and including any regulations now or
hereafter promulgated thereunder.
2.18 Insurance. Schedule 2.18 sets forth a true, complete
and correct description of all insurance currently maintained by RhoMed. RhoMed
has paid all premiums
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due under such policies and RhoMed is not in default with respect to its
obligations under any of such policies. The amount and nature of self-insurance
reserves are adequate and reasonable in view of the loss experience of RhoMed
and the business in which RhoMed is engaged, the pending claims against RhoMed,
and the known threatened claims and the known occurrences which have not given
rise to a pending claim.
2.19 Labor Matters. RhoMed is not a party to any collective
bargaining or other labor agreement and has not violated any laws, regulations,
orders or contract terms affecting the collective bargaining rights of
employees, equal opportunity employment, or employees health, safety, welfare,
wages and hours. There are no labor disputes existing, or to the best knowledge
of RhoMed, threatened, involving strikes, slow-downs, work stoppages, job
actions or lockouts of any employees of RhoMed or any grievance under any
collective bargaining or other labor agreement involving employees of RhoMed;
(ii) there are no unfair labor practices or petitions for election pending
before the National Labor Relations Board of any other federal or state labor
commission relating to the employees of RhoMed; and (iii) no demand for
recognition heretofore made by any labor organization is pending with respect
to RhoMed. There are no pending retaliatory or wrongful discharge claims or
federal, state or local employment discrimination charges or administrative or
judicial complaints arising therefrom pending against RhoMed nor, to the
knowledge of RhoMed, are any such charges or complaints threatened against
RhoMed.
ARTICLE III. TERMS OF SUBSCRIPTION
3.1 The Units will be offered on a "best efforts" basis. The
minimum subscrip tion per Subscriber shall be 1 Unit at $25,000 per Unit,
subject to the Corporation's right to accept subscriptions for fractions
thereof. The Corporation will hold closings until $1,000,000 of Units is
purchased by and sold to investors, unless earlier terminated by mutual
agreement of the Placement Agent and the Corporation. (the "Final Closing
Date").
3.2 Delivery of Units purchased pursuant to this Agreement
shall be made by the Corporation within 30 days of the payment of the purchase
price therefor by the Subscriber by personal or business check, wire transfer
of immediately available funds or money order made payable to "RhoMed
Incorporated".
ARTICLE IV. REGISTRATION UNDER THE 1933 ACT
4.1 The Corporation agrees that if, at any time during the
period commencing one year after (x) the closing date of an initial public
offering of the Common Stock by the Corporation registered under the Securities
Act of 1933, as amended (the "Act") or (y) the first date on which the Common
Stock of the Corporation (or securities received in exchange for
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Common Stock of the Corporation) trades on a national securities exchange or on
the National Association of Security Dealers, Inc. Automated Quotations System
("NASDAQ") and ending on the date which is five years later (the "Registration
Period"), a Subscriber who holds Warrants, or shares of the Corporation's
Common Stock which were issued upon the exercise of Warrants and which have not
previously been registered under the Act or which are not freely transferable
without registration under the Act due to the lapse of time or otherwise
("Restricted Shares"), shall request that the Corporation file a registration
statement under the Act covering Restricted Shares or shares of Common Stock
issuable upon the exercise of the Warrants, the Corporation will (i) promptly
notify each Subscriber who holds Restricted Shares or Warrants that such
registration statement will be filed and that Restricted Shares which are then
held, and/or may be acquired upon exercise of Warrants by the Subscriber, will
be included in such registration statement at the Subscriber's request, (ii)
cause such registration statement to cover all of such Common Stock which it
has been so requested to include, (iii) use its best efforts to cause such
registration statement to become effective as soon as practicable and (iv) take
all other action necessary under any Federal or state law or regulation of any
governmental authority to permit all such Common Stock which it has been so
requested to include in such registration statement to be sold or otherwise
disposed of, and will use its best efforts to maintain such compliance with
each such Federal and state law and regulation of any governmental authority
for the period necessary for such Subscribers to effect the proposed sale or
other disposition. The Corporation shall be required to effect a registration
or qualifica tion pursuant to this Paragraph 4.1 on one occasion only;
provided, however, in the event that the Corporation is eligible to utilize
Form S-3, the Corporation will be required to effect an unlimited number of
such S-3 registrations but no more than 2 per year.
4.2 The Corporation agrees that if, at any time and from time
to time during the Registration Period, the Board of Directors of the
Corporation shall authorize the filing of a registration statement under the
Act (other than the initial public offering of the Corporation's Common Stock
and otherwise than pursuant to Paragraph 4.1 hereof, or other than a
registration statement on Form S-8, S-4 or other form which does not include
substantially the same information as would be required in a form for the
general registration of securities) in connection with the proposed offer of
any of its securities by it or any of its stockholders, the Corporation will
(i) promptly notify each Subscriber who holds Warrants or Restricted Shares
that such registration statement will be filed and that the Restricted Shares
and/or Common Stock issuable upon the exercise of the Warrants which are then
held will be included in such registration statement at the Subscriber's
request, (ii) cause such registration statement to cover all of such Common
Stock which it has been so requested to include, (iii) use its best efforts to
cause such registration statement to become effective as soon as practicable
and (iv) take all other action necessary under any Federal or state law or
regulation of any governmental authority to permit all such Common Stock which
it has been so requested to include in such registration statement to be sold
or otherwise disposed of, and will use its best efforts to maintain such
compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for the Subscriber to effect
the proposed sale
Page 13
<PAGE>
or other disposition; provided, however that the foregoing "piggyback"
registration right shall be subject to cutbacks in the sole discretion of the
underwriter for the Corporation.
4.3 Whenever the Corporation is required pursuant to the
provisions of this Article IV to include in a registration statement Restricted
Shares or shares Common Stock issuable upon exercise of the Warrants, the
Corporation shall (i) furnish each Subscriber who holds any Restricted Shares
and/or Warrants and each underwriter of such Common Stock with such copies of
the prospectus, including the preliminary prospectus, conforming to the Act
(and such other documents as each such Subscriber or each such underwriter may
reasonably request) in order to facilitate the sale or distribution of such
Common Stock, (ii) use its best efforts to register or qualify such Common
Stock under the blue sky laws (to the extent applicable) of such jurisdiction
or laws (to the extent applicable) of such jurisdiction or jurisdictions as the
Subscriber who holds any Restricted Shares and/or Warrants and each underwriter
of such Common Stock being sold by such Subscribers shall reasonably request
and (iii) take such other actions as may be reasonably necessary or advisable
to enable such Subscribers and such underwriters to consummate the sale or
distribution in such jurisdiction or jurisdictions in which such Subscribers
shall have reasonably requested that such Common Stock be sold.
4.4 The Corporation shall pay all expenses incurred in
connection with any registration statement or other action pursuant to the
provisions of this Article IV, other than underwriting discounts and applicable
transfer taxes relating to the Common Stock issued upon exercise of the
Warrants.
4.5 The Corporation will indemnify the holders of Common
Stock issued upon the exercise of Warrants which is included in each
registration statement referred to in Paragraphs 4.1 and 4.2, and the
underwriters of such Common Stock, substantially to the same extent as is
customary for indemnification and contribution provisions in favor of
underwriters and selling shareholders of similar offerings, and such
Subscribers will indemnify the Corporation (and the underwriters, if
applicable) with respect to information furnished by them in writing to the
Corporation for inclusion therein substantially to the same extent as the under
writers indemnify the Corporation.
4.6 If the Corporation shall at any time have completed a
public offering of shares of its Common Stock, it shall thereafter take such
steps as may be necessary to register its Common Stock, as the case may be,
under Section 12(g) of the Securities Exchange Act of 1934, as amended, to
maintain such status, and to file with the Securities and Exchange Commission
all current reports and the information as may be necessary to enable the
Subscrib er to effect sales of the Subscriber's shares of Common Stock in
reliance upon Rule 144 promulgated under the Act.
Page 14
<PAGE>
4.7 If the Corporation files a registration statement with
the Securities and Exchange Commission in connection with a public offering of
the Corporation's securities, the Subscriber, by accepting this Agreement,
agrees, if so requested by the Corporation, that such Subscriber will not
directly or indirectly sell, make any short sale of, grant any option for the
purchase of, or otherwise dispose of any capital stock of the Corporation
during the 30-day period ending, and the 180-day period beginning (or any such
other period as is required by the underwriter of such offering) on the first
date of the effectiveness of such registration statement. Upon request, the
Subscriber will sign an agreement in reasonable form to such effect with the
underwriter of such an offering.
ARTICLE V. MISCELLANEOUS
5.1 Any notice or other communication given hereunder shall
be deemed sufficient if in writing and sent by registered or certified mail,
return receipt requested, or delivered by hand against written receipt
therefor, addressed to RhoMed Incorporated, 4261 Balloon Park Road NE,
Albuquerque, NM, 87109-5802, Attn: President, and to the Subscrib er at the
Subscriber's address indicated on the signature page of this Agreement. Notices
shall be deemed to have been given or delivered on the date of mailing, except
notices of change of address, which shall be deemed to have been given or
delivered when received.
5.2 This Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged, and this Agreement may
not be discharged except by performance in accordance with its terms or by a
writing signed by the party to be charged.
5.3 This Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
5.4 Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Units as herein provided; subject, however, to
the right hereby reserved to the Corporation to enter into the same agreements
with other subscribers and to add and/or delete other persons as subscribers.
5.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE
EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EX PRESSLY AGREE THAT ALL
THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE
Page 15
<PAGE>
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
5.6 In order to discourage frivolous claims the parties agree
that unless a claimant in any proceeding arising out of this Agreement succeeds
in establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other parties
to the action), then the other party shall be entitled to recover from such
claimant all of its/their reasonable legal costs and expenses relating to such
proceeding and/or incurred in preparation therefor.
5.7 The holding of any provision of this Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Agreement, which shall remain in full force and
effect. If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, such provision shall be interpreted so as to remain
enforceable to the maximum extent permissible consistent with applicable law
and the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provisions shall be deemed dependent
upon any other covenant or provision unless so expressed herein.
5.8 It is agreed that a waiver by either party of a breach of
any provision of this Agreement shall not operate, or be construed, as a waiver
of any subsequent breach by that same party.
5.9 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
5.10 This Agreement may be executed in two or more
counterparts each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
ARTICLE VI. NOTICE TO, AND REPRESENTATIONS AND COVENANTS OF
CERTAIN STATE RESIDENTS
6.1 Pennsylvania Residents: The undersigned hereby
acknowledges that the Corporation is relying upon the exemption from
registration of securities set forth in Section 203(d) of the Pennsylvania
Securities Act of 1972, as amended (the "Pennsylvania Act"), in connection with
the sale of the Units to the undersigned.
Page 16
<PAGE>
In accordance with the requirements of the Pennsylvania Act,
the undersigned hereby acknowledges and agrees that (a) the Units purchased
cannot be sold for a period of twelve (12) months from the date of purchase,
except as permitted under Section 204.0ll of the Pennsylvania Securities
Regulations, and (b) pursuant to Section 207(m) of the Pennsylvania Act, EACH
PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM
REGISTRATION UNDER SECTION 203(D) OF THE PENNSYLVANIA ACT HAS THE RIGHT TO
WITHDRAW HIS OR HER ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE
CORPORATION, THE PLACEMENT AGENT OR ANY OTHER PERSON WITHIN TWO (2) BUSINESS
DAYS FROM THE DATE OF RECEIPT BY THE CORPORATION OF THIS AGREEMENT.
6.2 Alabama Residents: The undersigned represents that he or
she, either alone or with the undersigned's representative, has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of investment in the Units.
6.3 Massachusetts Residents: If the undersigned is a natural
person, he or she represents that his or her investment in these Units does not
exceed 25% of his or her net worth or joint net worth with spouse (excluding
principal residence and its furnishings).
6.4 Maryland Residents: The undersigned acknowledges and
agrees that these Units will not be sold without registration under the
Maryland Securities Act or exemption therefrom.
6.5 Missouri Residents: The undersigned acknowledges that
these Units are not registered under the Missouri Securities Act and may be
disposed of only through a registered broker-dealer in Missouri. The
undersigned also acknowledges that it is a felony to sell securities in
violation of the Missouri Securities Act.
6.6 Wisconsin Residents: The undersigned represents that he
or she, either alone or with his or her representative, has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of investment in the Units.
Page 17
<PAGE>
ARTICLE VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE
The Subscriber represents and warrants that he, she or it
comes within one cate gory marked below, and that for any category marked, he
or she has truthfully set forth, where applicable, the factual basis or reason
the Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which the Corporation deems necessary in order to
verify the answers set forth below.
Category A The undersigned is an individual (not a
partnership, corporation, etc.) whose
individual net worth, or joint net worth
with his or her spouse, presently exceeds
$1,000,000.
Explanation. In calculating net
worth you may include equity in
personal property and real estate,
including your principal residence,
cash, short-term investments, stock
and securities. Equity in personal
property and real estate should be
based on the fair market value of
such property less debt secured by
such property.
Category B The undersigned is an individual (not a
partnership, corporation, etc.) who had an
income in excess of $200,000 in each of the
two most recent years, or joint income with
his or her spouse in excess of $300,000 in
each of those years (in each case includ
ing foreign income, tax exempt income and
full amount of capital gains and loses but
excluding any income of other family
members and any unrealized capital
appreciation) and has a reasonable
expectation of reaching the same income
level in the current year.
Category C
The undersigned is a director or executive
officer of the Corpo ration which is
issuing and selling the Units.
Category D The undersigned is a bank; a savings and
loan association, insurance company,
registered investment company; registered
business development company; licensed
small business invest ment company
("SBIC"); or employee benefit plan within
the meaning of Title 1 of ERISA and (a) the
investment decision is made by a plan
fiduciary which is either a bank, savings
and loan association, insurance company or
registered investment advisor, or (b) the
plan has total assets in excess of
$5,000,000
Page 18
<PAGE>
or is a self directed plan with investment
decisions made solely by persons that are
accredited investors.
-----------------------------
-----------------------------
(describe entity)
Category E The undersigned is a private business
development company as defined in Section
202(a)(22) of the Investment Advisors Act
of 1940.
-----------------------------
-----------------------------
(describe entity)
Category F The undersigned is a corporation,
partnership, Massachusetts business trust,
or non-profit organization within the
meaning of Section 501(c)(3) of the
Internal Revenue Code, in each case not
formed for the specific purpose of
acquiring the Units and with total assets
in excess of $5,000,000.
-----------------------------
-----------------------------
(describe entity)
Category G The undersigned is a trust with total
assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the
Units, where the purchase is directed by a
"sophisticated per son" as defined in
Regulation 506(b)(2)(ii).
Page 19
<PAGE>
Category H The undersigned is an entity all the equity
owners of which are "accredited investors"
within one or more of the above catego
ries. If relying upon this Category alone,
each equity owner must complete a separate
copy of this Agreement.
-----------------------------
-----------------------------
(describe entity)
Category I The undersigned is not within any of the
categories above and is therefore not an
accredited investor.
The undersigned is informed of the significance to the
Corporation of the foregoing representations, and they are made with the
intention that the Corporation will rely on them.
Page 20
<PAGE>
ARTICLE VIII. MANNER IN WHICH TITLE TO BE HELD (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Corporation*
(g) Trust*
(h) Other
*If Units are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
- -------------------------------------------------------------------------------
_____ Check here if Subscriber is a member of the
National Associa tion of Securities
Dealers, Inc. (the "NASD"), or owns any
stock or other interest in any member of
the NASD (other than interests acquired in
open market purchases), or has, for a
period of twelve months prior to the date
of this Agreement, been affiliated or
associated with any company, firm, or other
entity which is a member of the NASD.
-----------------------------
-----------------------------
(describe entity)
Page 21
<PAGE>
NUMBER OF UNITS________X $25,000 = ____________(THE "PURCHASE PRICE")
- ----------------------------------- -----------------------------------
Signature Signature [if purchasing jointly]
- ----------------------------------- -----------------------------------
Name Typed or Printed Name Typed or Printed
- ----------------------------------- -----------------------------------
Residence Address Residence Address
- ----------------------------------- -----------------------------------
City, State and Zip Code City, State and Zip Code
- ----------------------------------- -----------------------------------
Tax Identification or Tax Identification or
Social Security Number Social Security Number
Telephone No. Business
----------------------------
Telephone No. Home
--------------------------------
Name in which Notes should be
issued:
-------------------------------------------
Dated: , 1995 Dated: , 1995
----------------------- -----------------------
This Unit Purchase Agreement is agreed to and accepted as of , 1995.
RHOMED INCORPORATED
By:__________________________
Name:
Title:
Page 22
<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I,______________________________, am the__________________of
______________________________(the "Entity").
I certify that I am empowered and duly authorized by the
Entity to execute and carry out the terms of the Unit Purchase Agreement and to
purchase and hold the Units, and certify further that the Unit Purchase
Agreement has been duly and validly executed on behalf of the Entity and
constitutes a legal and binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this ______day of
_____________________, 1995.
------------------------------
(Signature)
Page 23
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER
MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
RHOMED INCORPORATED
Class B Warrant for the Purchase of
Shares of Common Stock
No. ______ _______ Shares
FOR VALUE RECEIVED, RHOMED INCORPORATED, a New Mexico
corporation (the "COMPANY"), hereby certifies that [] or his permitted assigns,
is entitled to purchase from the Company, at any time or from time to time
commencing on [Insert Closing Date] and prior to 5:00 P.M., New York City time,
on five years from [Insert Closing Date] (the "TERMINATION DATE"), [Insert
Number of Shares] ([]) fully paid and non-assessable shares of the Common
Stock, no par value, of the Company for an aggregate purchase price which is
the lesser of:
Class B Warrant Page 1
<PAGE>
(a) $[] (computed on the basis of $.25 per share); or
(b) the number of shares purchasable multiplied by
fifty percent (50%) of the price per share of Common Stock (as defined below),
in any single public offering or private placement of the Company's Common
Stock in which gross proceeds exceed $2,500,000.
Herein, (i) said Common Stock, together with any other
equity securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "COMMON STOCK", (ii) the shares of
the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the "WARRANT SHARES", (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred
to as the "AGGREGATE WARRANT PRICE", (iv) the price payable for each of the
Warrant Shares hereunder is referred to as the "PER SHARE WARRANT PRICE", (v)
this Warrant, all similar Warrants issued on the date hereof and all Warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "WARRANTS" and (vi) the holder of this Warrant
is referred to as the "HOLDER" and the holder of this Warrant and all other
Warrants or Warrant Shares issued upon the exercise of any Warrant are referred
to as the "HOLDERS". The Per Share Warrant Price is subject to adjustment as
hereinafter provided; in the event of any such adjustment, the number of
Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the
Per Share Warrant Price in effect immediately after such adjustment.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on [Insert Closing Date] and
prior to the Termination Date, unless terminated earlier as set forth in
Section 8 hereof, by the holder by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address set forth in
Subsection 11(a) hereof, together with proper payment of the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in part,
with payment for Warrant Shares made by certified or official bank check
payable to the order of the Company; or
(b) If this Warrant is exercised in part, this
Warrant must be exercised for a number of whole shares of the Common Stock and
the Holder is entitled to receive a new Warrant covering the Warrant Shares
which have not been exercised and setting forth the proportionate part of the
Aggregate Warrant Price applicable to such Warrant Shares. Upon surrender of
this Warrant, the Company will (i) issue a certificate or certificates in the
name of the Holder for the largest number of whole shares of the Common Stock
to which the
Class B Warrant Page 2
<PAGE>
Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of
any fractional share of the Common Stock to which the Holder shall be entitled,
pay to the Holder cash in an amount equal to the fair value of such fractional
share (determined in such reasonable manner as the Board of Directors of the
Company shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof
if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2. RESERVATION OF WARRANT SHARES; LISTING. The
Company agrees that, prior to the expiration of this Warrant, the Company will
at all times (a) have authorized and in reserve, and keep available, solely for
issuance and delivery upon the exercise of this Warrant, the shares of the
Common Stock and other securities and properties as from time to time shall be
receivable upon the exercise of this Warrant, free and clear of all
restrictions (other than restrictions necessary to comply with Federal and
state securities laws) on sale or transfer and free and clear of all preemptive
rights and rights of first refusal; and (b) if the Company hereafter lists its
Common Stock on any national securities exchange, keep the shares of Common
Stock receivable upon exercise of this Warrant authorized for listing on such
exchange upon notice of issuance.
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the
date of this Warrant, the Company shall issue or distribute to the holders of
shares of Common Stock evidence of its indebtedness, any other securities of
the Company or any cash, property or other assets (excluding a subdivision,
combination or reclassification, or dividend or distribution payable in shares
of Common Stock, referred to in Subsection 3(b), and also excluding cash
dividends or cash distributions paid out of net profits legally available
therefor in the full amount thereof, together with the value of other dividends
and distributions made substantially concurrently therewith or pursuant to a
plan which includes payment thereof, is equivalent to not more than 5% of the
Company's net worth) (any such non-excluded event being herein called a
"SPECIAL DIVIDEND"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price of the Common Stock
less the fair market value (as determined in good faith by the Company's Board
of Directors) of the evidence of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend applicable to one
share of Common Stock and the denominator of which shall be the then current
Market Price of the Common Stock. An adjustment made pursuant to this
Subsection 3(a) shall become effective immediately after the record date of any
such Special Dividend.
(b) In case the Company shall hereafter (i) pay a
dividend or make a distribution on its capital stock in shares of Common Stock,
(ii) subdivide its outstanding
Class B Warrant Page 3
<PAGE>
shares of Common Stock into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares or (iv)
issue by reclassification of its Common Stock any shares of capital stock of
the Company, the Per Share Warrant Price shall be adjusted to be equal to a
fraction, the numerator of which shall be the Aggregate Warrant Price and the
denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company which he would have owned immediately following
such action had such Warrant been exercised immediately prior thereto. An
adjustment made pursuant to this Subsection 3(b) shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
(c) Except as provided in Subsections 3(a) and 3(d),
in case the Company shall hereafter issue or sell any Common Stock, or any
securities convertible into Common Stock or any rights, options or Warrants to
purchase Common Stock or securities convertible into Common Stock, in each case
for a price per share or entitling the holders thereof to purchase Common Stock
at a price per share (determined by dividing (i) the total amount, if any,
received or receivable by the Company in consideration of the issuance or sale
of such securities plus the total consideration, if any, payable to the Company
upon exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the
number of additional shares of Common Stock issuable upon exercise or
conversion of such securities) less than the then current Per Share Warrant
Price in effect on the date of such issuance or sale, the Per Share Warrant
Price shall be adjusted as of the date of such issuance or sale so that the
same shall equal the price determined by dividing (i) the sum of (A) the number
of shares of Common Stock outstanding on the date of such issuance or sale
multiplied by the Per Share Warrant Price plus (B) the Total Consideration by
(ii) the number of shares of Common Stock outstanding on the date of such
issuance or sale plus the maximum number of additional shares of Common Stock
issuable upon exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price
shall be required in the case of the issuance by the Company of Common Stock
pursuant to the exercise of any Warrant or any other rights, option, warrant or
convertible security outstanding as of the date hereof, or the grant at any
time hereafter of an option pursuant to any employee incentive stock option
plan or nonqualified stock option plan of the Company.
(e) In case of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this
Class B Warrant Page 4
<PAGE>
Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Subsection 3(e) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The issuer of any shares of stock or other
securities or property thereafter deliverable on the exercise of this Warrant
shall be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Warrants not less
than 30 days prior to such event. A sale of all or substantially all of the
assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing purposes.
(f) In case any event shall occur as to which the
other provisions of this Section 3 are not strictly applicable but as to which
the failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants representing
the right to purchase a majority of the Warrant Shares subject to all
outstanding Warrants may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price
shall be required unless such adjustment would require an increase or decrease
of at least $0.05 per share of Common Stock; provided, however, that any
adjustments which by reason of this Subsection 3(g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment;
provided, further, however, that adjustments shall be required and made in
accordance with the provisions of this Section 3 (other than this Subsection
3(g)) not later than such time as may be required in order to preserve the
tax-free nature of a distribution to
Class B Warrant Page 5
<PAGE>
the Holder of this Warrant or Common Stock issuable upon the exercise hereof.
All calculations under this Section 3 shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be. Anything in this Section 3
to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Per Share Warrant Price, in addition to those required by
this Section 3, as it in its discretion shall deem to be advisable in order
that any stock dividend, subdivision of shares or distribution of rights to
purchase stock or securities convertible or exchangeable for stock hereafter
made by the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted
as provided in this Section 3 and upon any modification of the rights of a
Holder of Warrants in accordance with this Section 3, the Company shall
promptly obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company) setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or the effect of
such modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
(i) If the Board of Directors of the Company shall
declare any dividend or other distribution with respect to the Common Stock
other than a cash distribution out of earned surplus, the Company shall mail
notice thereof to the Holders of the Warrants not less than 15 days prior to
the record date fixed for determining stockholders entitled to participate in
such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant
to this Section 3, the Holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other capital stock of the Company,
the Board of Directors (whose determination shall be conclusive and shall be
described in a written notice to the Holder of any Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per Share Warrant
Price between or among shares or such classes of capital stock or shares of
Common Stock and other capital stock.
4. FULLY PAID STOCK; TAXES. The Company agrees
that the shares of the Common Stock represented by each and every certificate
of Warrant Shares delivered on the exercise of this Warrant be validly issued
and outstanding, fully paid and nonassessable, and not subject to preemptive
rights or rights of first refusal, and the Company will take all such actions
as may be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. The
Class B Warrant Page 6
<PAGE>
Company further covenants and agrees that it will pay, when due and payable,
any and all Federal and state stamp, original issue or similar taxes which may
be payable in respect of the issue of any Warrant Share or any certificate
thereof.
5. REGISTRATION UNDER SECURITIES ACT OF 1933. The
Holder of this Warrant shall have the same registration rights as provided in
Section 4 of the Unit Purchase Agreement dated as of the date hereof between
the Company and such Holder (or such Holder's predecessor in interest).
6. LIMITED TRANSFERABILITY. This Warrant may not
be sold, transferred, assigned or hypothecated by the Holder (a) except in
compliance with the provisions of the Act and the applicable state securities
"blue sky" laws, and is so transferable only upon the books of the Company
which it shall cause to be maintained for such purpose. The Company may treat
the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request
during ordinary business hours, to inspect and copy or make extracts from its
books showing the registered holders of Warrants. All Warrants issued upon the
transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the holder thereof shall be identical to those of
the Holder.
7. INCREASE IN SHARES. In the event that payment
on the Series B Senior Bridge Note (the "Note") issued in conjunction with this
Warrant and as part of a Unit pursuant to the Unit Purchase Agreement is not
made by the Maturity Date specified in the Note (as that term is defined in the
Note), then the number of shares the Holder is then entitled to purchase from
the Company (after giving effect to any adjustment required under Section 3)
will be increased by ten percent (10%). The purchase price per share for
additional shares purchasable pursuant to this section will be the Per Share
Warrant Price.
8. WARRANT TERMINATION. This Warrant automatically
terminates if:
(a) The Common Stock, or any securities into which
the Common Stock has been converted, trades on a national securities exchange
or on the National Association of Security Dealers, Inc. Automated Quotations
System ("NASDAQ"), and has, during any consecutive thirty trading day period,
had a closing price for at least twenty trading days equal to or greater than
two times the Per Share Warrant Price (the "Termination Event");
Class B Warrant Page 7
<PAGE>
(b) Notice of the Termination Event is given to the
Holder at the address and as set forth in Subsection 11(a) hereof; and
(c) The Holder has not, by the close of the sixtieth
day following giving notice of the Termination Event, exercised the Warrant as
set forth in Section 1.
9. LOSS, ETC., OF WARRANT. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and of indemnity reasonably satisfactory to the
Company, if lost, stolen or destroyed, and upon surrender and cancellation of
this Warrant, if mutilated, the Company shall execute and deliver to the Holder
a new Warrant of like date, tenor and denomination.
10. WARRANT HOLDER NOT SHAREHOLDER. Except as
otherwise provided herein, this Warrant does not confer upon the Holder any
right to vote or to consent to or receive notice as a stockholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a stockholder, prior to the exercise hereof.
11. COMMUNICATION. No notice or other communication
under this Warrant shall be effective unless, but any notice or other
communication shall be effective and shall be deemed to have been given if, the
same is in writing and is mailed by first-class mail, postage prepaid,
addressed to:
(a) the Company at 4261 Balloon Park Road NE,
Albuquerque, NM 87109-5802 or such other address as the Company
has designated in writing to the Holder, or
(b) the Holder at the address indicated on the signature
page to the Unit Purchase Agreement, or such other address as the
Holder has designated in writing to the Company.
12. HEADINGS. The headings of this Warrant have
been inserted as a matter of convenience and shall not affect the construction
hereof.
13. APPLICABLE LAW. This Warrant shall be governed
by and construed in accordance with the law of the State of New York without
giving effect to the principles of conflicts of law thereof.
Class B Warrant Page 8
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
to be signed by its President and its corporate seal to be hereunto affixed and
attested by its Secretary this ___ day of __________, 1995.
RHOMED INCORPORATED
By: ___________________________
President
ATTEST:
- --------------------
Secretary
[Corporate Seal]
Class B Warrant Page 9
<PAGE>
SUBSCRIPTION
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and
purchase ____________________ shares of the Common Stock, no par value, of
RhoMed Incorporated, covered by said Warrant, and makes payment therefor in
full at the price per share provided by said Warrant.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns
and transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
RhoMed Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of the
Common Stock, no par value per share, of RhoMed Incorporated covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of RhoMed Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
Class B Warrant Page 10
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER
MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
RHOMED INCORPORATED
Warrant for the Purchase of Shares of
Common Stock
No. Shares
FOR VALUE RECEIVED, RHOMED INCORPORATED, a New Mexico
corporation (the "COMPANY"), hereby certifies that [] or his permitted assigns,
is entitled to purchase from the Company, at any time or from time to time
commencing on [Insert Final Closing Date] and prior to 5:00 P.M., New York City
time, on ten years from [Insert Final Closing Date] (the "TERMINATION DATE"),
[Insert Number of Shares] ([]) fully paid and non-assessable shares of the
Common Stock, no par value, of the Company for an aggregate purchase price of
$[] (computed on the basis of $.30 per share). (Hereinafter, (i) said Common
Stock, together with any other equity securities which may be issued by the
Company with respect thereto or in substitution therefor, is referred to as the
"COMMON STOCK", (ii) the shares of the Common Stock purchasable hereunder or
under any other Warrant (as hereinafter defined) are referred to as the
"WARRANT SHARES", (iii) the aggregate
<PAGE>
purchase price payable for the Warrant Shares hereunder is referred to as the
"AGGREGATE WARRANT PRICE", (iv) the price payable for each of the Warrant
Shares hereunder is referred to as the "PER SHARE WARRANT PRICE", (v) this
Warrant, all similar Warrants issued on the date hereof and all Warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "WARRANTS" and (vi) the holder of this Warrant
is referred to as the "HOLDER" and the holder of this
Warrant and all other Warrants or Warrant Shares issued upon the exercise of
any Warrant are referred to as the "HOLDERS"). The Aggregate Warrant Price is
not subject to adjustment. The Per Share Warrant Price is subject to adjustment
as hereinafter provided; in the event of any such adjustment, the number of
Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the
Per Share Warrant Price in effect immediately after such adjustment.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on [Insert Final Closing Date]
and prior to the Termination Date, by the holder:
(i) by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address
set forth in Subsection 9(a) hereof, together with proper payment
of the Aggregate Warrant Price, or the proportionate part thereof
if this Warrant is exercised in part, with payment for Warrant
Shares made by certified or official bank check payable to the
order of the Company; or
(ii) by the surrender of this Warrant (with the cashless
exercise form at the end hereof duly executed) (a "CASHLESS
EXERCISE") at the address set forth in Subsection 9(a) hereof.
Such presentation and surrender shall be deemed a waiver of the
Holder's obligation to pay the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part.
In the event of a Cashless Exercise, the Holder shall exchange
its Warrant for that number of Warrant Shares subject to such
Cashless Exercise multiplied by a fraction, the numerator of
which shall be the difference between the then current Market
Price per share (as hereinafter defined) of Common Stock and the
Per Share Warrant Price, and the denominator of which shall be
the then current Market Price per share of Common Stock. For
purposes of any computation under this Section 1(a)(ii), the then
current market price per share of the Common Stock at any date
(the "MARKET PRICE") shall be deemed to be the last sale price of
the Common Stock on the business day prior to the date of the
Cashless Exercise or, in case no such reported sales take place
on such day, the average of the last reported bid and asked
prices of the Common Stock on such day, in either case on the
principal national securities exchange on which the Common Stock
is admitted to trading or listed, or if not listed or admitted to
trading on any such exchange, the representative closing bid
price of the Common Stock as reported by NASDAQ, or other similar
organization if NASDAQ is no longer reporting such information,
or on the OTC Electronic Bulletin or in the "Pink Sheets," or if
not so available, the fair market price of the Common Stock as
determined in good faith by the Board of Directors.
(b) If this Warrant is exercised in part, this
Warrant must be exercised for a number of whole shares of the Common Stock and
the Holder is entitled to receive a new Warrant covering the Warrant Shares
which have not been exercised and setting forth the
<PAGE>
proportionate part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon surrender of this Warrant, the Company will (i) issue a
certificate or certificates in the name of the Holder for the largest number of
whole shares of the Common Stock to which the Holder shall be entitled and, if
this Warrant is exercised in whole, in lieu of any fractional share of the
Common Stock to which the Holder shall be entitled, pay to the Holder cash in
an amount equal to the fair value of such fractional share (determined in such
reasonable manner as the Board of Directors of the Company shall determine),
and (ii) deliver the other securities and properties receivable upon the
exercise of this Warrant, if any, or the proportionate part thereof if this
Warrant is exercised in part, pursuant to the provisions of this Warrant.
2. RESERVATION OF WARRANT SHARES; LISTING. The
Company agrees that, prior to the expiration of this Warrant, the Company will
at all times (a) have authorized and in reserve, and will keep available,
solely for issuance or delivery upon the exercise of this Warrant, the shares
of the Common Stock and other securities and properties as from time to time
shall be receivable upon the exercise of this Warrant, free and clear of all
restrictions on sale or transfer and free and clear of all preemptive rights
and rights of first refusal; and (b) if the Company hereafter lists its Common
Stock on any national securities exchange, keep the shares of Common Stock
receivable upon exercise of this Warrant authorized for listing on such
exchange upon notice of issuance.
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the
date of this Warrant, the Company shall issue or distribute to the holders of
shares of Common Stock evidence of its indebtedness, any other securities of
the Company or any cash, property or other assets (excluding a subdivision,
combination or reclassification, or dividend or distribution payable in shares
of Common Stock, referred to in Subsection 3(b), and also excluding cash
dividends or cash distributions paid out of net profits legally available
therefor in the full amount thereof, together with the value of other dividends
and distributions made substantially concurrently therewith or pursuant to a
plan which includes payment thereof, is equivalent to not more than 5% of the
Company's net worth) (any such non-excluded event being herein called a
"SPECIAL DIVIDEND"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price of the Common Stock
less the fair market value (as determined in good faith by the Company's Board
of Directors) of the evidence of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend applicable to one
share of Common Stock and the denominator of which shall be the then current
Market Price of the Common Stock. An adjustment made pursuant to this
Subsection 3(a) shall become effective immediately after the record date of any
such Special Dividend.
(b) In case the Company shall hereafter (i) pay a
dividend or make a distribution on its capital stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the Per Share Warrant Price shall be
adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Warrant Price and the denominator of which shall be the number of
shares of Common Stock or other capital stock of the Company which he would
have owned immediately following such action
-3-
<PAGE>
had such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this Subsection 3(b) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(c) Except as provided in Subsections 3(a) and 3(d),
in case the Company shall hereafter issue or sell any Common Stock, any
securities convertible into Common Stock or any rights, options or Warrants to
purchase Common Stock or securities convertible into Common Stock, in each case
for a price per share or entitling the holders thereof to purchase Common Stock
at a price per share (determined by dividing (i) the total amount, if any,
received or receivable by the Company in consideration of the issuance or sale
of such securities plus the total consideration, if any, payable to the Company
upon exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the
number of additional shares of Common Stock issuable upon exercise or
conversion of such securities) less than the then current Per Share Warrant
Price in effect on the date of such issuance or sale, the Per Share Warrant
Price shall be adjusted as of the date of such issuance or sale so that the
same shall equal the price determined by dividing (i) the sum of (A) the number
of shares of Common Stock outstanding on the date of such issuance or sale
multiplied by the Per Share Warrant Price plus (B) the Total Consideration by
(ii) the number of shares of Common Stock outstanding on the date of such
issuance or sale plus the maximum number of additional shares of Common Stock
issuable upon exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price
shall be required in the case of the issuance by the Company of Common Stock
pursuant to the exercise of any Warrant.
(e) In case of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount of
securities, cash or other property which the Holder would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
Subsection 3(e) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The issuer of any shares of stock or other securities or property
thereafter deliverable on the exercise of this Warrant shall be responsible for
all of the agreements and obligations of the Company hereunder. Notice of any
such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so
-4-
<PAGE>
proposed to be made, shall be mailed to the Holders of the Warrants not less
than 30 days prior to such event. A sale of all or substantially al proposed
to be made, shall be mailed to the Holders of the Warrants not less than
30 days l of the assets of the Company for a consideration consisting primarily
of securities shall be deemed a consolidation or merger for the foregoing
purposes.
(f) In case any event shall occur as to which the
other provisions of this Section 3 are not strictly applicable but as to which
the failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants representing
the right to purchase a majority of the Warrant Shares subject to all
outstanding Warrants may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price
shall be required unless such adjustment would require an increase or decrease
of at least $0.05 per share of Common Stock; provided, however, that any
adjustments which by reason of this Subsection 3(g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment;
provided, further, however, that adjustments shall be required and made in
accordance with the provisions of this Section 3 (other than this Subsection
3(g)) not later than such time as may be required in order to preserve the
tax-free nature of a distribution to the Holder of this Warrant or Common Stock
issuable upon the exercise hereof. All calculations under this Section 3 shall
be made to the nearest cent or to the nearest 1/100th of a share, as the case
may be. Anything in this Section 3 to the contrary notwithstanding, the Company
shall be entitled to make such reductions in the Per Share Warrant Price, in
addition to those required by this Section 3, as it in its discretion shall
deem to be advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted
as provided in this Section 3 and upon any modification of the rights of a
Holder of Warrants in accordance with this Section 3, the Company shall
promptly obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company) setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or the effect of
such modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
(i) If the Board of Directors of the Company shall
declare any dividend or other distribution with respect to the Common Stock
other than a cash distribution out of earned surplus, the Company shall mail
notice thereof to the Holders of the Warrants not less than 15 days prior to
the record date fixed for determining stock holders entitled to participate in
such dividend or other distribution.
-5-
<PAGE>
(j) If, as a result of an adjustment made pursuant
to this Section 3, the Holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other capital stock of the Company,
the Board of Directors (whose determination shall be conclusive and shall be
described in a written notice to the Holder of any Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per Share Warrant
Price between or among shares or such classes of capital stock or shares of
Common Stock and other capital stock.
4. FULLY PAID STOCK; TAXES. The Company agrees
that the shares of the Common Stock represented by each and every certificate
of Warrant Shares delivered on the exercise of this Warrant be validly issued
and outstanding, fully paid and nonassessable, and not subject to preemptive
rights or rights of first refusal, and the Company will take all such actions
as may be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. The Company further covenants and agrees that it will pay,
when due and payable, any and all Federal and state stamp, original issue or
similar taxes which may be payable in respect of the issue of any Warrant Share
or any certificate thereof.
5. REGISTRATION UNDER SECURITIES ACT OF 1933. The
Holder of this Warrant shall have the same registration rights as provided in
Section 4 of the Purchase Agreement which is defined in the Placement Agency
Agreement dated March 5,1996 between the Company and Paramount Capital, Inc.
6. LIMITED TRANSFERABILITY. This Warrant may not
be sold, transferred, assigned or hypothecated by the Holder (a) except in
compliance with the provisions of the Act and the applicable state securities
"blue sky" laws, and is so transferable only upon the books of the Company
which it shall cause to be maintained for such purpose. The Company may treat
the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request
during ordinary business hours, to inspect and copy or make extracts from its
books showing the registered holders of Warrants. All Warrants issued upon the
transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the holder thereof shall be identical to those of
the Holder.
7. LOSS, ETC., OF WARRANT. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and of indemnity reasonably satisfactory to the
Company, if lost, stolen or destroyed, and upon surrender and cancellation of
this Warrant, if mutilated, the Company shall execute and deliver to the Holder
a new Warrant of like date, tenor and denomination.
8. WARRANT HOLDER NOT SHAREHOLDER. Except as
otherwise provided herein, this Warrant does not confer upon the Holder any
right to vote or to consent to or receive notice as a stockholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a stockholder, prior to the exercise hereof.
9. COMMUNICATION. No notice or other communication
under this Warrant shall be effective unless, but any notice or other
communication shall be effective and
-6-
<PAGE>
shall be deemed to have been given if, the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:
(a) the Company at 4261 Balloon Park Road NE,
Albuquerque, New Mexico 87109-5802 or other address as the
Company has designated in writing to the Holder, or
(b) the Holder at 375 Park Avenue, Suite 1501,
New York, New York 10152 or other such address as the Holder
has designated in writing to the Company.
10. HEADINGS. The headings of this Warrant have
been inserted as a matter of convenience and shall not affect
the construction hereof.
11. APPLICABLE LAW. This Warrant shall be governed
by and construed in accordance with the law of the State of New York without
giving effect to the principles of conflicts of law thereof.
-7-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
to be signed by its President and its corporate seal to be hereunto affixed and
attested by its Secretary this ___ day of __________, 1996.
RHOMED INCORPORATED
By: ___________________________
President
ATTEST:
- --------------------
Secretary
[Corporate Seal]
-8-
<PAGE>
SUBSCRIPTION
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and
purchase ____________________ shares of the Common Stock, no par value, of
RhoMed Incorporated, covered by said Warrant, and makes payment therefor in
full at the price per share provided by said Warrant.
Dated:_______________ Signature:____________________
Address:______________________
CASHLESS EXERCISE
The undersigned ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exchange its Warrant for
___________________ shares of Common Stock, no par value, of RhoMed
Incorporated pursuant to the Cashless Exercise provisions of the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns
and transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
RhoMed Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of the
Common Stock, no par value per share, of RhoMed Incorporated covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of RhoMed Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
-9-
<PAGE>
EXHIBIT B
WARRANT RECEIPT
[Address of Warrant Holder]
Dear Sirs:
Pursuant to Section 2(d) of the Placement Agency
Agreement dated March 5, 1996, between RhoMed Incorporated and Paramount
Capital, Inc., we are delivering herewith a warrant in your name to purchase
Warrants of the Company.
We hereby acknowledge receipt of $_________representing
payment in full for the warrant, in an amount equal to $.001 per share of the
Common Stock of the Company.
Very truly yours,
RHOMED INCORPORATED
By______________________________
Name:
Title:
I hereby acknowledge receipt of a warrant to purchase [] shares of Common
Stock.
- -------------------------------
[ ]
-10-
<PAGE>
EXHIBIT C
ORDER TO ISSUE PLACEMENT AGENT'S WARRANTS
RhoMed Incorporated
4261 Balloon Park Road NE
Albuquerque, NM 87109-5802
Dear Sirs:
Pursuant to Section 2(d) of the Placement Agency
Agreement dated March 5, 1996, between RhoMed Incorporated and Paramount
Capital, Inc., we hereby request that you issue warrants to purchase shares of
Common Stock, in an amount equal to $.001 per share, in the names and
denominations as set forth below:
Name Denominations
Very truly yours,
PARAMOUNT CAPITAL, INC.
By______________________________
Name: Wayne Rubin
Title: Chief Financial Officer
-11-
12/8/95
UNIT PURCHASE AGREEMENT
UNIT PURCHASE AGREEMENT (this "Agreement") made as of the
date set forth on the signature page hereof between RhoMed Incorporated, a New
Mexico corporation with its principal offices at 4261 Balloon Park Road NE,
Albuquerque, New Mexico 87109 ("RhoMed" or the "Corporation") and the
undersigned (the "Subscriber").
W I T N E S S E T H:
WHEREAS, the Corporation desires to issue an aggregate of up
to a maximum $750,000 of Series B Senior Bridge Notes (the "Notes") in a
private placement offering (the "Offering") in Units (the "Units"), each Unit
consisting of (a) $100,000 face amount of Notes and (b) Class B Warrants (the
"Warrants") to purchase 100,000 shares of Common Stock, no par value, of the
Corporation (the "Common Stock") and the Subscriber desires to purchase that
number of Units set forth on the signature page hereof on the terms and
conditions hereinafter set forth (the Notes, the Warrants, and the shares of
Common Stock issuable upon exercise of the Warrants being sometimes referred to
collectively herein as the "Securities").
NOW, THEREFORE, in consideration of the premises and the
mutual representations and covenants hereinafter set forth, the parties hereto
do hereby agree as follows:
ARTICLE I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY
SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set
forth, the Subscriber hereby subscribes for and agrees to purchase from the
Corporation such number of Units or fractions thereof as is set forth upon the
signature page hereof at a price equivalent to $100,000 per Unit and the
Corporation agrees to sell such Units to the Subscriber for said purchase
price. The terms of the Notes are set forth in the form of Series B Senior
Bridge Note attached hereto as Exhibit A and the terms of the Class B Warrants
are set forth in the form of warrant attached hereto as Exhibit B. The purchase
price for the Units is payable by personal or business check, wire transfer of
immediately available funds or money order made payable to "RhoMed
Incorporated" contemporaneously with the execution and delivery of this
Agreement. The Units will be delivered by the Corporation in accordance with
the terms set forth in Article III hereof.
1.2 The Subscriber recognizes that the purchase of Units
involves a high degree of risk in that (i) the Corporation may not have the
funds necessary to pay the principal of, and interest on, the Notes, (ii) the
Corporation remains a development stage business with limited operating history
and requires substantial funds in addition to the proceeds of the Offering;
(iii) an investment in the Corporation is highly speculative, and only
investors who can afford the
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loss of their entire investment should consider investing in the Corporation
and the Notes; (iv) the Subscriber may not be able to liquidate his investment;
(v) transferability of the Securities is extremely limited; and (vi) in the
event of a disposition, the Subscriber could sustain the loss of his entire
investment.
1.3 The Subscriber acknowledges that Subscriber must be an
"accredited investor", as described herein, in order to qualify for the
purchase of Units, and that Subscriber must be able to bear the economic risk
of an investment in the Units.
1.4 The Subscriber represents that Subscriber is an
"accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Act"), as
indicated by his responses to the questions contained in Article VII hereof,
and that Subscriber is able to bear the economic risk of an investment in the
Units.
1.5 The Subscriber hereby acknowledges and represents that
(i) Subscriber has prior investment experience, including investment in
non-listed and unregistered securities, or Subscriber has employed the services
of an investment advisor, attorney and/or accountant to read all of the
documents furnished or made available by the Corporation both to Subscriber and
to all other prospective investors in the Units and to evaluate the merits and
risks of such an investment on Subscriber's behalf; (ii) Subscriber recognizes
the highly speculative nature of this investment; and (iii) Subscriber is able
to bear the economic risk which Subscriber hereby assumes.
1.6 The Subscriber hereby represents that the Subscriber
either (i) has a preexisting personal or business relationship with the
Corporation or its officers or directors or (ii) by reason of the Subscriber's
business or financial experience or the business or financial experience of the
Subscriber's professional advisors (who are unaffiliated with and who are not
compensated by the Corporation or any affiliate or selling agent of the
Corporation, including the Placement Agent, directly or indirectly) has the
capacity to protect the Subscriber's own interests in connection with the
transaction contemplated hereby.
1.7 The Subscriber hereby represents that (i) Subscriber has
read this Agreement and all attachments and Exhibits to it, including the
Schedule of Exceptions; (ii) Subscriber has been furnished by the Corporation
during the course of this transaction with all information regarding the
Corporation which Subscriber has requested or desired to know; (iii) Subscriber
has been afforded the opportunity to ask questions of and receive answers from
duly authorized officers or other representatives of the Corporation concerning
the terms and conditions of the Offering; (iv) Subscriber has received any
additional information which Subscriber had requested; and (v) Subscriber is
not subscribing to purchase the Units as a result of or pursuant to any
advertisement, article, notice or other communication published in any
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newspaper, magazine or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
1.8 The Subscriber hereby acknowledges that the offering of
Units have not been reviewed by the United States Securities and Exchange
Commission (the "Commission") or any state regulatory authority, since the
Offering is intended to be exempt from the registra tion requirements of
Section 5 of the Act pursuant to Regulation D promulgated under the Act. The
Subscriber agrees that Subscriber will not sell or otherwise transfer the
Securities unless they are registered under the Act or unless an exemption from
such registration is available and until such Subscriber complies with the
transfer restrictions set forth in Paragraph 1.10 hereof.
1.9 The Subscriber understands that none of the Securities
have been registered under the Act or any state securities or "blue sky" laws
and are being sold in reliance on exemp tions from the registration
requirements of such Act and such laws and agrees that the Securities will not
be resold or transferred except as permitted under such Act and such laws
pursuant to registration or exemption therefrom. The Subscriber hereby
represents that Subscriber is purchasing the Units for Subscriber's own account
for investment and not with a view toward the resale or distribution of the
Units.
1.10 The Subscriber understands that there is no market for
the Units or any of the Securities comprising the Units and that no market may
develop for the Units or any of the Securities comprising the Units. The
Subscriber understands that even if a public market develops for the Units or
any of the Securities comprising the Units, Rule 144 (the "Rule 144")
promulgated under the Act requires, among other conditions, a two-year holding
period prior to the resale (in limited amounts) of securities acquired in a
non-public offering without having to satisfy the registration requirements
under the Act. The Subscriber understands that the Corporation is not obligated
to comply with any reporting requirements under the Securities Exchange Act of
1934, as amended, and that the Corporation makes no representation or war ranty
that it will disseminate to the public any current financial or other
information concerning the Corporation, as is required by Rule 144 as one of
the conditions of its availability. The Subscriber understands and hereby
acknowledges that the Corporation is under no obligation to register any of the
Units or any of the Securities comprising the Units under the Act or any state
securities or "blue sky" laws other than as set forth in Article IV. The
Subscriber agrees to hold the Corporation and its directors, officers, agents,
shareholders and controlling persons and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses (including reasonable legal fees) incurred
by them as a result of or arising out of (i) any misrepresentation made by such
Subscriber contained herein or in the Confidential Investor Questionnaire
contained in Article VII hereof, (ii) any sale or distribution by the
undersigned Subscriber in violation of the Act or any applicable state
securities or "blue sky" laws or (iii) any untrue statement or alleged untrue
statement of a material fact made by the Subscriber and contained herein.
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1.11 The Subscriber consents to the placement of a legend on
any certificate or other document evidencing the Securities that such
Securities have not been registered under the Act or any state securities or
"blue sky" laws and setting forth or referring to the restrictions on
transferability and sale thereof contained in this Agreement. The Subscriber is
aware that the Corporation will make a notation in its appropriate records with
respect to the restrictions on the transferability of such Securities.
1.12 The Subscriber understands that the Corporation will
review this Agreement and is hereby given authority by the Subscriber to call
Subscriber's bank or place of employment or otherwise review the financial
standing of the Subscriber; and it is further agreed that the Corporation
reserves the unrestricted right to reject or limit any subscription, to accept
subscriptions for fractional Units and to close the Offering to the Subscriber
at any time.
1.13 The Subscriber hereby represents that the address of the
Subscriber furnished by Subscriber on the signature page hereof is the
Subscriber's principal residence if Subscriber is an individual or its
principal business address if it is a corporation or other entity.
1.14 Subscriber represents that he or it has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Units and the Securities. This Agreement
constitutes the legal, valid and binding obligation of subscriber, enforceable
against Subscriber in accordance with its terms.
1.15 If the subscriber is a corporation, company, trust,
employee benefit plan, individual retirement account, Keogh Plan, or other
tax-exempt entity, it is authorized and qualified to become an investor in the
Corporation and the person signing this Agreement on behalf of such entity has
been duly authorized by such entity to do so.
ARTICLE II. REPRESENTATIONS BY AND COVENANTS OF RHOMED.
RhoMed hereby represents and warrants to each Subscriber that, as of
the acceptance date set forth on the signature page hereof, unless otherwise
set forth on the "Schedule of Exceptions" attached hereto which specifically
identifies the relevant subparagraph hereof, which exceptions shall be deemed
to be representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. RhoMed is
a corporation duly organized, validly existing and in good standing under the
laws of the State of New Mexico and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. RhoMed is duly qualified to transact business and is in good
standing in New Mexico and all other jurisdictions in which the failure so to
qualify would have a material adverse effect on its business or properties.
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2.2 Capitalization and Voting Rights. The authorized Capital
Stock of RhoMed consists of 40,000,000 shares of common stock, no par value
(the "Common Stock"), of which 6,914,140 were outstanding as of October 30,
1995, and 10,000,000 shares of preferred stock, no par value, of which
4,000,000 (the "Series A Preferred Stock") were outstanding as of October 30,
1995. The Series A Preferred Stock is convertible to a maximum of 10,132,859
shares of Common Stock. There were 23,402,113 shares of Common Stock issued or
issuable as of October 30, 1995, including shares issuable upon the exercise or
conversion of all outstanding options, including options not yet vested,
warrants, convertible notes, the Series A Preferred Stock and other securities
convertible into Common Stock. In addition, and as set forth in the Schedule of
Exceptions, there were, as of October 30, 1995, obligations to issue additional
shares of stock for which the actual number of shares can not be determined.
All of the outstanding shares of Capital Stock of the Corporation have been
duly and validly authorized, and are fully paid and nonassessable. The Notes
and Warrants to be issued and sold by the Corporation as contemplated hereby
and all shares of Common Stock issuable upon exercise of the Warrants, have
been duly and validly authorized and, when issued (and, in the case of the
Notes and Warrants, paid for as contemplated herein), will be validly issued,
fully paid and nonassessable. A sufficient number of shares of Common Stock are
authorized and reserved for issuance (i) upon exercise of the Warrants and (ii)
upon the exercise of all outstanding options, warrants and other rights to
purchase or subscribe for any shares of Common Stock, and RhoMed will, at all
times that the Warrants are outstanding, have authorized and reserved a
sufficient number of shares of Common Stock to provide for exercise of the
Warrants. Except as set forth in Schedule 2.2 and as otherwise required by law,
there are no restrictions upon the voting or transfer of any shares of the
Corporation's Capital Stock pursuant to the Corporation's Articles of
Incorporation, By-Laws or other governing documents or any agreement or other
instruments to which the Corporation is a party or by which the Corporation is
bound.
2.3 Authorization; Enforceability. RhoMed has the corporate
power to execute, deliver and perform the terms and provisions of each of the
Unit Purchase Agreements, Notes and Warrants (together, the "Transaction
Documents") to which it is a party, and has taken prior to the date hereof all
necessary corporate action to authorize the execution, delivery and performance
by it of each of the Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby. No other corporate
proceedings on the part of RhoMed are necessary for the issuance of the Notes
and Warrants. RhoMed has duly executed and delivered this Agreement and each of
the Trans action Documents to which it is a party. This Agreement constitutes,
and each of the other Transaction Documents, when executed and delivered by
RhoMed, assuming due execution by the other parties hereto and thereto, will
constitute the legal, valid and binding obligations of RhoMed enforceable
against RhoMed in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
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<PAGE>
2.4 Governmental Consents.
(i) The execution, delivery and performance by
RhoMed of this Agreement and the other Transaction Documents to which it is a
party and the consummation of the transactions contemplated hereby and thereby
(i) does not and will not contravene the applicable provisions of any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority to or by which RhoMed is bound, (ii) will not
violate, result in a breach of or constitute (with due notice or lapse of time
or both) a default under any contract, lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
RhoMed is a party or by which it is bound or to which any of its properties or
assets is subject, nor result in the creation or imposition of any lien upon
any of the properties or assets of RhoMed, and (iii) will not violate any
provision of the Articles of Incorporation or By-Laws of RhoMed.
(ii) No consent, authorization or order of, or
filing or registration with, any court or U.S. governmental authority or other
person is required to be obtained or made by RhoMed for the execution, delivery
and performance of this Agreement or any of the other Transaction Documents to
which it is a party, or the consummation of any of the transactions
contemplated hereby or thereby, except for (i) those consents or authorizations
previously obtained and those filings previously made, and (ii) any post-sale
filings required under applicable securities or blue sky laws.
(iii) RhoMed holds and is operating in
compliance with all licenses, permits, authorizations, approvals and
certificates from governmental authorities, including, without limitation, all
applicable approvals and authorizations of the Food and Drug Administration,
which are necessary to the conduct of its business as currently contemplated.
2.5 Litigation. Except as disclosed in Schedule 2.5, there is
no action, suit, proceeding or investigation pending or, to the best knowledge
of RhoMed, currently threatened against RhoMed which questions the validity of
this Agreement or any of the Transaction Documents or the right of RhoMed to
enter into it, or to consummate the transactions contemplated hereby or
thereby, or which might result, either individually or in the aggregate, in any
changes in the assets, condition, affairs or prospects of RhoMed which are
materially adverse to RhoMed taken as a whole, financially or otherwise, or any
change in the current equity ownership of RhoMed. The foregoing includes,
without limitation, actions pending or threatened involving the use in RhoMed's
business of any information or techniques allegedly proprietary to any of its
former employers or their obligations under any agreements with prior
employers. RhoMed is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality.
2.6 Patents and Trademarks. Schedule 2.6 hereto lists all
patents, trademarks, service marks, trade names, corporate names, and all
applications and registrations therefor,
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owned or licensed to or by RhoMed. Except as described in the Schedule of
Exceptions, RhoMed owns and possesses all right, title, and interest or holds a
valid license in and to all patents, copyrights, trademarks, service marks,
trade names, corporate names, and all applica tions and registrations therefor,
and to all mask works, licenses, inventions, trade secrets, know how and other
intellectual property rights necessary for the conduct of its business as
presently contemplated (collectively, the "Intellectual Property Rights").
RhoMed has taken all necessary action to protect all the Intellectual Property
Rights. Except as set forth in the Schedule of Exceptions, RhoMed has not
received any notice of, and there are not any facts known to RhoMed which
indicate the likelihood of, any infringement or misappropriation by any third
party of any of the Intellectual Property Rights; RhoMed has not received any
notice of, and there are not any facts known to RhoMed which indicate a
likelihood of, any claim by a third party contesting the validity of any of the
Intellectual Property Rights; RhoMed has not received any notice of any
infringement, misappropriation or violation by RhoMed or any of its employees
of any intellectual property rights of third parties, and, to the best of
RhoMed's knowledge, neither RhoMed nor any of its employees has infringed,
misappropriated or otherwise violated any intellectual property rights of any
third parties; and, to the best of RhoMed's knowledge, no infringement, illicit
copying, misappropriation or violation of any intellectual property rights of
any third party has occurred or will occur with respect to any products
currently being sold by RhoMed or with respect to any products currently under
development by RhoMed or with respect to the conduct of RhoMed's business as
currently contemplated. Except as described in the Schedule of Exceptions,
RhoMed is not aware that any of its employees are obligated under any contract
(including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his best efforts to
promote the interests of RhoMed or that would conflict with RhoMed's business
as proposed to be conducted. To the best of RhoMed's knowledge, neither the
execution nor delivery of this Agreement, nor the carrying on of RhoMed's
business by the employees of RhoMed, nor the conduct of RhoMed's business, as
proposed, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated.
2.7 Compliance with Other Instruments. Except as set forth in
Schedule 2.7 hereto, RhoMed is not in violation or default of any provisions of
its Restated Articles of Incorporation or Bylaws or of any instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound or, to its knowledge, of any provision of federal or state statute,
rule or regulation applicable to RhoMed. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or be in conflict
with or constitute, with or without the passage of time and giving of notice,
either a default under any such provision, instrument, judgment, order, writ,
decree or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of RhoMed.
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2.8 Agreements; Action. The performance of this Agreement and
the consummation of the transactions contemplated hereby will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under or conflict with, any inden ture, mortgage, deed of trust, voting
trust agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, material lease, contract or other agreement or
instrument to which RhoMed is a party or by which RhoMed or any of its property
is bound, or under the Restated Articles of Incorporation or By-Laws of RhoMed
or under any statute or under any order, rule or regulation applicable to
RhoMed or its business or property nor is the approval of any court or other
governmental agency or body required for the consummation by RhoMed of the
transactions on its part herein contemplated.
(i) Registration Rights. Except as provided in
Article IV below, or as disclosed in the Schedule 2.8 hereto, RhoMed has not
granted or agreed to grant any registration rights, including piggyback rights,
to any person or entity.
2.9 Corporate Documents. The By-Laws and Articles of
Incorporation of RhoMed are, in all material respects, in the form attached
hereto as Exhibits C and D respectively.
2.10 Title to Property and Assets. Except as disclosed in
Schedule 2.10 hereto, RhoMed owns its properties and assets free and clear of
all mortgages, liens, loans and encumbrances, except such encumbrances and
liens which arise in the ordinary course of business and do not materially
impair RhoMed's ownership or use of such properties or assets. With respect to
the properties and assets it leases, RhoMed is in compliance with such leases
and holds a valid leasehold interest free of any liens, claims or encumbrances.
2.11 Financial Statements. RhoMed has delivered to the
Subscriber its audited financial statements at August 31, 1994 for the fiscal
year ended on such date (attached hereto as Exhibit E), and its unaudited
financial statements at August 31, 1995 for the fiscal year ended on such date
(attached hereto as Exhibit F) (collectively, the "Financial Statements"). To
the best of RhoMed's knowledge the Financial Statements (i) are complete and
correct in all material respects and, to the best of RhoMed's knowledge, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated and with each
other and (ii) accurately set forth and describe in all material respects the
financial condition and operating results of RhoMed as of the dates, and for
the periods, indicated therein. To the best of RhoMed's knowledge, except as
set forth in the Financial Statements, this Agreement or the Schedule of
Exceptions, RhoMed has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to September
1, 1995 and (ii) obligations under contracts and commit ments incurred in the
ordinary course of business and not required under generally accepted
accounting principles to be reflected in the Financial Statements, which, in
both cases, indi vidually or in the aggregate, are not material to the
financial condition or operating results of
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RhoMed. RhoMed agrees that it will use reasonable efforts promptly to establish
and hereafter maintain a standard system of accounting established and
administered in accordance with generally accepted accounting principles.
2.12 Changes. Except as set forth in Schedule 2.12 hereto,
since September 1, 1995, to the best of RhoMed's knowledge there has not been:
(i) any change in the consolidated assets,
liabilities, financial condition or operating results of RhoMed from that
reflected in the Financial Statements, except changes in the ordinary course of
business which have not been, in the aggregate, materially adverse;
(ii) any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the assets,
properties, financial condition, operating results, prospects or business of
RhoMed (as such business is presently conducted and as it is proposed to be
conducted);
(iii) any waiver by RhoMed of a valuable right or
of a material debt owed to it;
(iv) any satisfaction or discharge of any lien,
claim or encumbrance or payment of any obligation by RhoMed, except in the
ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of RhoMed taken
as a whole (as such business is presently conducted and as it is proposed to be
conducted);
(v) any change or amendment to a contract or
arrangement by which RhoMed or any of its assets or properties is bound or
subject which is material to RhoMed taken as a whole;
(vi) any material change in any compensation
arrangement or agreement with any employee; or
(vii) any other event or condition of any
character which might materially and adversely affect the consolidated assets,
properties, financial condition, operating results or business of RhoMed (as
such business is presently conducted and as it is proposed to be conducted).
2.13 Tax Returns, Payments and Elections. RhoMed has filed
all tax returns and reports as required by law. These returns and reports are
true and correct in all material respects and RhoMed has paid all taxes and
other assessments due in accordance with such re-
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turns. The provision for taxes of RhoMed as shown in the Financial Statements
is adequate for taxes due or accrued as of the date thereof.
2.14 Minute Book. The minute book of RhoMed contains the
minutes of all meetings of directors and shareholders since the time of
RhoMed's incorporation and reflects all transactions referred to in such
minutes accurately in all material respects.
2.15 ERISA. Except as set forth in Schedule 2.15 hereto,
RhoMed does not have any "employee welfare benefit plans" or "employee pension
benefit plans" as defined in Section 3 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). RhoMed has made all required
contributions and has complied in all material respects with all laws
applicable to any of its employee benefit plans, including, without limitation,
ERISA. RhoMed does not participate in any single employer or multiemployer
pension plan subject to Title IV of ERISA. RhoMed does not provide any medical
or other welfare-type benefits to any retiree, except as required by law.
2.16 Investment Company Act; Other Regulations. RhoMed is
not, and immediately following the consummation of the transactions
contemplated hereby will not be, an "investment company", or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act. Except for the Securities Act, the Exchange Act and state
securities and "blue sky" laws, RhoMed is not subject to any federal or state
law or regulation limiting its ability to issue and perform its obligations
under or in connection with the issuance and sale of the Securities.
2.17 Environmental Matters. Except as set forth on Schedule
2.17 hereto, (a) the operations, properties, and facilities owned, leased, or
otherwise controlled by RhoMed (i) are, and to the best of RhoMed's knowledge
have been, in compliance with all Environmental Laws, (ii) are not contaminated
with any "Hazardous Material" (as defined below), (iii) are not now being and,
to the best of RhoMed's knowledge, were never used as a landfill, dump, or
other storage or disposal area for Hazardous Materials, (iv) are not now being
and, to the best of RhoMed's knowledge, were never used for military,
industrial or manufacturing purposes or as a gasoline service station, and (v)
do not contain any underground or aboveground storage tanks (whether or not
currently in use) and, to the best of RhoMed's knowledge, no such tank has been
removed therefrom; (b) the operations, properties and facilities presently or
previously owned, leased or otherwise controlled by RhoMed are not the subject
of any United States federal or state or Canadian federal or provincial
investigation, demand or proceeding, including, without limitation, any civil,
criminal and/or administrative proceeding, of which RhoMed has knowledge,
whether or not seeking costs, damages, expenses, penalties or injunctive
relief, in connection with the enforcement or any purported violation of any
Environmental Laws or evaluating whether any remedial action is required or
purported to be required pursuant to any Environmental Laws to respond to any
release or threatened release, whether intentional or unintentional, of any
Hazardous Material into the environment; (c)
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Hazardous Materials have not been generated, treated, manufactured, processed,
stored, transported or disposed of by RhoMed in violation of, or in a manner or
to a location which could reasonably be expected to give rise to liability
under, nor has RhoMed generated, treated, manufactured, processed, stored,
transported or disposed of at or under any of its presently or previously
owned, leased or controlled operations, properties or facilities any Hazardous
Material in violation of, or that could reasonably be expected to give rise to
liability under, any Environmental Law; (d) RhoMed has not received written
notice to the effect that it is or may be liable to any person (including,
without limitation, any individual or government, whether federal, state,
provincial, or local) in connection with, or as a result of, any release or
threatened release, whether intentional or unintentional, of any Hazardous
Material into the environment; and (e) RhoMed has not commissioned any reviews,
audits, reports or other analyses regarding the environmental condition of any
operation, property or facility presently or previously owned, leased or
otherwise controlled by RhoMed, nor has RhoMed received any documents or
correspondence from, nor has RhoMed sent any documents or correspondence to,
the United States Environmental Protection Agency, or any state, county or
local environmental or health agency concerning, the environmental condition of
any operation, property or facility presently or previously owned, leased or
otherwise controlled by RhoMed.
For purposes of this Paragraph 2.17: "Environmental Laws"
means any and all federal, state or local laws, statutes, codes, ordinances,
rules, regulations, policies, judgments, orders, decrees, permits, licenses, or
other governmental restrictions or requirements relating to pollution or
protection of public or employee health or safety or the environment,
including, but not limited to, CERCLA, SARA, RCRA, CWA, CAA, FIFRA, TSCA (each,
as defined below), and any comparable state, county or local Environmental Law.
"Hazardous Material" means (i) any hazardous substance, pollutant or
contaminant as now or hereafter defined in, or regulated under, CERCLA and its
implementing regulations, any toxic, carcinogenic, infectious, mutagenic,
radioactive, explosive or otherwise dangerous substance, hazardous or other
waste, hazardous constituent, petroleum and petroleum products, including crude
oil and any fraction thereof, asbestos, polychlorinated biphenyls,
urea-formaldehyde insulation, and any other chemical, material or substance now
or hereafter regulated under any Environmental Law and (ii) any substance, the
presence of which on or under the operations, properties, and facilities now
and, as appropriate, previously owned, leased, or otherwise controlled by
RhoMed threatens to cause a nuisance to, could constitute a trespass by RhoMed
upon, or poses a health or safety hazard to persons on or about, any adjacent
property or facility. "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986 ("SARA") 42 U.S.C. Sections 9601-9675; "RCRA"
means the Resource Conservation and Recovery Act of 1976 42 U.S.C. Sections
6901-6991; "CWA" means the Clean Water Act 33 U.S.C. Section 1321 et seq; "CAA"
means the Clean Air Act 42 U.S.C. Sections 7401 et seq; "FIFRA" means the
Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. Section 136 et seq;
"TSCA" means the Toxic Substances Control Act 15 U.S.C. Sections 2601-2671;
in each case, as amended from time to time and including any regulations now
or hereafter promulgated thereunder.
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2.18 Insurance. Schedule 2.18 sets forth a true, complete and
correct description of all insurance currently maintained by RhoMed. RhoMed has
paid all premiums due under such policies and RhoMed is not in default with
respect to its obligations under any of such policies. The amount and nature of
self-insurance reserves are adequate and reasonable in view of the loss
experience of RhoMed and the business in which RhoMed is engaged, the pending
claims against RhoMed, and the known threatened claims and the known
occurrences which have not given rise to a pending claim.
2.19 Labor Matters. RhoMed is not a party to any collective
bargaining or other labor agreement and has not violated any laws, regulations,
orders or contract terms affecting the collective bargaining rights of
employees, equal opportunity employment, or employees health, safety, welfare,
wages and hours. There are no labor disputes existing, or to the best knowledge
of RhoMed, threatened, involving strikes, slow-downs, work stoppages, job
actions or lockouts of any employees of RhoMed or any grievance under any
collective bargaining or other labor agreement involving employees of RhoMed;
(ii) there are no unfair labor practices or petitions for election pending
before the National Labor Relations Board of any other federal or state labor
commission relating to the employees of RhoMed; and (iii) no demand for
recognition heretofore made by any labor organization is pending with respect
to RhoMed. There are no pending retaliatory or wrongful discharge claims or
federal, state or local employment discrimination charges or administrative or
judicial complaints arising therefrom pending against RhoMed nor, to the
knowledge of RhoMed, are any such charges or complaints threatened against
RhoMed.
ARTICLE III. TERMS OF SUBSCRIPTION
3.1 The Units will be offered on a "best efforts" basis. The
minimum subscrip tion per Subscriber shall be 1 Unit at $100,000 per Unit,
subject to the Corporation's right to accept subscriptions for fractions
thereof. The maximum amount of the offering is $750,000. The Corporation and
the Placement Agent may, by mutual agreement, terminate the offering at any
time.
3.2 Subject to acceptance of this Agreement by the
Corporation, delivery of Units purchased pursuant to this Agreement shall be
made by the Corporation within 30 days of the payment of the purchase price
therefor by the Subscriber by personal or business check, wire transfer of
immediately available funds or money order made payable to "RhoMed
Incorporated". The Corporation reserves the right to reject any subscription
with or without cause. In the event that the Corporation does not accept a
subscription, the Corporation will return the Subscriber's funds immediately,
with any interest which the Corporation may have earned on those funds.
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<PAGE>
ARTICLE IV. REGISTRATION UNDER THE 1933 ACT
4.1 The Corporation agrees that if, at any time during the
period commencing one year after (x) the closing date of an initial public
offering of the Common Stock by the Corporation registered under the Securities
Act of 1933, as amended (the "Act") or (y) the first date on which the Common
Stock of the Corporation (or securities received in exchange for Common Stock
of the Corporation) trades on a national securities exchange or on the National
Association of Security Dealers, Inc. Automated Quotations System ("NASDAQ")
and ending on the date which is five years later (the "Registration Period"), a
Subscriber who holds Warrants, or shares of the Corporation's Common Stock
which were issued upon the exercise of Warrants and which have not previously
been registered under the Act or which are not freely transferable without
registration under the Act due to the lapse of time or otherwise ("Restricted
Shares"), shall request that the Corporation file a registration statement
under the Act covering Restricted Shares or shares of Common Stock issuable
upon the exercise of the Warrants, the Corporation will (i) promptly notify
each Subscriber who holds Restricted Shares or Warrants that such registration
statement will be filed and that Restricted Shares which are then held, and/or
may be acquired upon exercise of Warrants by the Subscriber, will be included
in such registration statement at the Subscriber's request, (ii) cause such
registration statement to cover all of such Common Stock which it has been so
requested to include, (iii) use its best efforts to cause such registration
statement to become effective as soon as practicable and (iv) take all other
action necessary under any Federal or state law or regulation of any
governmental authority to permit all such Common Stock which it has been so
requested to include in such registration statement to be sold or otherwise
disposed of, and will use its best efforts to maintain such compliance with
each such Federal and state law and regulation of any governmental authority
for the period necessary for such Subscribers to effect the proposed sale or
other disposition. The Corporation shall be required to effect a registration
or qualifica tion pursuant to this Paragraph 4.1 on one occasion only;
provided, however, in the event that the Corporation is eligible to utilize
Form S-3, the Corporation will be required to effect an unlimited number of
such S-3 registrations but no more than 2 per year.
4.2 The Corporation agrees that if, at any time and from time
to time during the Registration Period, the Board of Directors of the
Corporation shall authorize the filing of a registration statement under the
Act (other than the initial public offering of the Corporation's Common Stock
and otherwise than pursuant to Paragraph 4.1 hereof, or other than a
registration statement on Form S-8, S-4 or other form which does not include
substantially the same information as would be required in a form for the
general registration of securities) in connection with the proposed offer of
any of its securities by it or any of its stockholders, the Corporation will
(i) promptly notify each Subscriber who holds Warrants or Restricted Shares
that such registration statement will be filed and that the Restricted Shares
and/or Common Stock issuable upon the exercise of the Warrants which are then
held will be included in such registration statement at the Subscriber's
request, (ii) cause such registration statement to cover all of such Common
Stock which it has been so requested to include, (iii) use its best efforts
Page 13
<PAGE>
to cause such registration statement to become effective as soon as practicable
and (iv) take all other action necessary under any Federal or state law or
regulation of any governmental authority to permit all such Common Stock which
it has been so requested to include in such registration statement to be sold
or otherwise disposed of, and will use its best efforts to maintain such
compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for the Subscriber to effect
the proposed sale or other disposition; provided, however that the foregoing
"piggyback" registration right shall be subject to cutbacks in the sole
discretion of the underwriter for the Corporation.
4.3 Whenever the Corporation is required pursuant to the
provisions of this Article IV to include in a registration statement Restricted
Shares or shares Common Stock issuable upon exercise of the Warrants, the
Corporation shall (i) furnish each Subscriber who holds any Restricted Shares
and/or Warrants and each underwriter of such Common Stock with such copies of
the prospectus, including the preliminary prospectus, conforming to the Act
(and such other documents as each such Subscriber or each such underwriter may
reasonably request) in order to facilitate the sale or distribution of such
Common Stock, (ii) use its best efforts to register or qualify such Common
Stock under the blue sky laws (to the extent applicable) of such jurisdiction
or laws (to the extent applicable) of such jurisdiction or jurisdictions as the
Subscriber who holds any Restricted Shares and/or Warrants and each underwriter
of such Common Stock being sold by such Subscribers shall reasonably request
and (iii) take such other actions as may be reasonably necessary or advisable
to enable such Subscribers and such underwriters to consummate the sale or
distribution in such jurisdiction or jurisdictions in which such Subscribers
shall have reasonably requested that such Common Stock be sold.
4.4 The Corporation shall pay all expenses incurred in
connection with any registration statement or other action pursuant to the
provisions of this Article IV, other than underwriting discounts and applicable
transfer taxes relating to the Common Stock issued upon exercise of the
Warrants.
4.5 The Corporation will indemnify the holders of Common
Stock issued upon the exercise of Warrants which is included in each
registration statement referred to in Paragraphs 4.1 and 4.2, and the
underwriters of such Common Stock, substantially to the same extent as is
customary for indemnification and contribution provisions in favor of
underwriters and selling shareholders of similar offerings, and such
Subscribers will indemnify the Corporation (and the underwriters, if
applicable) with respect to information furnished by them in writing to the
Corporation for inclusion therein substantially to the same extent as the under
writers indemnify the Corporation.
4.6 If the Corporation shall at any time have completed a
public offering of shares of its Common Stock, it shall thereafter take such
steps as may be necessary to register its Common Stock, as the case may be,
under Section 12(g) of the Securities Exchange Act of
Page 14
<PAGE>
1934, as amended, to maintain such status, and to file with the Securities and
Exchange Commission all current reports and the information as may be necessary
to enable the Subscrib er to effect sales of the Subscriber's shares of Common
Stock in reliance upon Rule 144 promulgated under the Act.
4.7 If the Corporation files a registration statement with
the Securities and Exchange Commission in connection with a public offering of
the Corporation's securities, the Subscriber, by accepting this Agreement,
agrees, if so requested by the Corporation, that such Subscriber will not
directly or indirectly sell, make any short sale of, grant any option for the
purchase of, or otherwise dispose of any capital stock of the Corporation
during the 30-day period ending, and the 180-day period beginning (or any such
other period as is required by the underwriter of such offering) on the first
date of the effectiveness of such registration statement. Upon request, the
Subscriber will sign an agreement in reasonable form to such effect with the
underwriter of such an offering.
ARTICLE V. MISCELLANEOUS
5.1 Any notice or other communication given hereunder shall
be deemed sufficient if in writing and sent by registered or certified mail,
return receipt requested, or delivered by hand against written receipt
therefor, addressed to RhoMed Incorporated, 4261 Balloon Park Road NE,
Albuquerque, NM, 87109-5802, Attn: President, and to the Subscrib er at the
Subscriber's address indicated on the signature page of this Agreement. Notices
shall be deemed to have been given or delivered on the date of mailing, except
notices of change of address, which shall be deemed to have been given or
delivered when received.
5.2 This Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged, and this Agreement may
not be discharged except by performance in accordance with its terms or by a
writing signed by the party to be charged.
5.3 This Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
5.4 Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Units as herein provided; subject, however, to
the right hereby reserved to the Corporation to enter into the same agreements
with other subscribers and to add and/or delete other persons as subscribers.
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<PAGE>
5.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE
EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EX PRESSLY AGREE THAT ALL
THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
5.6 In order to discourage frivolous claims the parties agree
that unless a claimant in any proceeding arising out of this Agreement succeeds
in establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other parties
to the action), then the other party shall be entitled to recover from such
claimant all of its/their reasonable legal costs and expenses relating to such
proceeding and/or incurred in preparation therefor.
5.7 The holding of any provision of this Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Agreement, which shall remain in full force and
effect. If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, such provision shall be interpreted so as to remain
enforceable to the maximum extent permissible consistent with applicable law
and the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provisions shall be deemed dependent
upon any other covenant or provision unless so expressed herein.
5.8 It is agreed that a waiver by either party of a breach of
any provision of this Agreement shall not operate, or be construed, as a waiver
of any subsequent breach by that same party.
5.9 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
5.10 This Agreement may be executed in two or more
counterparts each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
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<PAGE>
ARTICLE VI. NOTICE TO, AND REPRESENTATIONS AND COVENANTS OF
UNITED STATES AND CERTAIN STATE RESIDENTS
6.1 FOR ALL UNITED STATES RESIDENTS:
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHER MORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTA TION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
6.2 FOR CALIFORNIA RESIDENTS ONLY:
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS OFFERING HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND
THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPTED FROM QUALIFICATION BY SECTION 25100, 25102 OR 25104
OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS OFFERING
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICA TIONS BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
6.3 FOR CONNECTICUT RESIDENTS ONLY:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE CONNECTICUT
UNIFORM SECURITIES ACT AND, THEREFORE, CANNOT BE RESOLD UNLESS REGISTERED UNDER
SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
Page 17
<PAGE>
THE UNDERSIGNED ACKNOWLEDGES THAT THE SECURITIES HAVE NOT BEEN REGISTERED UNDER
SECTION 36-485 OF THE CONNECTICUT UNIFORM SECURITIES ACT AND ARE OFFERED AND
SOLD PURSUANT TO AN EXEMPTION THEREFROM. THE SECURITIES CANNOT BE SOLD OR
TRANSFERRED UNLESS THEY ARE REGISTERED OR EXEMPT FROM REGISTRATION UNDER THE
CONNECTICUT UNIFORM SECURITIES ACT OR SOLD IN A TRANSACTION WHICH IS EXEMPT
UNDER SAID ACT.
6.4 FOR FLORIDA RESIDENTS ONLY:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE FLORIDA
SECURITIES ACT AND ARE BEING SOLD IN RELIANCE UPON AN EXEMPTION PROVIDED BY
SECTION 517.061 THEREOF. UNLESS THE SECURI TIES ARE REGISTERED, THEY MAY NOT BE
REOFFERED FOR SALE OR RESOLD IN THE STATE OF FLORIDA EXCEPT AS AN EXEMPT
SECURITY OR IN AN EXEMPT TRANSACTION UNDER SAID ACT.
6.5 FOR IOWA RESIDENTS ONLY:
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
6.6 FOR MASSACHUSETTS RESIDENTS ONLY:
WITH RESPECT TO ACCREDITED INVESTORS WHO ARE NATURAL PERSONS, THE INVESTMENT
MUST BE SUITABLE AND IS PRESUMED SUITABLE IF THE INVESTMENT DOES NOT EXCEED 25
PERCENT OF THE INVESTOR'S INDIVIDUAL NET WORTH OR NET WORTH COMBINED WITH
SPOUSE, EXCLUSIVE OF PRINCIPAL RESIDENCE AND FURNISHINGS.
6.7 FOR PENNSYLVANIA RESIDENTS ONLY:
EACH PENNSYLVANIA RESIDENT WHO PURCHASED THE SECURITIES REPRE SENTED BY THIS
CERTIFICATE HAS AGREED NOT TO SELL THESE SECURITIES FOR A PERIOD OF TWELVE (12)
MONTHS AFTER THE DATE OF PURCHASE.
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<PAGE>
PURSUANT TO SECTION 207 OF THE PENNSYLVANIA SECURITIES ACT OF 1972, EACH PERSON
WHO ACCEPTS THIS OFFER TO PURCHASE SECURITIES EXEMPT FROM REGISTRATION BY
SECTION 203 OF THE PENNSYLVANIA SECURITIES ACT OF 1972 DIRECTLY FROM THE
COMPANY OR ITS AFFILIATES WILL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE
WITHOUT INCURRING ANY LIABILITY TO THE SELLER, SELLING AGENTS OR ANY OTHER
PERSON, WITHIN TWO (2) BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE
SECURITIES BEING OFFERED. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY
SEND A LETTER OR TELEGRAM TO THE ISSUER AT THE ADDRESS SET FORTH IN THE TEXT OF
THE OFFERING LITERATURE, INDICATING HIS OR HER INTENTION TO WITHDRAW. SUCH
LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE
AFOREMENTIONED SECOND BUSINESS DAY. IT IS PRUDENT TO SEND SUCH LETTER BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND TO
EVIDENCE THE TIME WHEN IT WAS MAILED. IF THE REQUEST IS MADE ORALLY IN PERSON
OR BY TELEPHONE TO THE ISSUER AT THE NUMBER LISTED IN THE TEXT OF THE OFFERING
LITERATURE, A WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED SHOULD BE
REQUESTED.
Page 19
<PAGE>
ARTICLE VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE
The Subscriber represents and warrants that he, she or it
comes within one cate gory marked below, and that for any category marked, he
or she has truthfully set forth, where applicable, the factual basis or reason
the Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which the Corporation deems necessary in order to
verify the answers set forth below.
Category A The undersigned is an individual (not a
partnership, corporation, etc.) whose
individual net worth, or joint net worth
with his or her spouse, presently exceeds
$1,000,000.
Explanation. In calculating net
worth you may include equity in
personal property and real estate,
including your principal residence,
cash, short-term investments, stock
and securities. Equity in personal
property and real estate should be
based on the fair market value of
such property less debt secured by
such property.
Category B The undersigned is an individual (not a
partnership, corporation, etc.) who had an
income in excess of $200,000 in each of the
two most recent years, or joint income with
his or her spouse in excess of $300,000 in
each of those years (in each case includ
ing foreign income, tax exempt income and
full amount of capital gains and loses but
excluding any income of other family
members and any unrealized capital
appreciation) and has a reasonable
expectation of reaching the same income
level in the current year.
Category C The undersigned is a director or executive
officer of the Corpo ration which is
issuing and selling the Units.
Category D The undersigned is a bank; a savings and
loan association, insurance company,
registered investment company; registered
business development company; licensed
small business invest ment company
("SBIC"); or employee benefit plan within
the meaning of Title 1 of ERISA and (a) the
investment decision is made by a plan
fiduciary which is either a bank, savings
and loan association, insurance company or
registered investment advisor, or (b) the
plan has total assets in excess of
$5,000,000
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<PAGE>
or is a self directed plan with investment
decisions made solely by persons that are
accredited investors.
---------------------------
---------------------------
(describe entity)
Category E The undersigned is a private business
development company as defined in Section
202(a)(22) of the Investment Advisors Act
of 1940.
---------------------------
---------------------------
(describe entity)
Category F The undersigned is a corporation,
partnership, Massachusetts business trust,
or non-profit organization within the
meaning of Section 501(c)(3) of the
Internal Revenue Code, in each case not
formed for the specific purpose of
acquiring the Units and with total assets
in excess of $5,000,000.
---------------------------
---------------------------
(describe entity)
Category G The undersigned is a trust with total
assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the
Units, where the purchase is directed by a
"sophisticated per son" as defined in
Regulation 506(b)(2)(ii).
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<PAGE>
Category H The undersigned is an entity all the equity
owners of which are "accredited investors"
within one or more of the above catego
ries. If relying upon this Category alone,
each equity owner must complete a separate
copy of this Agreement.
---------------------------
---------------------------
(describe entity)
Category I The undersigned is not within any of the
categories above and is therefore not an
accredited investor.
The undersigned is informed of the significance to the
Corporation of the foregoing representations, and they are made with the
intention that the Corporation will rely on them.
Page 22
<PAGE>
ARTICLE VIII. MANNER IN WHICH TITLE TO BE HELD (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Corporation*
(g) Trust*
(h) Other
*If Units are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
----------------------------------------------------------
_____ Check here if Subscriber is a member of the
National Associa tion of Securities
Dealers, Inc. (the "NASD"), or owns any
stock or other interest in any member of
the NASD (other than interests acquired in
open market purchases), or has, for a
period of twelve months prior to the date
of this Agreement, been affiliated or
associated with any company, firm, or other
entity which is a member of the NASD.
---------------------------
---------------------------
(describe entity)
Page 23
<PAGE>
NUMBER OF UNITS________X $100,000 = ____________(THE "PURCHASE PRICE")
- ---------------------------------- ----------------------------------
Signature Signature [if purchasing jointly]
- ---------------------------------- ----------------------------------
Name Typed or Printed Name Typed or Printed
- ---------------------------------- ----------------------------------
Residence Address Residence Address
- ---------------------------------- ----------------------------------
City, State and Zip Code City, State and Zip Code
- ---------------------------------- ----------------------------------
Tax Identification or Tax Identification or
Social Security Number Social Security Number
Telephone No. Business_____________________
Telephone No. Home_________________________
Name in which Notes should be
issued:____________________________________
Dated: , 1995 Dated: , 1995
--------------------- ------------------------
This Unit Purchase Agreement is agreed to and accepted as of , 1995.
RHOMED INCORPORATED
By:_______________________________
Name:
Title:
Page 24
<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I,__________________, am the___________________________of
(the "Entity").
I certify that I am empowered and duly authorized by the
Entity to execute and carry out the terms of the Unit Purchase Agreement and to
purchase and hold the Units, and certify further that the Unit Purchase
Agreement has been duly and validly executed on behalf of the Entity and
constitutes a legal and binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this _____ day of
___________________, 1995.
-----------------------------------
(Signature)
Page 25
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH
TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
RHOMED INCORPORATED
Warrant for the Purchase of Shares of
Common Stock
No. Shares
FOR VALUE RECEIVED, RHOMED INCORPORATED, a New Mexico
corporation (the "COMPANY"), hereby certifies that [] or his permitted
assigns, is entitled to purchase from the Company, at any time or from time to
time commencing on [Insert Final Closing Date] and prior to 5:00 P.M., New
York City time, on ten years from [Insert Final Closing Date] (the
"TERMINATION DATE"), [Insert Number of Shares] ([]) fully paid and
non-assessable shares of the Common Stock, no par value, of the Company for an
aggregate purchase price of $[] (computed on the basis of $.30 per share).
(Hereinafter, (i) said Common Stock, together with any other equity securities
which may be issued by the Company with respect thereto or in substitution
therefor, is referred to as the "COMMON STOCK", (ii) the shares of the Common
Stock purchasable hereunder or under any other Warrant (as hereinafter
defined) are referred to as the "WARRANT SHARES", (iii) the aggregate purchase
price payable for the Warrant Shares hereunder is referred to as the
"AGGREGATE WARRANT PRICE", (iv) the price payable for each of the Warrant
Shares hereunder is referred to as the "PER SHARE WARRANT PRICE", (v) this
Warrant, all similar Warrants issued on the date hereof and all Warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "WARRANTS" and (vi) the holder of this Warrant
is referred to as the "HOLDER" and the holder of this
<PAGE>
Warrant and all other Warrants or Warrant Shares issued upon the exercise of
any Warrant are referred to as the "HOLDERS"). The Aggregate Warrant Price is
not subject to adjustment. The Per Share Warrant Price is subject to
adjustment as hereinafter provided; in the event of any such adjustment, the
number of Warrant Shares shall be adjusted by dividing the Aggregate Warrant
Price by the Per Share Warrant Price in effect immediately after such
adjustment.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised, in whole at any time or in part
from time to time, commencing on [Insert Final Closing Date] and prior to the
Termination Date, by the holder:
(i) by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address
set forth in Subsection 9(a) hereof, together with proper payment
of the Aggregate Warrant Price, or the proportionate part thereof
if this Warrant is exercised in part, with payment for Warrant
Shares made by certified or official bank check payable to the
order of the Company; or
(ii) by the surrender of this Warrant (with the cashless
exercise form at the end hereof duly executed) (a "CASHLESS
EXERCISE") at the address set forth in Subsection 9(a) hereof. Such
presentation and surrender shall be deemed a waiver of the Holder's
obligation to pay the Aggregate Warrant Price, or the proportionate
part thereof if this Warrant is exercised in part. In the event of
a Cashless Exercise, the Holder shall exchange its Warrant for that
number of Warrant Shares subject to such Cashless Exercise
multiplied by a fraction, the numerator of which shall be the
difference between the then current Market Price per share (as
hereinafter defined) of Common Stock and the Per Share Warrant
Price, and the denominator of which shall be the then current
Market Price per share of Common Stock. For purposes of any
computation under this Section 1(a)(ii), the then current market
price per share of the Common Stock at any date (the "MARKET
PRICE") shall be deemed to be the last sale price of the Common
Stock on the business day prior to the date of the Cashless
Exercise or, in case no such reported sales take place on such day,
the average of the last reported bid and asked prices of the Common
Stock on such day, in either case on the principal national
securities exchange on which the Common Stock is admitted to
trading or listed, or if not listed or admitted to trading on any
such exchange, the representative closing bid price of the Common
Stock as reported by NASDAQ, or other similar organization if
NASDAQ is no longer reporting such information, or on the OTC
Electronic Bulletin or in the "Pink Sheets," or if not so
available, the fair market price of the Common Stock as determined
in good faith by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock and the Holder is
entitled to receive a new Warrant covering the Warrant Shares which have not
been exercised and setting forth the proportionate part of the Aggregate
Warrant Price applicable to such Warrant Shares. Upon surrender of this
Warrant, the Company will (i) issue a certificate or certificates in the name
of the Holder for the largest number of whole shares of the Common Stock to
<PAGE>
which the Holder shall be entitled and, if this Warrant is exercised in whole,
in lieu of any fractional share of the Common Stock to which the Holder shall
be entitled, pay to the Holder cash in an amount equal to the fair value of
such fractional share (determined in such reasonable manner as the Board of
Directors of the Company shall determine), and (ii) deliver the other
securities and properties receivable upon the exercise of this Warrant, if
any, or the proportionate part thereof if this Warrant is exercised in part,
pursuant to the provisions of this Warrant.
2. RESERVATION OF WARRANT SHARES; LISTING. The Company agrees that,
prior to the expiration of this Warrant, the Company will at all times (a)
have authorized and in reserve, and will keep available, solely for issuance
or delivery upon the exercise of this Warrant, the shares of the Common Stock
and other securities and properties as from time to time shall be receivable
upon the exercise of this Warrant, free and clear of all restrictions on sale
or transfer and free and clear of all preemptive rights and rights of first
refusal; and (b) if the Company hereafter lists its Common Stock on any
national securities exchange, keep the shares of Common Stock receivable upon
exercise of this Warrant authorized for listing on such exchange upon notice
of issuance.
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the date of this
Warrant, the Company shall issue or distribute to the holders of shares of
Common Stock evidence of its indebtedness, any other securities of the Company
or any cash, property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common
Stock, referred to in Subsection 3(b), and also excluding cash dividends or
cash distributions paid out of net profits legally available therefor in the
full amount thereof, together with the value of other dividends and
distributions made substantially concurrently therewith or pursuant to a plan
which includes payment thereof, is equivalent to not more than 5% of the
Company's net worth) (any such non-excluded event being herein called a
"SPECIAL DIVIDEND"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price of the Common Stock
less the fair market value (as determined in good faith by the Company's Board
of Directors) of the evidence of indebtedness, cash, securities or property,
or other assets issued or distributed in such Special Dividend applicable to
one share of Common Stock and the denominator of which shall be the then
current Market Price of the Common Stock. An adjustment made pursuant to this
Subsection 3(a) shall become effective immediately after the record date of
any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make
a distribution on its capital stock in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted to be
equal to a fraction, the numerator of which shall be the Aggregate Warrant
Price and the denominator of which shall be the number of shares of Common
Stock or other capital stock of the Company which he would have owned
immediately following such action had such Warrant been exercised immediately
prior thereto. An adjustment made pursuant to this Subsection 3(b) shall
become effective immediately after the record date in the case of a dividend
or distribution and shall become
<PAGE>
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(c) Except as provided in Subsections 3(a) and 3(d), in case the
Company shall hereafter issue or sell any Common Stock, any securities
convertible into Common Stock or any rights, options or Warrants to purchase
Common Stock or securities convertible into Common Stock, in each case for a
price per share or entitling the holders thereof to purchase Common Stock at a
price per share (determined by dividing (i) the total amount, if any, received
or receivable by the Company in consideration of the issuance or sale of such
securities plus the total consideration, if any, payable to the Company upon
exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number
of additional shares of Common Stock issuable upon exercise or conversion of
such securities) less than the then current Per Share Warrant Price in effect
on the date of such issuance or sale, the Per Share Warrant Price shall be
adjusted as of the date of such issuance or sale so that the same shall equal
the price determined by dividing (i) the sum of (A) the number of shares of
Common Stock outstanding on the date of such issuance or sale multiplied by
the Per Share Warrant Price plus (B) the Total Consideration by (ii) the
number of shares of Common Stock outstanding on the date of such issuance or
sale plus the maximum number of additional shares of Common Stock issuable
upon exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price shall be required
in the case of the issuance by the Company of Common Stock pursuant to the
exercise of any Warrant.
(e) In case of any capital reorganization or reclassification, or
any consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing corporation, or
in case of any sale or conveyance to another entity of the property of the
Company as an entirety or substantially as an entirety, or in the case of any
statutory exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third corporation into the
Company), the Holder of this Warrant shall have the right thereafter to
receive on the exercise of this Warrant the kind and amount of securities,
cash or other property which the Holder would have owned or have been entitled
to receive immediately after such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance had this Warrant
been exercised immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or
conveyance and in any such case, if necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Section 3 with
respect to the rights and interests thereafter of the Holder of this Warrant
to the end that the provisions set forth in this Section 3 shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in
relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
Subsection 3(e) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The issuer of any shares of stock or other securities or property
thereafter deliverable on the exercise of this Warrant shall be responsible
for all of the agreements and obligations of the Company hereunder. Notice of
any such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holders of the Warrants not less than 30 days
<PAGE>
prior to such event. A sale of all or substantially all of the assets of the
Company for a consideration consisting primarily of securities shall be deemed
a consolidation or merger for the foregoing purposes.
(f) In case any event shall occur as to which the other provisions
of this Section 3 are not strictly applicable but as to which the failure to
make any adjustment would not fairly protect the purchase rights represented
by this Warrant in accordance with the essential intent and principles hereof
then, in each such case, the Holders of Warrants representing the right to
purchase a majority of the Warrant Shares subject to all outstanding Warrants
may appoint a firm of independent public accountants of recognized national
standing reasonably acceptable to the Company, which shall give their opinion
as to the adjustment, if any, on a basis consistent with the essential intent
and principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent
public accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments which by
reason of this Subsection 3(g) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided,
further, however, that adjustments shall be required and made in accordance
with the provisions of this Section 3 (other than this Subsection 3(g)) not
later than such time as may be required in order to preserve the tax-free
nature of a distribution to the Holder of this Warrant or Common Stock
issuable upon the exercise hereof. All calculations under this Section 3 shall
be made to the nearest cent or to the nearest 1/100th of a share, as the case
may be. Anything in this Section 3 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Per Share Warrant
Price, in addition to those required by this Section 3, as it in its
discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or
securities convertible or exchangeable for stock hereafter made by the Company
to its stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Warrants
in accordance with this Section 3, the Company shall promptly obtain, at its
expense, a certificate of a firm of independent public accountants of
recognized standing selected by the Board of Directors (who may be the regular
auditors of the Company) setting forth the Per Share Warrant Price and the
number of Warrant Shares after such adjustment or the effect of such
modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
(i) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock other than a
cash distribution out of earned surplus, the Company shall mail notice thereof
to the Holders of the Warrants not less than 15 days prior to the record date
fixed for determining stockholders entitled to participate in such dividend or
other distribution.
<PAGE>
(j) If, as a result of an adjustment made pursuant to this Section
3, the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares
of Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall
determine the allocation of the adjusted Per Share Warrant Price between or
among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of
the Common Stock represented by each and every certificate of Warrant Shares
delivered on the exercise of this Warrant be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights or rights
of first refusal, and the Company will take all such actions as may be
necessary to assure that the par value or stated value, if any, per share of
the Common Stock is at all times equal to or less than the then Per Share
Warrant Price. The Company further covenants and agrees that it will pay, when
due and payable, any and all Federal and state stamp, original issue or
similar taxes which may be payable in respect of the issue of any Warrant
Share or any certificate thereof.
5. REGISTRATION UNDER SECURITIES ACT OF 1933. The Holder of this
Warrant shall have the same registration rights as provided in Section 4 of
the Purchase Agreement which is defined in the Placement Agency Agreement
dated March 5,1996 between the Company and Paramount Capital, Inc.
6. LIMITED TRANSFERABILITY. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder (a) except in compliance
with the provisions of the Act and the applicable state securities "blue sky"
laws, and is so transferable only upon the books of the Company which it shall
cause to be maintained for such purpose. The Company may treat the registered
Holder of this Warrant as he or it appears on the Company's books at any time
as the Holder for all purposes. The Company shall permit any Holder of a
Warrant or his duly authorized attorney, upon written request during ordinary
business hours, to inspect and copy or make extracts from its books showing
the registered holders of Warrants. All Warrants issued upon the transfer or
assignment of this Warrant will be dated the same date as this Warrant, and
all rights of the holder thereof shall be identical to those of the Holder.
7. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like
date, tenor and denomination.
8. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided
herein, this Warrant does not confer upon the Holder any right to vote or to
consent to or receive notice as a stockholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
stockholder, prior to the exercise hereof.
<PAGE>
9. COMMUNICATION. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 4261 Balloon Park Road NE,
Albuquerque, New Mexico 87109-5802 or other address as the Company
has designated in writing to the Holder, or
(b) the Holder at 375 Park Avenue, Suite 1501, New York,
New York 10152 or other such address as the Holder has designated
in writing to the Company.
10. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
11. APPLICABLE LAW. This Warrant shall be governed by and construed
in accordance with the law of the State of New York without giving effect to
the principles of conflicts of law thereof.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
to be signed by its President and its corporate seal to be hereunto affixed
and attested by its Secretary this ___ day of __________, 1996.
RHOMED INCORPORATED
By: ___________________________
President
ATTEST:
___________________
Secretary
[Corporate Seal]
<PAGE>
SUBSCRIPTION
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and
purchase ____________________ shares of the Common Stock, no par value, of
RhoMed Incorporated, covered by said Warrant, and makes payment therefor in
full at the price per share provided by said Warrant.
Dated:_______________ Signature:____________________
Address:______________________
CASHLESS EXERCISE
The undersigned ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exchange its Warrant for
___________________ shares of Common Stock, no par value, of RhoMed
Incorporated pursuant to the Cashless Exercise provisions of the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns
and transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
RhoMed Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of
the Common Stock, no par value per share, of RhoMed Incorporated covered by
the foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of RhoMed Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
<PAGE>
EXHIBIT B
WARRANT RECEIPT
[Address of Warrant Holder]
Dear Sirs:
Pursuant to Section 2(d) of the Placement Agency
Agreement dated March 5, 1996, between RhoMed Incorporated and Paramount
Capital, Inc., we are delivering herewith a warrant in your name to purchase
Warrants of the Company.
We hereby acknowledge receipt of $ _________
representing payment in full for the warrant, in an amount equal to $.001 per
share of the Common Stock of the Company.
Very truly yours,
RHOMED INCORPORATED
By__________________________
Name:
Title:
I hereby acknowledge receipt of
a warrant to purchase [] shares
of Common Stock.
_______________________________
[ ]
<PAGE>
EXHIBIT C
ORDER TO ISSUE PLACEMENT AGENT'S WARRANTS
RhoMed Incorporated
4261 Balloon Park Road NE
Albuquerque, NM 87109-5802
Dear Sirs:
Pursuant to Section 2(d) of the Placement Agency
Agreement dated March 5, 1996, between RhoMed Incorporated and Paramount
Capital, Inc., we hereby request that you issue warrants to purchase shares
of Common Stock, in an amount equal to $.001 per share, in the names and
denominations as set forth below:
Name Denominations
Very truly yours,
PARAMOUNT CAPITAL, INC.
By______________________________
Name: Wayne Rubin
Title: Chief Financial Officer
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT (this "Agreement") made as
of the last date set forth on the signature page hereof between RhoMed
Incorporated, a New Mexico corporation with its principal offices at 4261
Balloon Park Road NE, Albuquerque, New Mexico 87109 ("RhoMed" or the
"Company") and the undersigned (the "Subscriber").
W I T N E S S E T H:
WHEREAS, the Company desires to issue an aggregate of up
to a maximum $4,000,000 of Common Stock in a private placement offering (the
"Offering") in Units (the "Units"), each Unit consisting of 400,000 shares of
Common Stock, no par value, of the Company (the "Common Stock"), at a purchase
price of $.25 per share, and the Subscriber desires to purchase that number of
Units set forth on the signature page hereof on the terms and conditions
hereinafter set forth (the shares of Common Stock being sometimes referred to
herein as the "Securities" or "Shares"). The terms of the Offering are
contained in the Confidential Term Sheet as herein defined.
NOW, THEREFORE, in consideration of the premises and the
mutual representations and covenants hereinafter set forth, the parties hereto
do hereby agree as follows:
ARTICLE I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY THE SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company such
number of Units or fractions thereof as is set forth upon the signature page
hereof at a price equivalent to $100,000 per Unit and the Company agrees to
sell such Units to the Subscriber for said purchase price. The purchase price
for the Units is payable by personal or business check, wire transfer of
immediately available funds or money order made payable to "RhoMed
Incorporated" contem poraneously with the execution and delivery of this
Agreement by the Subscriber. The Units will be delivered by the Company in
accordance with the terms set forth in Article III hereof.
1.2 The Subscriber recognizes that the purchase of Units involves a
high degree of risk in that (i) the Company remains a development stage
business with limited oper ating history and requires substantial funds in
addition to the proceeds of the Offering; (ii) an investment in the Company is
highly speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Company; (iii) the Subscriber may
not be able to liquidate his investment; (iv) transferability of the Securities
is extremely limit ed; and (v) in the event of a disposition, the Subscriber
could sustain the loss of his entire investment.
<PAGE>
1.3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"), as indicated by his
responses to the questions contained in Article VII hereof, and that the
Subscriber is able to bear the economic risk of an investment in the Units.
1.4 The Subscriber hereby acknowledges and represents that (i) the
Subscriber has prior investment experience, including investment in non-listed
and unregis tered securities, or the Subscriber has employed the services of an
investment advisor, attorney and/or accountant to read all of the documents
furnished or made available by the Company both to the Subscriber and to all
other prospective investors in the Units and to evaluate the merits and risks
of such an investment on the Subscriber's behalf; (ii) the Subscriber recog
nizes the highly speculative nature of this investment; and (iii) the
Subscriber is able to bear the economic risk which th e Subscriber hereby
assumes.
1.5 The Subscriber hereby acknowledges receipt and careful review of
(a) the Confidential Term Sheet dated March 6, 1996, as supplemented and
amended, and the attachments and exhibits thereto, all of which constitute an
integral part thereof (the "Term Sheet") and (b) this Agreement and all
attachments to it, including the Schedule of Exceptions; and hereby represents
that the Subscriber has been furnished by the Company during the course of this
transaction with all information regarding the Company which the Subscriber has
requested or desired to know, has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the terms and conditions of the
Offering and has received any additional infor mation which the Subscriber has
requested.
1.6 (a) The Subscriber has relied solely upon the information
provided by the Company in the Term Sheet in making the decision to invest in
the Units. To the extent necessary, the Subscriber has retained, at the expense
of the Subscriber, and relied upon appropriate professional advice regarding
the investment, tax and legal merits and conse quences of this Agreement and
its purchase of the Units hereunder. The Subscriber acknowledges and agrees
that Paramount Capital, Inc. (the "Placement Agent") has not supplied any
information for inclusion in the Term Sheet other than information furnished in
writing to the Company by the Placement Agent specifically for inclusion in the
Term Sheet relating to the Placement Agent, that the Placement Agent has no
responsibility for the accuracy or completeness of the Term Sheet and that the
Subscriber has not relied upon the independent investigation or verification,
if any, which may have been undertaken by the Placement Agent.
(b) The Subscriber covenants that (i) the Subscriber was
contacted regarding the sale of the Units by the Placement Agent (or an
authorized agent or representa tive thereof) with whom the Subscriber had a
prior substantial pre-existing relationship and (ii)
Page 2
<PAGE>
no Units were offered or sold to it by means of any form of general
solicitation or general advertising, and in connection therewith the Subscriber
did not: (A) receive or review any advertisement, article, notice or other
communication published in a newspaper or magazine or similar media or
broadcast over television or radio whether closed circuit, or generally
available; or (B) attend any seminar meeting or industry investor conference
whose attendees were invited by any general solicitation or general
advertising.
1.7 The Subscriber hereby represents that the Subscriber either by
reason of the Subscriber's business or financial experience or the business or
financial experience of the Subscriber's professional advisors (who are
unaffiliated with and who are not compensated by the Company or any affiliate
or selling agent of the Company, including the Placement Agent, directly or
indirectly) has the capacity to protect the Subscriber's own interests in
connection with the transaction contemplated hereby.
1.8 The Subscriber hereby acknowledges that the offering of Units
have not been reviewed by the United States Securities and Exchange Commission
(the "Commission") or any state regulatory authority, since the Offering is
intended to be exempt from the registra tion requirements of Section 5 of the
Act pursuant to Regulation D promulgated under the Act. The Subscriber agrees
that Subscriber will not sell or otherwise transfer the Securities unless they
are registered under the Act or unless an exemption from such registration is
available and until such Subscriber complies with the transfer restrictions set
forth in Paragraph 1.10 hereof.
1.9 The Subscriber understands that none of the Securities have been
registered under the Act or any state securities or "blue sky" laws and are
being sold in reliance on exemptions from the registration requirements of such
Act and such laws and agrees that the Securities will not be resold or
transferred except as permitted under such Act and such laws pursuant to
registration or exemption therefrom. The Subscriber hereby represents that
Subscriber is purchasing the Units for Subscriber's own account for investment
and not with a view toward the resale or distribution of the Units.
1.10 The Subscriber understands that there is no market for the
Units or any of the Securities comprising the Units and that no market may
develop for the Units or any of the Securities comprising the Units. The
Subscriber understands that even if a public market develops for the Units or
any of the Securities comprising the Units, Rule 144 ("Rule 144") promulgated
under the Act requires, among other conditions, a two-year holding period prior
to the resale (in limited amounts) of securities acquired in a non-public
offering without having to satisfy the registration requirements under the Act.
The Subscriber understands that the Company is not obligated to comply with any
reporting requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and that the Company makes no representation or warranty
that it will disseminate to the public any current financial or other
information concerning the Company, as is required by Rule 144 as one of the
conditions of its availability. The Subscriber understands and hereby
acknowledges that the Company is under no obligation to register any of the
Units or any of the Securities comprising the Units
Page 3
<PAGE>
under the Act or any state securities or "blue sky" laws other than as set
forth in Article IV. The Subscriber agrees to hold the Company and its
directors, officers, agents (including the Placement Agent), shareholders and
controlling persons and their respective heirs, represen tatives, successors
and assigns harmless and to indemnify them against all liabilities, costs and
expenses (including reasonable legal fees) incurred by them as a result of or
arising out of (i) any misrepresentation made by such Subscriber contained
herein or in the Confidential Investor Questionnaire contained in Article VII
hereof, (ii) any sale or distribution by the undersigned Subscriber in
violation of the Act or any applicable state securities or "blue sky" laws or
(iii) any untrue statement or alleged untrue statement of a material fact made
by the Subscriber and contained herein.
1.11 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities that such Securities
have not been registered under the Act or any state securities or "blue sky"
laws and setting forth or referring to the restrictions on transferability and
sale thereof contained in this Agreement. The Subscriber is aware that the
Company will make a notation in its appropriate records with respect to the
restrictions on the transferability of such Securities.
1.12 The Subscriber understands that the Company will review this
Agreement and is hereby given authority by the Subscriber to call Subscriber's
bank or place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company reserves the unrestricted
right, without further documentation or agreement on the part of the
Subscriber, to reject or limit any subscription, to accept subscriptions for
fractional Units and to close the Offering to the Subscriber at any time.
1.13 The Subscriber hereby represents that the address of the
Subscriber furnished by Subscriber on the signature page hereof is the
Subscriber's principal residence if Subscriber is an individual or its
principal business address if it is a corporation or other entity.
1.14 Subscriber represents that he or it has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Units and the Securities. This Agreement
constitutes the legal, valid and binding obligation of subscriber, enforceable
against Subscriber in accordance with its terms.
1.15 If the subscriber is a Company, company, trust, employee
benefit plan, individual retirement account, Keogh Plan, or other tax-exempt
entity, it is authorized and qualified to become an investor in the Company and
the person signing this Agreement on behalf of such entity has been duly
authorized by such entity to do so.
1.16 The Subscriber acknowledges that if he is a Registered
Representative of an NASD member firm, he must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm in Section 7.4 below.
Page 4
<PAGE>
1.17 The Subscriber acknowledges that at such time, if ever, as the
Shares are registered, sales of the Shares will be subject to state securities
laws, including those of the State of New Jersey which requires any securities
sold in New Jersey to be sold through a registered broker-dealer or in reliance
upon an exemption from registration.
ARTICLE II. REPRESENTATIONS BY AND COVENANTS OF RHOMED.
RhoMed hereby represents and warrants to each Subscriber that, as of
the acceptance date set forth on the signature page hereof, unless otherwise
set forth on the "Schedule of Exceptions" attached hereto which specifically
identifies the relevant subparagraph hereof, which exceptions shall be deemed
to be representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. RhoMed is a
Company duly organized, validly existing and in good standing under the laws of
the State of New Mexico and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. RhoMed
is duly qualified to transact business and is in good standing in New Mexico
and all other jurisdictions in which the failure so to qualify would have a
material adverse effect on its business or properties.
2.2 Capitalization and Voting Rights. The authorized Capital Stock
of RhoMed consists of 40,000,000 shares of common stock, no par value (the
"Common Stock"), of which 6,928,069 were outstanding as of January 31, 1996,
and 10,000,000 shares of preferred stock, no par value, of which 4,000,000 (the
"Series A Preferred Stock") were outstanding as of January 31, 1996. The Series
A Preferred Stock is convertible to a maximum of 10,132,859 shares of Common
Stock. There were 27,837,988 shares of Common Stock issued or issuable as of
January 31, 1996, including shares issuable upon the exercise or conversion of
all outstanding options, including options not yet vested, warrants,
convertible notes, the Series A Preferred Stock and other securities
convertible into Common Stock. In addition, and as set forth in the Schedule of
Exceptions, there were, as of January 31, 1996, obligations to issue additional
shares of stock for which the actual number of shares can not be determined. A
sufficient number of shares of Common Stock will, within sixty days of the date
hereof, be reserved for issuance (i) upon conversion of the Series A Preferred
Stock and (ii) upon the exercise of all outstanding options, warrants and other
rights to purchase or subscribe for any shares of Common Stock. The holder of
3,548,681 shares of Series A Preferred Stock, convertible into a maximum of
8,989,571 shares of Common Stock, has agreed to not exercise any right to
convert until such time as the authorized Capital Stock has been increased to
at least 60,000,000 shares of Common Stock. All of the outstanding shares of
Capital Stock of the Company have been duly and validly authorized and issued,
and are fully paid and nonassessable. The shares of Common Stock have been duly
and validly authorized and, when issued, will be validly issued, fully paid and
nonassessable. Except as set forth in Schedule 2.2 and as otherwise required by
law, there are no restrictions upon the voting or transfer of any shares of the
Company's Capital Stock pursuant to the Company's Articles of Incorporation,
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Bylaws or other governing documents or any agreement or other instruments to
which the Company is a party or by which the Company is bound.
2.3 Authorization; Enforceability. RhoMed has the corporate power to
execute, deliver and perform the terms and provisions of each of the Unit
Purchase Agreements (together, the "Transaction Documents") to which it is a
party, and has taken prior to the date hereof all necessary corporate action to
authorize the execution, delivery and performance by it of each of the
Transaction Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. No other corporate proceedings on the part of
RhoMed are necessary for the issuance of the Common Stock. RhoMed has duly
executed and delivered this Agreement and each of the Transaction Documents to
which it is a party. This Agreement constitutes, and each of the other
Transaction Documents, when executed and delivered by RhoMed, assuming due
execution by the other parties hereto and thereto, will constitute the legal,
valid and binding obligations of RhoMed enforceable against RhoMed in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
2.4 Governmental Consents.
(i) The execution, delivery and performance by RhoMed of
this Agreement and the other Transaction Documents to which it is a party and
the consummation of the transactions contemplated hereby and thereby (i) does
not and will not contravene the applicable provisions of any law, statute,
rule, regulation, order, writ, injunction, judgment or decree of any court or
governmental authority to or by which RhoMed is bound, (ii) will not violate,
result in a breach of or constitute (with due notice or lapse of time or both)
a default under any contract, lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which RhoMed is
a party or by which it is bound or to which any of its properties or assets is
subject, nor result in the creation or imposition of any lien upon any of the
properties or assets of RhoMed, and (iii) will not violate any provision of the
Articles of Incorporation or Bylaws of RhoMed.
(ii) No consent, authorization or order of, or filing or
registration with, any court or U.S. governmental authority or other person is
required to be obtained or made by RhoMed for the execution, delivery and
performance of this Agreement or any of the other Transaction Documents to
which it is a party, or the consummation of any of the transactions
contemplated hereby or thereby, except for (i) those consents or authorizations
previously obtained and those filings previously made, and (ii) any post-sale
filings required under applicable securities or blue sky laws.
(iii) RhoMed holds and is operating in compliance with all
licenses, permits, authorizations, approvals and certificates from governmental
authorities, including,
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without limitation, all applicable approvals and authorizations of the Food and
Drug Administration, which are necessary to the conduct of its business as
currently contemplated.
2.5 Litigation. Except as disclosed in Schedule 2.5, there is no
action, suit, proceeding or investigation pending or, to the best knowledge of
RhoMed, currently threatened against RhoMed which questions the validity of
this Agreement or any of the Transaction Documents or the right of RhoMed to
enter into it, or to consummate the transactions contemplated hereby or
thereby, or which might result, either individually or in the aggregate, in any
changes in the assets, condition, affairs or prospects of RhoMed which are
materially adverse to RhoMed taken as a whole, financially or otherwise, or any
change in the current equity ownership of RhoMed. The foregoing includes,
without limitation, actions pending or threatened involving the use in RhoMed's
business of any information or techniques allegedly proprietary to any of its
former employers or their obligations under any agreements with prior
employers. RhoMed is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality.
2.6 Patents and Trademarks. Schedule 2.6 hereto lists all patents,
trademarks, service marks, trade names, corporate names, and all applications
and registrations therefor, owned or licensed to or by RhoMed. Except as
described in the Schedule of Exceptions, RhoMed owns and possesses all right,
title, and interest or holds a valid license in and to all patents, copyrights,
trademarks, service marks, trade names, corporate names, and all applica tions
and registrations therefor, and to all mask works, licenses, inventions, trade
secrets, know how and other intellectual property rights necessary for the
conduct of its business as presently contemplated (collectively, the
"Intellectual Property Rights"). RhoMed has taken all necessary action to
protect all the Intellectual Property Rights. Except as set forth in the
Schedule of Exceptions, RhoMed has not received any notice of, and there are
not any facts known to RhoMed which indicate the likelihood of, any
infringement or misappropriation by any third party of any of the Intellectual
Property Rights; RhoMed has not received any notice of, and there are not any
facts known to RhoMed which indicate a likelihood of, any claim by a third
party contesting the validity of any of the Intellectual Property Rights;
RhoMed has not received any notice of any infringement, misappropriation or
violation by RhoMed or any of its employees of any intellectual property rights
of third parties, and, to the best of RhoMed's knowledge, neither RhoMed nor
any of its employees has infringed, misappropriated or otherwise violated any
intellectual property rights of any third parties; and, to the best of RhoMed's
knowledge, no infringement, illicit copying, misappropriation or violation of
any intellectual property rights of any third party has occurred or will occur
with respect to any products currently being sold by RhoMed or with respect to
any products currently under development by RhoMed or with respect to the
conduct of RhoMed's business as currently contemplated. Except as described in
the Schedule of Exceptions, RhoMed is not aware that any of its employees are
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of RhoMed or that would conflict with
RhoMed's business as proposed
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to be conducted. To the best of RhoMed's knowledge, neither the execution nor
delivery of this Agreement, nor the carrying on of RhoMed's business by the
employees of RhoMed, nor the conduct of RhoMed's business, as proposed, will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees is now obligated.
2.7 Compliance with Other Instruments. Except as set forth in
Schedule 2.7 hereto, RhoMed is not in violation or default of any provisions of
its Restated Articles of Incorporation or Bylaws or of any instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound or, to its knowledge, of any provision of federal or state statute,
rule or regulation applicable to RhoMed. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or be in conflict
with or constitute, with or without the passage of time and giving of notice,
either a default under any such provision, instrument, judgment, order, writ,
decree or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of RhoMed.
2.8 Agreements; Action. The performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under or conflict with, any inden ture, mortgage, deed of trust, voting
trust agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, material lease, contract or other agreement or
instrument to which RhoMed is a party or by which RhoMed or any of its property
is bound, or under the Restated Articles of Incorporation or Bylaws of RhoMed
or under any statute or under any order, rule or regulation applicable to
RhoMed or its business or property nor is the approval of any court or other
governmental agency or body required for the consummation by RhoMed of the
transactions on its part herein contemplated.
2.9 Registration Rights. Except as provided in Article IV below, or
as disclosed in Schedule 2.9 hereto, RhoMed has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
2.10 Corporate Documents. The Bylaws and Articles of Incorporation
of RhoMed are, in all material respects, in the form attached to the Term Sheet
as Exhibit A and Exhibit B respectively.
2.11 Title to Property and Assets. Except as disclosed in Schedule
2.11 hereto, RhoMed owns its properties and assets free and clear of all
mortgages, liens, loans and encumbrances, except such encumbrances and liens
which arise in the ordinary course of business and do not materially impair
RhoMed's ownership or use of such properties or assets. With respect to the
properties and assets it leases, RhoMed is in compliance with such leases and
holds a valid leasehold interest free of any liens, claims or encumbrances.
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2.12 Financial Statements. RhoMed has delivered to the Subscriber
its audited financial statements at August 31, 1995 for the fiscal year ended
on such date (attached to the Term Sheet as Exhibit C) and its unaudited
financial statements for the period ended January 31, 1996 (attached to the
Term Sheet as Exhibit D) (collectively, the "Financial Statements"). To the
best of RhoMed's knowledge the Financial Statements (i) are complete and
correct in all material respects and, to the best of RhoMed's knowledge, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated and with each
other and (ii) accurately set forth and describe in all material respects the
financial condition and operating results of RhoMed as of the dates, and for
the periods, indicated therein. To the best of RhoMed's knowledge, except as
set forth in the Financial Statements, this Agreement or the Schedule of
Exceptions, RhoMed has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to September
1, 1995 and (ii) obligations under contracts and commit ments incurred in the
ordinary course of business and not required under generally accepted
accounting principles to be reflected in the Financial Statements, which, in
both cases, indi vidually or in the aggregate, are not material to the
financial condition or operating results of RhoMed. RhoMed agrees that it will
use reasonable efforts to hereafter maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.13 Changes. Except as set forth in Schedule 2.13 hereto, since
September 1, 1995, to the best of RhoMed's knowledge there has not been:
(i) any change in the consolidated assets, liabilities,
financial condition or operating results of RhoMed from that reflected in the
Financial Statements, except changes in the ordinary course of business which
have not been, in the aggregate, materially adverse;
(ii) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets,
properties, financial condition, operating results, prospects or business of
RhoMed (as such business is presently conducted and as it is proposed to be
conducted);
(iii) any waiver by RhoMed of a valuable right or of a
material debt owed to it;
(iv) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by RhoMed, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of RhoMed taken as a whole
(as such business is presently conducted and as it is proposed to be
conducted);
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(v) any change or amendment to a contract or arrangement by
which RhoMed or any of its assets or properties is bound or subject which is
material to RhoMed taken as a whole;
(vi) any material change in any compensation arrangement or
agreement with any employee; or
(vii) any other event or condition of any character which
might materially and adversely affect the consolidated assets, properties,
financial condition, operating results or business of RhoMed (as such business
is presently conducted and as it is proposed to be conducted).
2.14 Tax Returns, Payments and Elections. Except as set forth in
Schedule 2.14 hereto, RhoMed has filed all tax returns and reports as required
by law. These returns and reports are true and correct in all material respects
and RhoMed has paid all taxes and other assessments due in accordance with such
returns. The provision for taxes of RhoMed as shown in the Financial Statements
is adequate for taxes due or accrued as of the date thereof.
2.15 Minute Book. The minute book of RhoMed contains the minutes of
all meetings of directors and shareholders since the time of RhoMed's
incorporation and reflects all transactions referred to in such minutes
accurately in all material respects.
2.16 ERISA. Except as set forth in Schedule 2.16 hereto, RhoMed does
not have any "employee welfare benefit plans" or "employee pension benefit
plans" as defined in Section 3 of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). RhoMed has made all required contributions and
has complied in all material respects with all laws applicable to any of its
employee benefit plans, including, without limitation, ERISA. RhoMed does not
participate in any single employer or multiemployer pension plan subject to
Title IV of ERISA. RhoMed does not provide any medical or other welfare-type
benefits to any retiree, except as required by law.
2.17 Investment Company Act; Other Regulations. RhoMed is not, and
immediately following the consummation of the transactions contemplated hereby
will not be, an "investment company", or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act. Except
for the Act, the Exchange Act and state securities and "blue sky" laws, RhoMed
is not subject to any federal or state law or regulation limiting its ability
to issue and perform its obligations under or in connection with the issuance
and sale of the Securities.
2.18 Environmental Matters. Except as set forth on Schedule 2.18
hereto, (a) the operations, properties, and facilities owned, leased, or
otherwise controlled by RhoMed (i) are, and to the best of RhoMed's knowledge
have been, in compliance with all Environmental Laws, (ii) are not contaminated
with any "Hazardous Material" (as defined below), (iii) are not
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now being and, to the best of RhoMed's knowledge, were never used as a
landfill, dump, or other storage or disposal area for Hazardous Materials, (iv)
are not now being and, to the best of RhoMed's knowledge, were never used for
military, industrial or manufacturing purposes or as a gasoline service
station, and (v) do not contain any underground or aboveground storage tanks
(whether or not currently in use) and, to the best of RhoMed's knowledge, no
such tank has been removed therefrom; (b) the operations, properties and
facilities presently or previously owned, leased or otherwise controlled by
RhoMed are not the subject of any United States federal or state or Canadian
federal or provincial investigation, demand or proceeding, including, without
limitation, any civil, criminal and/or administrative proceeding, of which
RhoMed has knowledge, whether or not seeking costs, damages, expenses,
penalties or injunctive relief, in connection with the enforcement or any
purported violation of any Environmental Laws or evaluating whether any
remedial action is required or purported to be required pursuant to any
Environmental Laws to respond to any release or threatened release, whether
intentional or unintentional, of any Hazardous Material into the environment;
(c) Hazardous Materials have not been generated, treated, manufactured,
processed, stored, transported or disposed of by RhoMed in violation of, or in
a manner or to a location which could reasonably be expected to give rise to
liability under, nor has RhoMed generated, treated, manufactured, processed,
stored, transported or disposed of at or under any of its presently or
previously owned, leased or controlled operations, properties or facilities any
Hazardous Material in violation of, or that could reasonably be expected to
give rise to liability under, any Environmental Law; (d) RhoMed has not
received written notice to the effect that it is or may be liable to any person
(including, without limitation, any individual or government, whether federal,
state, provincial, or local) in connection with, or as a result of, any release
or threatened release, whether intentional or unintentional, of any Hazardous
Material into the environment; and (e) RhoMed has not commissioned any reviews,
audits, reports or other analyses regarding the environmental condition of any
operation, property or facility presently or previously owned, leased or
otherwise controlled by RhoMed, nor has RhoMed received any documents or
correspondence from, nor has RhoMed sent any documents or correspondence to,
the United States Environmental Protection Agency, or any state, county or
local environmental or health agency concerning, the environmental condition of
any operation, property or facility presently or previously owned, leased or
otherwise controlled by RhoMed.
For purposes of this Paragraph 2.18: "Environmental Laws"
means any and all federal, state or local laws, statutes, codes, ordinances,
rules, regulations, policies, judgments, orders, decrees, permits, licenses, or
other governmental restrictions or requirements relating to pollution or
protection of public or employee health or safety or the environment,
including, but not limited to, CERCLA, SARA, RCRA, CWA, CAA, FIFRA, TSCA (each,
as defined below), and any comparable state, county or local Environmental Law.
"Hazardous Material" means (i) any hazardous substance, pollutant or
contaminant as now or hereafter defined in, or regulated under, CERCLA and its
implementing regulations, any toxic, carcinogenic, infectious, mutagenic,
radioactive, explosive or otherwise dangerous substance, hazardous or other
waste, hazardous constituent, petroleum and petroleum products, including crude
oil and any fraction thereof, asbestos, polychlorinated biphenyls,
urea-formaldehyde insulation, and any other
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chemical, material or substance now or hereafter regulated under any
Environmental Law and (ii) any substance, the presence of which on or under the
operations, properties, and facilities now and, as appropriate, previously
owned, leased, or otherwise controlled by RhoMed threatens to cause a nuisance
to, could constitute a trespass by RhoMed upon, or poses a health or safety
hazard to persons on or about, any adjacent property or facility. "CERCLA"
means the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986
("SARA") 42 U.S.C. ss.ss. 9601-9675; "RCRA" means the Resource Conservation and
Recovery Act of 1976 42 U.S.C. ss. 6901-6991; "CWA" means the Clean Water Act
33 U.S.C. ss. 1321 et seq; "CAA" means the Clean Air Act 42 U.S.C. ss.ss. 7401
et seq; "FIFRA" means the Federal Insecticide, Fungicide and Rodenticide Act 7
U.S.C. ss. 136 et seq; "TSCA" means the Toxic Substances Control Act 15 U.S.C.
ss.ss. 2601-2671; in each case, as amended from time to time and including any
regulations now or hereafter promulgated thereunder.
2.19 Insurance. Schedule 2.19 sets forth a true, complete and
correct description of all insurance currently maintained by RhoMed. RhoMed has
paid all premiums due under such policies and RhoMed is not in default with
respect to its obligations under any of such policies. The amount and nature of
self-insurance reserves are adequate and reasonable in view of the loss
experience of RhoMed and the business in which RhoMed is engaged, the pending
claims against RhoMed, and the known threatened claims and the known
occurrences which have not given rise to a pending claim.
2.20 Labor Matters. RhoMed is not a party to any collective
bargaining or other labor agreement and has not violated any laws, regulations,
orders or contract terms affecting the collective bargaining rights of
employees, equal opportunity employment, or employees health, safety, welfare,
wages and hours. There are no labor disputes existing, or to the best knowledge
of RhoMed, threatened, involving strikes, slow-downs, work stoppages, job
actions or lockouts of any employees of RhoMed or any grievance under any
collective bargaining or other labor agreement involving employees of RhoMed;
(ii) there are no unfair labor practices or petitions for election pending
before the National Labor Relations Board of any other federal or state labor
commission relating to the employees of RhoMed; and (iii) no demand for
recognition heretofore made by any labor organization is pending with respect
to RhoMed. There are no pending retaliatory or wrongful discharge claims or
federal, state or local employment discrimination charges or administrative or
judicial complaints arising therefrom pending against RhoMed nor, to the
knowledge of RhoMed, are any such charges or complaints threatened against
RhoMed.
ARTICLE III. TERMS OF SUBSCRIPTION
3.1 The Units will be offered on a "best efforts" basis. The minimum
sub scription per Subscriber shall be 1 Unit at $100,000 per Unit, subject to
the Company's right to accept subscriptions for fractions thereof. The maximum
amount of the offering is
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$4,000,000. The Company and the Placement Agent may, by mutual agreement,
terminate the offering at any time.
3.2 Placement of the Units will be made by the Placement Agent, who
will receive (i) a placement fee in the amount 9% of the purchase price of the
Units placed and (ii) a non-accountable expense allowance equal to 4% of the
purchase price of the Units placed. The Placement Agent shall be entitled to
warrants to purchase Units equal to 10% of the Common Stock issued in the
Offering at an exercise price of $.30 per share.
3.3 Subject to acceptance of this Agreement by the Company, delivery
of Units purchased pursuant to this Agreement shall be made by the Company
within 30 days of the payment of the purchase price therefor by the Subscriber
by personal or business check, wire transfer of immediately available funds or
money order made payable to "RhoMed Incorporated". The Company reserves the
right to reject any subscription with or without cause. In the event that the
Company does not accept a subscription, the Company will return the
Subscriber's funds immediately, with any interest which the Company may have
earned on those funds.
3.4 The Subscriber hereby authorizes and directs the Company to
deliver the Securities to be issued to the Subscriber pursuant to this
Agreement directly to the Subscriber's account maintained by the Placement
Agent or, if no such account exists, to the residential or business address
indicated on the signature page hereto.
3.5 The Subscriber hereby authorizes and directs the Company to
return any funds for unaccepted subscriptions to the same account from which
the funds were drawn, including any customer account maintained with the
Placement Agent.
ARTICLE IV. REGISTRATION UNDER THE 1933 ACT
4.1 As used in this Agreement, the following terms shall have the
following meanings:
(a) "Affiliate" shall mean, with respect to any person, any
other person controlling, controlled by or under direct or indirect common
control with such person (for the purposes of this definition "control," when
used with respect to any specified person, shall mean the power to direct the
management and policies of such person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the
foregoing).
(b) "Business Day" shall mean a day Monday through Friday
on which banks are generally open for business in New York.
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(c) "Holders" shall mean the Subscribers and any person
holding Registrable Securities to whom the rights under Article IV have been
transferred in accordance with Section 4.9 hereof.
(d) "Person" shall mean any person, individual,
corporation, partnership, trust or other nongovernmental entity or any
governmental agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).
(e) The terms "register," "registered" and "registration"
refer to the registration effected by preparing and filing a registration
statement in compliance with the Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) "Registrable Securities" shall mean (A) the Common
Stock and (B) any Common Stock issued as (or issuable upon the conversion of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to or in replacement of the Shares; provided,
however, that securities shall only be treated as Registrable Securities if and
only for so long as they (I) have not been disposed of pursuant to a
registration statement declared effective by the Commission, (II) have not been
sold in a transaction exempt from the registration and prospectus delivery
requirements of the Act so that all transfer restrictions and restrictive
legends with respect thereto are removed upon the consummation of such sale,
(III) are not saleable as exempt securities pursuant to Section 3(a)(10) of the
Securities Act of 1933 or (IV) are held by a Holder or a permitted transferee
pursuant to Section 4.9.
(g) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Section 4.2 hereof, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and expenses of counsel for the Company, blue sky
fees and expenses (for a reasonable number of states) and the expense of any
special audits incident to or required by any such registration (but excluding
the fees of legal counsel for any Holder).
(h) "Registration Statement" shall have the meaning
ascribed to such term in Section 4.2.
(i) "Registration Period" shall have the meaning ascribed
to such term in Section 4.4.
(j) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities and all fees and expenses of legal counsel for any Holder.
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4.2 The Company agrees that no later than 180 days after (x) the
closing date of the first registration statement for an initial public offering
of the Common Stock of the Company registered under the Act or (y) the first
date on which the Common Stock of the Company (or securities received in
exchange for Common Stock of the Company) trades on a national securities
exchange, on the National Association of Security Dealers, Inc. Automated
Quotations System ("NASDAQ"), on the OTC Electronic Bulletin Board or in "pink
sheets", the Company will file a registration statement (the "Registration
Statement") with the Commission and use its reasonable best efforts to effect
the registration, qualifications or compliances (including, without limitation,
the execution of any required undertaking to file post-effective amendments,
appropriate qualifications under applicable blue sky or other state securities
laws and appropriate compliance with applicable securities laws, requirements
or regulations) as may be so reasonably requested and as would permit or
facilitate the sale and distribution of all Registrable Securities.
Notwithstanding the foregoing, the Company (i) will not be obligated to enter
into any underwriting agreement for the sale of any of the Shares and (ii) may
delay the filing for a period not to exceed sixty (60) days if the Company
determines in good faith that such filing would have an adverse effect on the
Company or would otherwise be inadvisable.
4.3 All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 4.2 shall be
borne by the Company. All Selling Expenses relating to the sale of securities
registered by or on behalf of Holders shall be borne by such Holders pro rata
on the basis of the number of securities so registered.
4.4 In the case of the registration, qualification or compliance
effected by the Company pursuant to this Agreement, the Company will, upon
reasonable request, inform each Holder as to the status of such registration,
qualification and compliance. At its expense the Company will:
(a) use its reasonable best efforts to keep such
registration and any qualification or compliance under state securities laws
which the Company determines to obtain, continuously effective until the
Holders have completed the distribution described in the registration statement
relating thereto. The period of time during which the Company is required
hereunder to keep the Registration Statement effective is referred to herein as
the "Registration Period." Notwithstanding the foregoing, at the Company's
election the Company may cease to keep such registration, qualification or
compliance effective with respect to any Registrable Securities, and the
registration rights of a Holder shall expire, at such time as the Holder may
sell under Rule 144 under the Act (or other exemption from registration
acceptable to the Company) in a three-month period all Registrable Securities
then held by such Holder; and
(b) advise the Holders:
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(i) when the Registration Statement or any amendment
thereto has been filed with the Commission and when the registration
statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for such purpose;
(iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Shares
included therein for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the
making of any changes in the Registration Statement or the
prospectus so that, as of such date, the statements therein are not
misleading and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the
case of the prospectus, in the light of the circumstances under
which they were made) not misleading;
(c) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of any Registration Statement at the
earliest possible time;
(d) furnish to each Holder, without charge, at least one
copy of such Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits (including those incorporated by reference) in the form
filed with the Commission;
(e) during the Registration Period, deliver to each Holder,
without charge, as many copies of the prospectus included in such Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and the Company consents to the use, consistent with the provisions
hereof, of the prospectus or any amendment or supplement thereto by each of the
selling Holders of Registrable Securities in connection with the offering and
sale of the Registrable Securities covered by the prospectus or any amendment
or supplement thereto. In addition, upon the reasonable request of the
Subscriber and subject in all cases to confidentiality protections reasonably
acceptable to the Company, the Company will meet with a Subscriber or a
representative thereof at the Company's headquarters to discuss all information
relevant for disclosure in the Registration Statement covering the Registrable
Securities, and will otherwise cooperate with any Subscriber
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conducting an investigation for the purpose of reducing or eliminating such
Subscriber's exposure to liability under the Act, including the reasonable
production of information at the Company's headquarters;
(f) during the Registration Period, deliver to each Holder,
without charge, (i) as soon as practicable (but in the case of the annual
report of the Company to its stockholders, within 120 days after the end of
each fiscal year of the Company) one copy of: (A) its annual report to its
stockholders (which annual report shall contain financial statements audited in
accordance with generally accepted accounting principles in the United States
of America by a firm of certified public accountants of recognized standing);
(B) if not included in substance in its annual report to stockholders, its
annual report on Form 10-K (or similar form); (C) each of its quarterly reports
to its stockholders, and, if not included in substance in its quarterly reports
to stockholders, its quarterly report on Form 10-Q (or similar form), and (D) a
copy of the full Registration Statement (the foregoing, in each case, excluding
exhibits); and (ii) upon reasonable request, all exhibits excluded by the
parenthetical to the immediately preceding clause (D), and all other
information that is generally available to the public;
(g) prior to any public offering of Registrable Securities
pursuant to any Registration Statement, register or qualify for offer and sale
under the securities or blue sky laws of such jurisdictions as any such Holders
reasonably request in writing, provided that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction, and do any and all other
acts or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Registrable Securities covered by such Registration
Statement;
(h) cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to any Registration Statement free of any restrictive legends
to the extent not required at such time and in such denominations and
registered in such names as Holders may request at least three business days
prior to sales of Registrable Securities pursuant to such Registration
Statement;
(i) upon the occurrence of any event contemplated by
Section 4.4(b)(v) above, the Company shall promptly prepare a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus, or file any other required document so that, as thereafter
delivered to purchasers of the Registrable Securities included therein, the
prospectus will not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and
(j) use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and will make generally
available to the Holders not later than 45 days (or 90 days if the fiscal
quarter is the fourth fiscal quarter) after the end of its fiscal
Page 17
<PAGE>
quarter in which the first anniversary date of the effective date of the
Registration Statement occurs, an earnings statement satisfying the provisions
of Section 11(a) of the Act.
4.5 The Holders shall have no right to take any action to restrain,
enjoin or otherwise delay any registration pursuant to Section 4.2 hereof as a
result of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
4.6 (a) To the extent permitted by law, the Company will indemnify
each Holder, each underwriter of the Shares and each person controlling such
Holder within the meaning of Section 15 of the Act, with respect to which any
registration, qualification or compliance has been effected pursuant to this
Agreement, against all claims, losses, damages and liabilities (or action in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 4.6(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse each Holder, each
underwriter of the Shares and each person controlling such Holder, for
reasonable legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action as
incurred, provided that the Company will not be liable in any such case to the
extent that any untrue statement or omission or allegation thereof is made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder and stated to be specifically for use in
preparation of such registration statement, prospectus or offering circular;
provided that the Company will not be liable in any such case where the claim,
loss, damage or liability arises out of or is related to the failure of the
Holder to comply with the covenants and agreements contained in this Agreement
respecting sales of Registrable Securities, and except that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any such untrue statement or alleged untrue statement or omission or alleged
omission made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the Securities and Exchange Commission at the
time the registration statement becomes effective or in the amended prospectus
filed with the Commission pursuant to Rule 424(b) or in the prospectus subject
to completion and term sheet under Rule 434 of the Act, which together meet the
requirements of Section 10(a) of the Act (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any such Holder, any such
underwriter or any such controlling person, if a copy of the Final Prospectus
was not furnished to the person or entity asserting the loss, liability, claim
or damage at or prior to the time such furnishing is required by the Act.
(b) Each Holder will severally, if Registrable Securities
held by such Holder are included in the securities as to which such
registration, qualification or compliance
Page 18
<PAGE>
is being effected, indemnify the Company, each of its directors and officers,
each underwriter of the Shares and each person who controls the Company within
the meaning of Section 15 of the Act, against all claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened (subject to
Section 4.6(c) below), arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus or offering circular, or any amendment or supplement
thereof, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in light of the circumstances in which they were made, and will
reimburse the Company, such directors and officers, each underwriter of the
Shares and each person controlling the Company for reasonable legal and any
other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action as incurred, in
each case to the extent, but only to the extent, that such untrue statement or
omission or allegation thereof is made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Holder and
stated to be specifically for use in preparation of such registration
statement, prospectus or offering circular; provided that the indemnity shall
not apply to the extent that such claim, loss, damage or liability results from
the fact that a current copy of the prospectus that was made available to the
Holder was not sent or given to the person asserting any such claim, loss,
damage or liability at or prior to the written confirmation of the sale of the
Registrable Securities confirmed to such person if such current copy of the
prospectus would have cured the defect giving rise to such loss, claim, damage
or liability. Notwithstanding the foregoing, in no event shall a Holder be
liable for any such claims, losses, damages or liabilities in excess of the
proceeds received by such Holder in the offering, except in the event of fraud
by such Holder.
(c) Each party entitled to indemnification under this
Section 4.6 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement, unless
such failure is prejudicial to the Indemnifying Party in defending such claim
or litigation. An Indemnifying Party shall not be liable for any settlement of
an action or claim effected without its written consent (which consent will not
be unreasonably withheld).
(d) If the indemnification provided for in this Section 4.6
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any
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<PAGE>
loss, liability, claim, damage or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such loss, liability, claim, damage
or expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
4.7
(a) Each Holder agrees that, upon receipt of any notice
from the Company of the happening of any event requiring the preparation of a
supplement or amendment to a prospectus relating to Registrable Securities so
that, as thereafter delivered to the Holders, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, each Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement contemplated by Section 4.2
until its receipt of copies of the supplemented or amended prospectus from the
Company and, if so directed by the Company, each Holder shall deliver to the
Company all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
(b) Each Holder agrees to suspend, upon request of the
Company, any disposition of Registrable Securities pursuant to the registration
statement and prospectus contemplated by Section 4.2 during (A) any period not
to exceed two 30-day periods within any one 12-month period the Company
requires in connection with a primary underwritten offering of equity
securities (or such longer period as required by the underwriter of such
offering) and (B) any period, not to exceed one 60-day period per circumstance
or develop ment, when the Company determines in good faith that offers and
sales pursuant thereto should not be made by reason of the presence of material
undisclosed circumstances or developments with respect to which the disclosure
that would be required in such a prospectus is premature, would have an adverse
effect on the Company or is otherwise inadvisable.
(c) As a condition to the inclusion of its Registrable
Securities, each Holder shall furnish to the Company such information regarding
such Holder and the distribution proposed by such Holder as the Company may
request in writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article IV.
Page 20
<PAGE>
(d) Each Holder hereby covenants with the Company (1) not
to make any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Act to be satisfied, and (2) if such
Registrable Securities are to be sold by any method or in any transaction other
than on Nasdaq (or other national securities exchange), in the over-the-counter
market, in privately negotiated transactions, or in a combination of such
methods, to notify the Company at least five business days prior to the date on
which the Holder first offers to sell any such Shares.
(e) Each Holder acknowledges and agrees that the
Registrable Securities sold pursuant to the registration statement described in
this Section are not transferable on the books of the Company unless the stock
certificate submitted to the transfer agent evidencing such Shares is
accompanied by a certificate reasonably satisfactory to the Company to the
effect that (A) the Registrable Securities have been sold in accordance with
such registration statement and (B) the requirement of delivering a current
prospectus has been satisfied.
(f) Each Holder agrees not to take any action with respect
to any distribution deemed to be made pursuant to such registration statement,
that constitutes a violation of Rule 10(b)-6 under the Exchange Act or any
other applicable rule, regulation or law.
(g) At the end of the period during which the Company is
obligated to keep the registration statement current and effective as described
above, the Holders of Registrable Securities included in the registration
statement shall discontinue sales of shares pursuant to such registration
statement upon receipt of notice from the Company of its intention to remove
from registration the shares covered by such registration statement which
remain unsold, and such Holders shall notify the Company of the number of
shares registered which remain unsold immediately upon receipt of such notice
from the Company.
4.8 With a view to making available to the Holders the benefits of
certain rules and regulations of the Commission which at any time permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Act, at all times;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Exchange Act; and
(c) so long as a Holder owns any unregistered Registrable
Securities, furnish to such Holder upon any reasonable request a written
statement by the Company as to its compliance with Rule 144 under the Act, and
of the Exchange Act, a copy of the most
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<PAGE>
recent annual or quarterly report of the Company, and such other reports and
documents of the Company as such Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Holder to sell
any such securities without registration.
4.9 The rights to cause the Company to register Registrable
Securities granted to the Holders by the Company under Section 4.1 may be
assigned in full by a Holder, provided, that: (i) such transfer may otherwise
be effected in accordance with applicable securities laws; (ii) such transfer
involves not less than the lesser of all of such Holder's Shares or 100,000
Shares; (iii) such Holder gives prior written notice to the Company; and (iv)
such transferee agrees to comply with the terms and provisions of this
Agreement, including, without limitation, the restrictions in Section 1.17, and
such transfer is otherwise in compliance with this Agreement. Except as
specifically permitted by this Section 4.9, the rights of a Holder with respect
to Registrable Securities as set out herein shall not be transferable to any
other Person, and any attempted transfer shall cause all rights of such Holder
therein to be forfeited.
4.10 With the written consent of the Company and the Holders holding
at least a majority of the Registrable Securities that are then outstanding,
any provision of this Article IV may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely) or amended. Upon the effectuation of
each such waiver or amendment, the Company shall promptly give written notice
thereof to the Holders, if any, who have not previously received notice thereof
or consented thereto in writing.
4.11 If the Company files a registration statement with the
Commission in connection with a public offering of the Company's securities,
the Subscriber, by accepting this Agreement, agrees, if so requested by the
Company, that such Subscriber will not directly or indirectly sell, make any
short sale of, grant any option for the purchase of, or otherwise dispose of
any capital stock of the Company during the 30-day period ending, and the
180-day period beginning (or any such other period as is required by the
underwriter of such offering) on the first date of the effectiveness of such
registration statement. Upon request, the Subscriber will sign an agreement in
reasonable form to such effect with the underwriter of such an offering.
ARTICLE V. MISCELLANEOUS
5.1 Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail,
return receipt requested, or delivered by hand against written receipt
therefor, addressed to RhoMed Incorporated, 4261 Balloon Park Road NE,
Albuquerque, NM, 87109-5802, Attn: President, and to the Subscrib er at the
Subscriber's address indicated on the signature page of this Agreement. Notices
shall be deemed to have been given or delivered on the date of mailing, except
notices of change of address, which shall be deemed to have been given or
delivered when received.
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<PAGE>
5.2 This Agreement shall not be changed, modified or amended except
by a writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
5.3 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective heirs, legal representatives,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.
5.4 Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Units as herein provided; subject, however, to
the right hereby reserved to the Company to enter into the same agreements with
other subscribers and to add and/or delete other persons as subscribers.
5.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED
BY ANY OF THE PARTIES HERETO, THE PARTIES EX PRESSLY AGREE THAT ALL THE TERMS
AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
5.6 In order to discourage frivolous claims the parties agree that
unless a claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other parties
to the action), then the other party shall be entitled to recover from such
claimant all of its/their reasonable legal costs and expenses relating to such
proceeding and/or incurred in preparation therefor.
5.7 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If
any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other
covenant or provision unless so expressed herein.
5.8 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
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<PAGE>
5.9 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
5.10 This Agreement may be executed in two or more counterparts each
of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
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<PAGE>
ARTICLE VI. NOTICE TO, AND REPRESENTATIONS AND COVENANTS OF UNITED STATES
AND CERTAIN STATE RESIDENTS
6.1 FOR ALL UNITED STATES RESIDENTS:
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHER MORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTA TION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
6.2 FOR CALIFORNIA RESIDENTS ONLY:
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS OFFERING HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND
THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPTED FROM QUALIFICATION BY SECTION 25100, 25102 OR 25104
OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS OFFERING
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICA TIONS BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
6.3 FOR CONNECTICUT RESIDENTS ONLY:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE CONNECTICUT
UNIFORM SECURITIES ACT AND, THEREFORE, CANNOT BE RESOLD UNLESS REGISTERED UNDER
SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE UNDERSIGNED ACKNOWLEDGES THAT THE SECURITIES HAVE NOT BEEN REGISTERED UNDER
SECTION 36-485 OF THE CONNECTICUT UNIFORM
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<PAGE>
SECURITIES ACT AND ARE OFFERED AND SOLD PURSUANT TO AN EXEMPTION THEREFROM. THE
SECURITIES CANNOT BE SOLD OR TRANSFERRED UNLESS THEY ARE REGISTERED OR EXEMPT
FROM REGISTRATION UNDER THE CONNECTICUT UNIFORM SECURITIES ACT OR SOLD IN A
TRANSACTION WHICH IS EXEMPT UNDER SAID ACT.
6.4 FOR FLORIDA RESIDENTS ONLY:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE FLORIDA
SECURITIES ACT AND ARE BEING SOLD IN RELIANCE UPON AN EXEMPTION PROVIDED BY
SECTION 517.061 THEREOF. UNLESS THE SECURI TIES ARE REGISTERED, THEY MAY NOT BE
REOFFERED FOR SALE OR RESOLD IN THE STATE OF FLORIDA EXCEPT AS AN EXEMPT
SECURITY OR IN AN EXEMPT TRANSACTION UNDER SAID ACT.
6.5 FOR IOWA RESIDENTS ONLY:
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
6.6 FOR MASSACHUSETTS RESIDENTS ONLY:
WITH RESPECT TO ACCREDITED INVESTORS WHO ARE NATURAL PERSONS, THE INVESTMENT
MUST BE SUITABLE AND IS PRESUMED SUITABLE IF THE INVESTMENT DOES NOT EXCEED 25
PERCENT OF THE INVESTOR'S INDIVIDUAL NET WORTH OR NET WORTH COMBINED WITH
SPOUSE, EXCLUSIVE OF PRINCIPAL RESIDENCE AND FURNISHINGS.
6.7 FOR PENNSYLVANIA RESIDENTS ONLY:
EACH PENNSYLVANIA RESIDENT WHO PURCHASED THE SECURITIES REPRE SENTED BY THIS
CERTIFICATE HAS AGREED NOT TO SELL THESE SECURITIES FOR A PERIOD OF TWELVE (12)
MONTHS AFTER THE DATE OF PURCHASE.
PURSUANT TO SECTION 207 OF THE PENNSYLVANIA SECURITIES ACT OF 1972, EACH PERSON
WHO ACCEPTS THIS OFFER TO PURCHASE SECURITIES EXEMPT FROM REGISTRATION BY
SECTION 203 OF THE PENNSYLVANIA SECURITIES ACT OF 1972 DIRECTLY FROM THE
COMPANY OR ITS AFFILIATES WILL HAVE
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<PAGE>
THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE
SELLER, SELLING AGENTS OR ANY OTHER PERSON, WITHIN TWO (2) BUSINESS DAYS AFTER
HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED. TO ACCOMPLISH
THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO THE ISSUER
AT THE ADDRESS SET FORTH IN THE TEXT OF THE OFFERING LITERATURE, INDICATING HIS
OR HER INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE SENT AND
POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY. IT IS
PRUDENT TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO
ENSURE THAT IT IS RECEIVED AND TO EVIDENCE THE TIME WHEN IT WAS MAILED. IF THE
REQUEST IS MADE ORALLY IN PERSON OR BY TELEPHONE TO THE ISSUER AT THE NUMBER
LISTED IN THE TEXT OF THE OFFERING LITERATURE, A WRITTEN CONFIRMATION THAT THE
REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED.
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<PAGE>
ARTICLE VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE
7.1 The Subscriber represents and warrants that he, she or it comes
within one category marked below, and that for any category marked, he or she
has truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which the Company deems necessary in order to verify
the answers set forth below.
Category A__ The undersigned is an individual (not a
partnership, corporation, etc.) whose
individual net worth, or joint net worth
with his or her spouse, presently exceeds
$1,000,000.
Explanation. In calculating net
worth you may include equity in
personal property and real estate,
including your principal residence,
cash, short-term investments, stock
and securities. Equity in personal
property and real estate should be
based on the fair market value of
such property less debt secured by
such property.
Category B__ The undersigned is an individual (not a
partnership, corporation, etc.) who had an
income in excess of $200,000 in each of the
two most recent years, or joint income with
his or her spouse in excess of $300,000 in
each of those years (in each case includ
ing foreign income, tax exempt income and
full amount of capital gains and loses but
excluding any income of other family
members and any unrealized capital
appreciation) and has a reasonable
expectation of reaching the same income
level in the current year.
Category C__ The undersigned is a director or executive
officer of the Compa ny which is issuing
and selling the Units.
Category D__ The undersigned is a bank; a savings and
loan association, insurance company,
registered investment company; registered
business development company; licensed
small business invest ment company
("SBIC"); or employee benefit plan within
the meaning of Title 1 of ERISA and (a) the
investment decision is made by a plan
fiduciary which is either a bank, savings
and loan association, insurance company or
registered investment advisor, or (b) the
plan has total assets in excess of
$5,000,000
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<PAGE>
or is a self directed plan with investment
decisions made solely by persons that are
accredited investors.
----------------------------
----------------------------
(describe entity)
Category E__ The undersigned is a private business
development company as defined in section
202(a)(22) of the Investment Advisors Act
of 1940.
----------------------------
----------------------------
(describe entity)
Category F__ The undersigned is a corporation,
partnership, Massachusetts business trust,
or non-profit organization within the
meaning of Section 501(c)(3) of the
Internal Revenue Code, in each case not
formed for the specific purpose of
acquiring the Units and with total assets
in excess of $5,000,000.
----------------------------
----------------------------
(describe entity)
Category G__ The undersigned is a trust with total
assets in excess of $5,000, 000, not formed
for the specific purpose of acquiring the
Units, where the purchase is directed by a
"sophisticated person" as defined in
Regulation 506(b)(2)(ii).
Category H__ The undersigned is an entity all the equity
owners of which are "accredited investors"
within one or more of the above catego
ries. If relying upon this Category alone,
each equity owner must complete a separate
copy of this Agreement.
----------------------------
----------------------------
(describe entity)
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<PAGE>
Category I The undersigned is not within any of the
categories above and is therefore not an
accredited investor.
The undersigned is informed of the significance to you of the
foregoing representations, and they are made with the intention that you will
rely on them.
7.2 SUITABILITY (please answer each question)
(a) Describe your current employment, including the company
by which you are employed and its principal business:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(b) Describe any college or graduate degrees held by you:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(c) Types of prior investments:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(d) Have you participated in other private placements
before:
YES_______ NO_______
(e) Please indicate frequency of such prior participation
in private placements of:
Public Private Public or Private
Companies Companies Biotechnology Companies
--------- --------- -----------------------
Frequently ------ ------- --------
Occasionally ------ ------- --------
Never ------ ------- --------
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<PAGE>
(f) Do you expect your current level of income to
significantly decrease in the foreseeable future:
YES_______ NO_______
(g) Do you have any other investments or contingent liabilities which
you reasonably anticipate could cause you to need sudden cash requirements in
excess of cash readily available to you:
YES_______ NO_______
(h) Are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
YES_______ NO_______
(i) Do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES_______ NO_______
Page 31
<PAGE>
7.3 MANNER IN WHICH TITLE TO BE HELD (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Corporation*
(g) Trust*
(h) Other
*If Units are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
Page 32
<PAGE>
7.4 NASD Affiliation
Are you affiliated or associated with an NASD member firm (please check one):
Yes _________ No __________
If Yes, please describe:
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
*If Subscriber is a Registered Representative with an NASD member firm, have
the following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
- ---------------------------------
Name of NASD Member Firm
By: ______________________________
Authorized Officer
Date: ____________________________
Page 33
<PAGE>
7.5 REPRESENTATIONS AND WARRANTIES
The Undersigned hereby represents and warrants to the Company as
follows:
The Undersigned has been informed of the significance to the Company
of the foregoing representations and answers contained in this Agreement.
The answers to the foregoing questions are true, complete and correct
and have been provided under the assumption that the Company will rely upon
them for all purposes, including but not limited to the purpose of determining
whether the offering in which I propose to participate is exempt from
registration under federal and state securities laws.
The Undersigned will notify the Company immediately, at any time on or
prior to the Final Closing Date, in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and complete.
The Undersigned is able to bear the economic risk of the investment
and, at the present time, can afford a complete loss of such investment.
Page 34
<PAGE>
SIGNATURE PAGE
NUMBER OF UNITS X $100,000 = (THE "PURCHASE PRICE")
---------- ---------------
- ----------------------------------- ---------------------------------
Signature Signature (if purchasing jointly)
- ----------------------------------- ---------------------------------
Name Typed or Printed Name Typed or Printed
- ----------------------------------- ---------------------------------
Address Address
- ----------------------------------- ---------------------------------
City, State and Zip Code City, State and Zip Code
- ----------------------------------- ---------------------------------
Telephone-Business Telephone--Business
- ----------------------------------- ---------------------------------
Telephone-Residence Telephone--Residence
- ----------------------------------- ---------------------------------
Facsimile-Business Facsimile--Business
- ----------------------------------- ---------------------------------
Facsimile-Residence Facsimile--Residence
- ----------------------------------- ---------------------------------
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued:
Dated:___________________________, 1996
This Subscription Agreement is agreed to and accepted as of , 1996.
RHOMED INCORPORATED
By:_____________________________________
Name: Edward J. Quilty
Title: CEO and Chairman
Page 35
<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I,____________________, am the_____________________ of
_____________________________________________ (the "Entity").
I certify that I am empowered and duly authorized by the
Entity to execute and carry out the terms of the Subscription Agreement and to
purchase and hold the Units, and certify further that the Subscription
Agreement has been duly and validly executed on behalf of the Entity and
constitutes a legal and binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this day of ,_____
______, 1996.
--------------------
(Signature)
Page 36
ANNUAL REPORT ON FORM 10-KSB
For the transition period from September 1, 1995 to June 30, 1996
Commission file number 0-22686
PALATIN TECHNOLOGIES, INC.
Exhibit 21.1, subsidiaries of the registrant
<TABLE>
<CAPTION>
Names under which
Name of subsidiary: State of incorporation: subsidiary does business:
- ------------------- ----------------------- -------------------------
<S> <C> <C>
RhoMed Incorporated New Mexico RhoMed Incorporated
Ediflex Digital Systems, Inc. Delaware Ediflex Digital Systems, Inc.
Interfilm Technologies, Inc. New York Interfilm Technologies, Inc.
</TABLE>
As independent public accountants, we hereby consent to the incorporation in
this Form 10-KSB of our report dated July 31, 1996. It should be noted that we
have not audited any financial statements of the Company subsequent to June 30,
1996 or performed any audit procedures subsequent to the date of our report.
/s/ ARTHUR ANDERSEN LLP
--------------------------
ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
September 24, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements for the ten month period ended June 30, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> SEP-1-1995
<PERIOD-END> JUN-30-1996
<CASH> 6,791,300
<SECURITIES> 0
<RECEIVABLES> 4,461
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,862,304
<PP&E> 279,889
<DEPRECIATION> 183,535
<TOTAL-ASSETS> 7,041,205
<CURRENT-LIABILITIES> 2,359,400
<BONDS> 1,843,598
0
0
<COMMON> 115,388
<OTHER-SE> 2,722,819
<TOTAL-LIABILITY-AND-EQUITY> 2,838,207
<SALES> 24,457
<TOTAL-REVENUES> 24,457
<CGS> 0
<TOTAL-COSTS> 2,120,239
<OTHER-EXPENSES> 1,802,097
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,897,879)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,897,879)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/17/1996
960174859 - 2634913
CERTIFICATE OF LIMITED PARTNERSHIP
OF
THE INTERFILM STOCKHOLDERS LIMITED PARTNERSHIP
This Certificate of Limited Partnership of The Interfilm Stockholders
Limited Partnership is being executed by the undersigned for the purpose of
forming a limited partnership pursuant to the Delaware Revised Uniform Limited
Partnership Act.
1. The name of the limited partnership is The Interfilm
Stockholders Limited Partnership.
2. The address of the registered office of the limited
partnership in Delaware is 1209 Orange Street, Wilmington, Delaware
19801. The limited partnership's registered agent at that address is
The Corporation Trust Company.
3. The name and address of the general partner is:
NAME ADDRESS
---- -------
Fab Five, Inc. 110 Greene Street, Suite 601
New York, New York 10012
IN WITNESS WHEREOF, the undersigned, constituting all of the general
partners of the Partnership, have caused this Certificate of Limited
Partnership, which shall become effective on June 17, 1996, to be duly executed
as of the 11th day of June, 1996.
FAB FIVE, INC.
By: /s/ William Franzblau
----------------------------
William Franzblau, President
AGREEMENT OF LIMITED PARTNERSHIP
OF
THE INTERFILM STOCKHOLDERS LIMITED PARTNERSHIP
This AGREEMENT OF LIMITED PARTNERSHIP of The Interfilm Stockholders
Limited Partnership (the "Partnership") is made and entered into as of the
11th day of June, 1996, by and among Fab Five, Inc., a New Jersey corporation
("FFI"), and whose address is set forth on Schedule A hereto, as the General
Partner, and those persons whose names and addresses are set forth on Schedule
A hereto as Limited Partners with reference to the following:
A. Pursuant to that certain Agreement and Plan of Reorganization
dated as of April 12, 1996 (the "Merger Agreement") by and among RhoMed
Incorporated, ("RhoMed"), Interfilm, Inc. ("Interfilm") and Interfilm
Acquisition Corp. ("InSub"), concurrently herewith, InSub will merge (the
"Merger") with and into RhoMed and each issued and outstanding share of the
Preferred Stock and Common Stock of RhoMed will be converted into shares of
Interfilm Series A Preferred Stock and Interfilm Series B Preferred Stock,
respectively.
B. In connection with the Merger and pursuant to the Merger
Agreement, the assets of Interfilm and Interfilm Technologies, Inc. ("ITI")
set forth on Exhibit A attached hereto (the "Interfilm Assets") are being
transferred herewith to the Partnership effective immediately after the
effective time of the Merger (the "Effective Time") to hold, liquidate and
distribute the same as set forth herein.
C. Pursuant to the Merger Agreement, The Interfilm Stockholders Trust
(the "Trust") has been established to hold on behalf of certain stockholders
of Interfilm a limited partnership interest in the Partnership.
In consideration of the mutual covenants herein contained and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
FORMATION OF LIMITED PARTNERSHIP
1.1 Formation. The General Partner and the Limited Partners hereby
agree by execution of this Agreement to form a limited partnership under the
provisions of the Delaware
1
<PAGE>
Revised Uniform Limited Partnership Act (the "Delaware Act"). Each
party hereto represents and warrants that it is duly authorized to join in
such limited partnership and that the person executing this Agreement of
Limited Partnership on its behalf is duly authorized to do so.
1.2 Partnership Name. The name of the Partnership shall be "The
Interfilm Stockholders Limited Partnership." The business of the Partnership
may be conducted under such other name or names as the General Partner may
from time to time select.
1.3 Certificate of Limited Partnership. The Partners shall execute a
Certificate of Limited Partnership (the "Certificate") pursuant to the
provisions of the Delaware Act. The General Partner shall file the executed
copy of the Certificate together with a duplicate copy with the Secretary of
State of the State of Delaware, and upon receipt from the Secretary of State
of the duplicate copy of the Certificate (and any certificates of amendment
thereto that may subsequently be filed) marked "Filed", the General Partner
shall promptly deliver or mail a copy of such Certificate (or any such
certificate of amendment) to each Limited Partner. The Partners hereby agree
to execute, and the General Partner agrees to file, and record all such other
certificates and documents, including amendments to the Certificate, and to do
such other acts as may be appropriate to comply with all requirements for the
formation and operation of a limited partnership, the ownership of property,
and the conduct of business under the laws of the State of Delaware and any
other jurisdiction in which the Partnership may own property or conduct
business.
1.4 Principal Business Office, Registered Office and Registered
Agent. The principal business office of the Partnership shall be located at
110 Greene Street, Room 601, New York, New York 10012. The registered office
of the Partnership shall be c/o The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware 19801. The registered agent for service of
process on the Partnership shall be The Corporation Trust Company, whose
address is 1209 Orange Street, Wilmington, Delaware 19801. The principal
business office, the registered office and the registered agent of the
Partnership may be changed by the General Partner from time to time in
accordance with the then applicable provisions of the Delaware Act and any
other applicable laws. The General Partner shall give prompt written notice to
the Limited Partners of any change of such business office, registered office
or registered agent for service of process and file a certificate of amendment
to the Certificate reflecting such change.
2
<PAGE>
1.5 Term of Partnership. The Partnership shall commence upon the
filing of the Certificate with the Secretary of State of the State of
Delaware, and shall continue until December 31, 2006, unless the Partnership
is sooner terminated and dissolved upon the happening of any of the following
events:
(a) The liquidation of all or substantially all of the
Partnership Estate and the satisfaction of all probable transferee liabilities
of the Partnership;
(b) The agreement to dissolve the Partnership by the General
Partner and the Limited Partners (acting by Consent of the Limited Partners);
(c) The happening of any event that makes it unlawful for
the Partnership's business to be continued or for the Partners to continue the
Partnership's business in the form of a limited partnership; or
(d) The Retirement of the General Partner, except as
otherwise provided in Section 11.1(b).
ARTICLE II
DEFINED TERMS
The defined terms used in this Agreement shall have the meanings
specified below:
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such person. The ownership by a person of ten percent
(10%) or more of another person shall create a rebuttable presumption of
control of such other person.
"Agreement" shall mean this Agreement of Limited Partnership,
including the exhibits and schedules attached hereto, as it may be further
amended from time to time.
"Assignee" shall have the meaning set forth in Section 10.1.
"Capital Contribution" shall mean, as to any Partner, the amount of
capital deemed contributed to the Partnership by such Partner pursuant to
Section 4.1.
"Certificate" shall have the meaning set forth in Section 1.3.
3
<PAGE>
"Claims" shall have the meaning set forth in Section 7.5(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any subsequent Federal law of similar import.
"Consent of the Limited Partners" shall mean the written consent or
approval of the Limited Partners whose Percentage Interests represent at least
fifty percent (50%) of all Percentage Interests in the Partnership.
"Delaware Act" shall have the meaning set forth in Section 1.1.
"Determination" shall have the meaning set forth in Section 7.5(b).
"Effective Time" shall have the meaning set forth in Recital B.
"Event of Bankruptcy" shall mean, as to any Partner, the filing of a
petition for relief as debtor or bankrupt under the Federal Bankruptcy Reform
Act of 1978, as amended, or like provision of law; insolvency of such Partner
as finally determined by a court proceeding; filing by such Partner, or
another in respect of such Partner, of a petition or application to accomplish
the same or for the appointment of a receiver or a trustee for such Partner or
a substantial portion of its assets; or commencement of any proceeding
relating to such Partner under any other reorganization, arrangement,
insolvency, adjustment of debt or liquidation law of any jurisdiction, unless,
with respect to any of the foregoing, such event of bankruptcy is susceptible
to cure and is cured (and all proceedings dismissed with prejudice) within 90
days.
"General Partner" shall mean Fab Five, Inc. or any individual or
entity who becomes a General Partner as provided herein, in his or its
capacity as a General Partner.
"InSub" shall mean Interfilm Acquisition Corp., a New Mexico
corporation.
"Interfilm" shall mean Interfilm, Inc., a New Jersey corporation.
"ITI" shall mean Interfilm Technologies, Inc., a Delaware corporation
and a wholly owned subsidiary of Interfilm.
4
<PAGE>
"Limited Partner" or "Limited Partners" shall mean any or all of the
Limited Partners or any individual or entity who becomes a Substitute Limited
Partner as provided herein, in his or its capacity as a Limited Partner.
"Merger" shall have the meaning set forth in Recital A.
"Merger Agreement" shall have the meaning set forth in Recital A.
"Partnership" shall mean The Interfilm Stockholders Limited
Partnership, a Delaware limited partnership.
"Partnership Estate" shall mean the aggregate of the Interfilm
Assets.
"Partnership Receipts" shall mean all rents, royalties, income
proceeds and other receipts of or from the Partnership Estate, including,
without limitation, any recovery against Sony Corporation of America and its
affiliates ("Sony") arising from litigation filed or to be filed against Sony
(the "Sony Litigation") and any amounts obtained from the sale or licensing of
any intellectual property.
"Percentage Interest" of a Partner shall mean that percentage set
forth after such Partner's name in Schedule A as the same may be adjusted from
time to time in accordance with the provisions of this Agreement.
"Private Letter Ruling" shall have the meaning set forth in Section
7.5(b).
"Proceeds" shall have the meaning set forth in Section 7.5(b).
"Record Date" shall mean the business day prior to the Effective
Time.
"Retirement" (including the verb form "Retire" and the adjective form
"Retiring") means, as to a General Partner, the occurrence of an Event of
Bankruptcy, dissolution without continuation, liquidation, or voluntary or
involuntary withdrawal or retirement from the Partnership for any reason, or
abandonment by the General Partner of its performance of its functions as the
General Partner, including any state of facts by reason of which the General
Partner may no longer continue as a General Partner by law or pursuant to any
terms of this Agreement.
"RhoMed" shall mean RhoMed Incorporated, a New Mexico corporation.
5
<PAGE>
"Schedule A" shall mean the schedule attached hereto and marked as
Schedule A, identifying the General Partner and the Limited Partners and
stating their respective Percentage Interests.
"Substitute Limited Partner" shall mean any individual or entity who
becomes a Substitute Limited Partner pursuant to the provisions of Section
10.1.
"Tax Assessment" shall have the meaning set forth in Section 7.5(b).
"Tax Matters Partner" shall have the meaning set forth in Section
8.1.
"Terminating Partner" shall have the meaning set forth in Section
11.1(b).
"Trust" shall have the meaning set forth in Recital C.
ARTICLE III
PURPOSES POWERS AND LIMITATIONS
3.1 Purpose. The Partnership has been organized pursuant to Section
5.18(d) of the Merger Agreement for the primary purpose of receiving,
liquidating and distributing the Partnership Estate, and, subject to the
limitations set forth herein, its activities shall be limited to those
reasonably necessary to, and consistent with, the accomplishment of such
purpose.
3.2 Status of Partnership Estate. Except as provided herein, in no
event shall any part of the Partnership Estate revert or be distributed to
Interfilm, ITI or to any stockholder of Interfilm or ITI as such other than a
Limited Partner entitled thereto under the terms of this Agreement. Any
unclaimed part of the Partnership Estate shall be subject to disposition in
accordance with applicable laws.
3.3 Limitations. No part of the Partnership Estate or the Partnership
Receipts shall be used or disposed of by the General Partner for any purpose
other than (i) for the purposes for which this Partnership was created as set
forth herein, including without limitation, the payment of, and the creation
of reserves for the payment of, the unpaid or contingent liabilities and debts
of Interfilm as of the Effective Time, the indemnity obligations of Interfilm
under the Merger Agreement or the liabilities of Interfilm existing as of the
Effective Time which are assumed by the Partnership pursuant to the terms of
the Merger Agreement and which are listed on Exhibit B attached hereto,
6
<PAGE>
(collectively, the "Interfilm Liabilities") and the obligations, liabilities
and the expenses incurred in connection with the administration of the
Partnership Estate; and (ii) the distribution thereof to the Partners in
accordance with the terms of this Agreement. In order to preserve and protect
the Partnership Estate pending disposition or distribution thereof, the
General Partner shall not invest monies forming a part of the Partnership
Estate except in demand and time deposits in federally insured banks or
savings institutions or short term certificates of deposit.
ARTICLE IV
CAPITAL CONTRIBUTIONS; DEFAULTS;
CAPITAL ACCOUNTS
4.1 Capital Contributions. Immediately following the Effective Time,
Interfilm and ITI shall irrevocably assign, set over and deliver to the
Partnership the Interfilm Assets and each Partner's capital account shall be
credited as set forth on Schedule A for such Partner's deemed share of the
Interfilm Assets calculated in accordance with the percentage that the number
of shares of Interfilm Common Stock beneficially owed by each Partner bears to
the total number of shares of Interfilm Common Stock outstanding, each
determined as of the Record Date, provided, however, that in the case of (a)
the Trust, the Trust shall be deemed to own the aggregate number of shares of
Interfilm Common Stock beneficially owned by all of the beneficiaries of the
Trust and (b) FFI, FFI shall be deemed to own the shares of Interfilm Common
Stock beneficially owned by William Franzblau.
4.2 No Further Additional Contributions. Except as otherwise provided
in this Agreement, or upon the written agreement of all of the Partners, no
Partner shall be required or permitted to make additional Capital
Contributions to the Partnership.
4.3 No Interest on Capital. No Partner shall be entitled to receive
interest on such Partner's Capital Contribution.
4.4 Capital Accounts. A capital account shall be established and
maintained for each Partner. Each Partner's capital account shall be credited
initially with an amount equal to such Partner's deemed initial Capital
Contribution. Thereafter, the capital accounts of the Partners shall be
credited with additional Capital Contributions, if any, charged for
distributions made and credited or charged pursuant to the provisions of
Article V, and shall otherwise
7
<PAGE>
appropriately reflect the transactions of the Partnership and the Partners.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocation of Profits and Losses. In each fiscal year, the items
of income, gain, loss and deduction shall be allocated, for purposes of
adjusting the Partners' respective capital accounts, among the Partners in
accordance with their Percentage Interests. For purposes of income taxation, a
Partner's share of income, gain, loss, deduction, or credit (or item thereof)
shall be determined in accordance with the Partner's interest in the
Partnership within the meaning of Section 704(b) of the Code. If, as the
result of a transfer of an interest in the Partnership, or otherwise, there is
a change in ownership, such allocation of the items of income, gain, loss and
deduction shall take into account the varying interests of the Partners during
such year (by appropriate and equitable adjustments consistent with the
requirements of the Code and applicable regulations issued thereunder).
5.2 Distributions.
(a) Subject to the provisions of this Agreement, the General
Partner shall, as the General Partner in its sole discretion deems appropriate
(but at least on an annual basis), distribute and pay, or cause to be
distributed and paid, to the Partners on a date set by the General Partner,
all or part of the Partnership Estate that remains after payment of, or
provision for, expenses, liabilities, obligations, and reserves for contingent
claims arising hereunder, including, without limitation, any retention amounts
pursuant to Section 7.5 herein, and for potential claims of unlocated
Partners, as provided herein and after the withholding of the taxes or
charges, if any, as provided herein. Such distributions shall be made in
proportion to the respective Percentage Interests of the Partners.
(b)If any conflicting claims or demands are made or asserted
to any interest of any Partner herein, the General Partner shall be entitled,
at its sole election, to refuse to comply with any such conflicting claims or
demands. The General Partner shall be entitled to refrain and refuse to act
until (i) the rights of the adverse claimants have been adjudicated by a final
judgment of a court of competent jurisdiction, or (ii) all differences have
been adjusted by valid written agreement between all of such parties, and the
General Partner shall have been furnished with an executed counterpart of such
agreement;
8
<PAGE>
the General Partner may, in its absolute discretion, require that there be
furnished a surety bond or other security satisfactory to the General Partner to
fully indemnify the General Partner as between all conflicting claims or
demands.
(c) Any portion of the Partnership Estate which shall be
available to, but unclaimed or refused by, any Partner shall be deemed to be
subject to applicable escheat laws, and the General Partner is expressly
authorized to pay and/or deliver such portion of the Partnership Estate at
such time or times as may be consonant with such laws and in accordance with
the provisions thereof.
(d) The General Partner shall make such reports in writing
to each of the Partners as the General Partner deems appropriate.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
6.1 Limited Liability. No Limited Partner shall be personally liable
for any of the debts, liabilities, obligations or contracts of the
Partnership, nor shall a Limited Partner be required to lend any funds to the
Partnership.
6.2 No Control. The Limited Partners shall not participate in the
control of the management of the business of, or transact any business for,
the Partnership. No Limited Partner shall have the power to sign for or bind
the Partnership.
6.3 Examination of Partnership Records. The Limited Partners and
their agents may, at any reasonable time, examine, audit and obtain copies of
the books, records and accounts of the Partnership, inspect its properties or
otherwise make reasonable inquiry as to Partnership affairs.
ARTICLE VII
RIGHTS AND OBLIGATIONS OF THE GENERAL PARTNER
7.1 Transfer to the General Partner. The General Partner agrees to
accept the assets constituting the Partnership Estate, subject to the
Interfilm Liabilities. However, the General Partner shall be responsible only
for the assets delivered to it or registered in the Partnership's name and
shall have no duty to make, nor incur any liability for failing to make, any
search for unknown assets. The General Partner shall be responsible for only
9
<PAGE>
those liabilities of which it is informed, and shall have no duty to make, nor
incur any liability for failing to make, any search for unknown liabilities.
The General Partner shall hold the Partnership Estate without provision for or
the payment of any interest thereon to any Partner except that i nterest
earned on any assets of the Partnership shall become a part of the Partnership
Estate.
7.2 Payment of Liabilities. Prior to any distribution to the Partners
the General Partner shall pay from the Partnership Estate, or otherwise
discharge or provide for, all expenses, charges, liabilities, and obligations
of the Partnership, including the Interfilm Liabilities and any taxes imposed
on the Partnership and any taxes imposed on Interfilm or RhoMed with respect
to the transfer of the Interfilm Assets to the Partnership. The General
Partner may, in its sole discretion, make provisions by reserve or otherwise
out of the Partnership Estate, for such amount as the General Partner may
determine to be necessary to meet present or future liabilities of the
Partnership, whether fixed or contingent.
7.3 Taxes. Subject to Section 7.2 above, the General Partner shall
withhold from time to time from that portion of the Partnership Estate
otherwise distributable to the Partners such sums as may be sufficient to pay
any taxes or other charges which have been or may be imposed on the Partners
under the income tax laws or other laws of the United States or any state or
political subdivision by reason of distributions which have been or will be
made to the Partners, and the General Partner may, in its discretion, enter
into agreements with taxing or other authorities for the payment of such
amounts as may be withheld in accordance with the provisions of this Section.
7.4 Limitation of Responsibility. It is expressly understood that
neither Interfilm nor any affiliate of Interfilm, including RhoMed, shall be
obligated to provide any funds whatsoever with respect to payment of the
Interfilm Liabilities or in connection with the collection of the Partnership
Receipts, including the Sony Litigation. By way of example, any expenses
pertaining to the Sony Litigation shall be the responsibility of the
Partnership and not Interfilm. Accordingly, any and all Partnership Receipts
and the Partnership Assets shall be reserved for the period(s) set forth in
Section 7.5 and paid by the General Partner for purposes of reimbursing
Interfilm and any of its affiliates, including RhoMed, for all liabilities,
expenses, costs and reasonable fees and expenses of their professional
advisors, including attorneys and accountants that they may incur as a result
of the Sony Litigation, and for payment of the Interfilm Liabilities.
10
<PAGE>
7.5 Retention of Amounts.
(a) Any and all proceeds generated by the Partnership shall
be held in trust by the Partnership for purposes of indemnifying Interfilm or
any affiliate of Interfilm, including RhoMed, for all liabilities, expenses
and costs that it may incur, including tax and related claims and expenses and
the reasonable fees and expenses of its professional advisors, including
attorneys and accountants, as a result of the Sony Litigation and any
obligations of Interfilm and InSub under Section 8.1(b) of the Merger
Agreement (collectively, the "Claims"). Further, in the event that, prior to
the second anniversary of the Effective Time, any proceeds shall be generated
by the Partnership arising out of the Sony Litigation or a sale or other
transfer of the intellectual property included within the Interfilm Assets
which exceed the amounts payable to RhoMed pursuant to Section 5.18(b) of the
Merger Agreement, then such sum as shall be reasonably necessary to secure any
Claims as to which RhoMed shall have given the Partnership notice prior to
such second anniversary, plus $100,000, shall continue to be held by the
Partnership pending resolution of the Claims.
(b) Notwithstanding anything to the contrary in this
Agreement or in the Merger Agreement, the Partnership shall hold all of the
proceeds of the Sony Litigation (the "Proceeds") unless and until permitted to
distribute to the Partners or disburse such Proceeds pursuant to the
provisions of Section 5.18(c) of the Merger Agreement.
(i) Upon the request of and at the expense of the
Partnership, Interfilm shall request from the Internal Revenue Service a
private letter ruling (the "Private Letter Ruling") confirming that the
Proceeds will not be treated as the income of Interfilm or any member of its
consolidated group for federal income tax purposes. If Interfilm receives the
Private Letter ruling confirming such treatment, Interfilm shall give written
notice to the Partnership and the General Partner may immediately distribute
to the Partners so much of the aggregate Proceeds up to Ten Million Dollars
($10,000,000.00) as exceed the amount, if any, required to be held by the
Partnership pursuant to Section 5.18(b) of the Merger Agreement. If (A)
neither the Partnership nor Interfilm do not receive the Private Letter Ruling
confirming such treatment or (B) the Internal Revenue Service provides notice
to Interfilm that it will not provide Interfilm with the Private Letter Ruling
confirming such treatment, then the Partnership shall continue to hold (unless
disbursed pursuant to Section 5.18(c)(iii) of the Merger Agreement) that
portion of the aggregate Proceeds up to Ten Million Dollars
11
<PAGE>
($10,000,000.00) which is equal to forty percent (40%) of the amount
by which the aggregate Proceeds up to Ten Million Dollars ($10,000,000.00)
exceeds Two Million Dollars ($2,000,000.00) (the "Forty Percent Holdback")
until the date which is thirty (30) days after the earlier of (1) the sixth
anniversary of the due date (including any extensions) of the federal income
tax return of Interfilm for its taxable year in which the Partnership receives
the Proceeds (or the date on which Interfilm files such return for such year,
if later than such sixth anniversary) and (2) the date of a determination (as
defined in Section 1313(a) of the Code, a "Determination") of the amount of
all taxes, if any, payable by Interfilm in connection with the transactions
contemplated by the Merger Agreement.
(ii) In addition to any amounts withheld pursuant to
Section 5.18(c)(i) of the Merger Agreement, the Partnership shall continue to
hold (unless disbursed pursuant to Section 5.18(c)(iii) of the Merger
Agreement) and shall not distribute to the Partners, fifty percent (50%) of
the amount by which the aggregate Proceeds exceed Ten Million Dollars
($10,000,000.00) until the date which is thirty (30) days after the earlier of
(1) the sixth anniversary of the due date (including any extensions) of the
federal income tax return of Interfilm for its taxable year which includes the
Effective Time (or the date on which Interfilm files such return for such
year, if later than such sixth anniversary) and (2) the date of a
Determination of the amount of all taxes, if any, payable by Interfilm in
connection with the transactions which are contemplated by the Merger
Agreement.
(iii) Upon notice to the Partnership by Interfilm
of any assessment by the Internal Revenue Service against Interfilm of any
taxes, penalties or interest payable in connection with the transactions which
are contemplated by this Agreement, the Partnership shall immediately pay to
Interfilm all such taxes, penalties and interest so assessed (the "Tax
Assessment"), and any reasonable attorney's and accountant's fees and expenses
incurred in connection therewith. Interfilm shall immediately pay the amount
of the Tax Assessment to the Internal Revenue Service in payment thereof or,
upon the written request of the Partnership and at the Partnership's sole
expense, Interfilm shall decline to pay the amount of the Tax Assessment and
shall file a petition in United States Tax Court asserting any available
defenses to the assessment. If Interfilm pays the amount of the Tax Assessment
to the Internal Revenue Service, at the request of the Partnership and at
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the Partnership's sole expense, Interfilm shall file a refund claim with
respect to the Tax Assessment and, if so requested by the Partnership and at
the Partnership's sole expense, shall pursue such claim until a Determination
is obtained. If Interfilm receives a refund with respect to the Tax
Assessment, it shall, after deducting its reasonable expenses incurred in
connection with obtaining such refund, promptly pay the amount so refunded
plus any interest received thereon to the Partnership.
(iv) All Proceeds other than those required to be
held by the Partnership pursuant to Section 5.18(b) and Section 5.18(c) of the
Merger Agreement may be distributed to the Partners following the second
anniversary of the Effective Time.
7.6 Claims Procedure. If Interfilm receives notice of any Claim or
other commencement of any action or proceeding with respect to which the
Partnership is obligated to provide indemnification pursuant to the Merger
Agreement or this Agreement, Interfilm shall promptly give the General Partner
written notice thereof which notice shall specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. Such notice shall
be a condition precedent to any liability of the Partnership for
indemnification hereunder. Interfilm shall not settle or compromise any claim
by a third party for which it is entitled to indemnification hereunder,
without the prior written consent of the General Partner which consent shall
not be unreasonably withheld or delayed, unless suit shall have been
instituted against it and the General Partner shall not have taken control of
such suit after notification thereof as provided herein.
7.7 Defense of Claims. In connection with any Claim giving rise to
indemnity under this Agreement or the Merger Agreement resulting from or
arising out of any claim or legal proceeding by a third party, the
Partnership, at its sole cost and expense, may, upon written notice to
Interfilm, assume the defense of any such claim or legal proceeding (including
claims where Interfilm or RhoMed is named as a defendant) using counsel of its
choice (subject to the approval of Interfilm, which approval may not be
unreasonably withheld or delayed) if it acknowledges to Interfilm in writing
its obligations to indemnify Interfilm with respect to all elements of such
claim. Interfilm shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense; provided,
however, that if Interfilm, in its reasonable discretion, determines that
there exists a conflict of interest between the Partnership and Interfilm,
Interfilm shall have the right to engage separate counsel, the reasonable
costs and expenses of which shall be paid by the Partnership, but in no event
shall the Partnership be liable
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to pay for the costs and expenses of more than one such separate counsel; and,
provided further, that if Interfilm is named as a defendant in any legal
proceeding, Interfilm shall have the right, at its own expense, upon written
notice to the Partnership, to assume the defense thereof, subject to the right
of the Partnership to participate (but not control) such defense at its own
cost. If the Partnership does not assume the defense of any claim or
litigation resulting therefrom as set forth in the first proviso clause of the
immediately preceding sentence, Interfilm may defend or settle against such
claim or litigation, after giving notice of the same to the Partnership, on
such terms as Interfilm may deem appropriate in its reasonable judgment, and
the Partnership shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. In connection
with any Claim made by RhoMed pursuant to Article 8 of the Merger Agreement,
the Partnership shall immediately reserve such sums as shall be reasonably
necessary to secure its obligation to provide indemnification for such claims
pursuant to the Merger Agreement (as they may be amended from time to time by
notice to the Partnership by RhoMed) and shall promptly pay to RhoMed all
amounts expended by RhoMed relating to such claims upon presentation of an
invoice therefor.
7.8 Management. Except as otherwise specifically provided in this
Agreement, the General Partner shall have full responsibility and exclusive
and complete discretion in the management and control of the business and
affairs of the Partnership for the purposes herein stated, shall make all
decisions affecting the Partnership's affairs and business, and shall have
full, complete and exclusive discretion to take any and all action that the
Partnership is authorized to take and to make all decisions with respect
thereto.
7.9 Authority of the General Partner. Except as otherwise
specifically provided in this Agreement, the General Partner shall have full
and complete power to do any and all things necessary or incidental to
carrying out the purposes of the Partnership and to manage and conduct the
Partnership business, and shall possess and enjoy all of the rights and powers
of partners in a partnership without limited partners under the Delaware Act.
The General Partner shall have the authority to execute on behalf of the
Partnership such agreements, contracts, instruments and other documents as it
shall from time to time approve, such approval to be conclusively evidenced by
its execution and delivery of any of the foregoing. The signature of the
General Partner on all such instruments, agreements, contracts, leases,
conveyances or documents, and upon any
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checks, drafts, notes and other negotiable instruments, shall be sufficient to
bind the Partnership in respect thereof and no third person need look to the
application of funds or authority to act or require joinder of any other
party.
7.10 Title to Assets. The General Partner shall have the power to
hold, and shall hold, the legal and equitable title to all assets which at any
time constitute the Partnership Estate, and the General Partner shall hold and
administer such assets and property in trust, pursuant to the terms of this
Partnership.
7.11 Powers of the General Partner. Subject to the limitations
imposed herein, the General Partner shall have the following specific powers:
(a) To sell, transfer, assign, convey, or invest the
Partnership Estate or any part thereof.
(b) To collect and receive any and all property and assets
due to or owing or belonging to Interfilm as of the Effective Time or the
Partnership, to give full discharge and release therefor.
(c) To collect, liquidate or otherwise convert into cash all
property, assets and rights in the Partnership Estate, and to pay, discharge
and satisfy all remaining liabilities, expenses and obligations of, and claims
against, Interfilm, the Partnership and the General Partner, with the right to
prosecute and defend litigation, including all claims against Sony and enter
into settlements and compromises in connection therewith.
(d) To retain or receive on behalf of, and for the benefit
of, those Partners who have not been located or have refused payment, all
liquidating distributions, unclaimed dividends, and other payments to which
they may be entitled hereunder, and to make disposition thereof in accordance
with applicable laws.
(e) To do and perform any acts or things reasonable or
appropriate for the continued operation and the conservation, protection and
orderly administration of the Partnership Estate, and, in connection
therewith, to employ such agents, attorneys and counsel, and to confer upon
them such authority as the General Partner may deem expedient, and to pay
reasonable compensation therefor.
(f) The exercise of any discretionary power vested in the
General Partner shall be final and conclusive upon all Partners hereunder and
upon all persons whomsoever.
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(g)The General Partner shall, to the extent necessary,
prepare and file appropriate federal and state income tax returns and other
returns and reports required by applicable law on behalf of the Partnership.
The enumeration of powers in this Section shall not be
considered in any way to limit or control the power of the General Partner to
act as specifically authorized by any other Section or provision of this
Agreement and to act in such manner as the General Partner may in its absolute
discretion deem reasonable or appropriate to conserve, protect and administer
the Partnership Estate or to confer on the Partners the benefits intended to
be conferred upon them by this Agreement.
7.12 Limitation of Liability. The General Partner shall act in all
matters in its absolute discretion and shall be liable only for its own
willful misconduct. Without prejudice to the generality of the foregoing
provisions of this Section 7.12, it is further provided that:
(a) No successor General Partner shall be in any way
responsible for the acts or omissions of the General Partner in office prior
to the date on which it became a General Partner.
(b) The General Partner shall not be deemed bound by any
duties or obligations other than those specifically set forth in this
Agreement and no implied covenants or obligations shall be read into this
Partnership Agreement against the General Partner.
(c) In the absence of bad faith or gross negligence on the
part of the General Partner, the General Partner may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the General Partner.
(d) The General Partner shall not be liable for any error of
judgment made in good faith.
(e) If any controversy arises between the parties hereto or
with any third person with respect to the subject matter of this Agreement or
its terms or conditions, the General Partner shall not be required to
determine the same or take any action, but may await the settlement of any
such controversy by final appropriate legal proceedings or otherwise as may be
reasonably required by it.
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7.13 Rights of General Partner. Except as otherwise provided in
Section 7.12:
(a) The General Partner may rely and shall be protected in
acting upon any notice, resolution, certificate, credential, statement,
instrument, opinion, report, notice, request, consent, order, or other paper
or document believed by him to be genuine and to have been signed or presented
by the proper party or parties.
(b) The General Partner shall have the right to rely upon
and shall be fully protected in acting upon the advice or opinion of any
attorney, auditor or other expert at any time employed by him in connection
with any matter concerning the Partnership or the Partnership Estate.
(c) Persons dealing with the General Partner shall look only
to the Partnership Estate to satisfy any liability incurred by the General
Partner to such person in carrying out the terms of this Agreement, and the
General Partner shall have no other obligation to satisfy any such liability
except in the event of the General Partner's willful misconduct hereunder.
7.14 No Bond. No bond shall be required of the General Partner.
7.15 Indemnification. The General Partner shall be indemnified by and
receive reimbursement from the Partnership Estate against and for any and all
loss, lability, expense, or damage, including without limitation its
attorneys' fees and costs, which the General Partner may incur or sustain in
the exercise and performance of any of its powers and duties under this
Agreement in accordance with the terms hereof.
7.16 Payment of Distributions. Notwithstanding anything herein to the
contrary, all amounts to be paid hereunder except for the payment of
Partnership expenses of $3,000 or less or as set forth on Exhibit B attached
hereto shall be made pursuant to instructions by the General Partner through a
third party paying agent reasonably acceptable to Interfilm.
7.17 Compensation. The General Partner shall be entitled to
reasonable compensation for his services hereunder, in the amount of $10,000
per year out of the first proceeds of the Partnership Receipts or from the
amounts paid to the Partnership pursuant to Section 7.19 hereof.
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7.18 Reimbursement. The General Partner shall be reimbursed monthly
first from the Partnership Receipts and then from the Partnership Estate for
all expenses reasonably incurred by it in the exercise of powers or in the
performance of his duties in accordance with the Partnership Agreement.
7.19 Responsibility of Interfilm. Interfilm shall be responsible for
up to $7,500 per annum for the first full three years of the term hereof to be
applied first to the payment of Partnership expenses and then to the fees set
forth in Section 7.17 hereof, and shall make payment therefor to the General
Partner upon an invoice from the General Partner.
ARTICLE VIII
FILING OF RETURNS AND OTHER WRITINGS;
ELECTIONS; ACCOUNTING AND REPORTING
8.1 Filing of Returns and Other Writings; Tax Elections; Tax Matters
Partner. The General Partner shall cause the preparation and timely filing of
all Partnership tax returns and shall, on behalf of the Partnership, make such
tax elections and determinations as it, in its reasonable business judgment,
deems will be most favorable to the Partners generally, and, in addition, the
General Partner shall timely file all other writings required by any
governmental authority having jurisdiction to require such filing. At the
request of the transferee of a Limited Partner, the General Partner, its
discretion, may make the election provided in Section 754 of the Code on
behalf of the Partnership; provided, that such transferee agree to reimburse
the Partnership for all reasonable expenses incurred by the Partnership in
connection therewith.
The Tax Matters Partner shall be entitled to take such actions on
behalf of the Partnership in any and all proceedings with the Internal Revenue
Service as it, in its reasonable business judgment, deems to be most favorable
to the Limited Partners generally. The Tax Matters Partner shall be entitled
to be reimbursed by the Partnership for all costs and expenses incurred by it
in connection with any such proceeding and to be indemnified by the
Partnership (and solely out of Partnership assets) with respect to any action
brought against it in connection with the settlement of any such proceeding.
As used herein, the term "Tax Matters Partner" shall mean the General Partner.
8.2 Accounting. The General Partner shall keep or cause to be kept at
the Partnership's expense full,
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accurate, complete and proper books and accounts of all operations of the
Partnership.
ARTICLE IX
TRANSFER OF GENERAL PARTNER INTEREST;
REMOVAL OF GENERAL PARTNER;
SUCCESSOR GENERAL PARTNER
9.1 Retirement and Removal of the General Partner.
(a) The General Partner may Retire from the Partnership by
giving notice to the Partners and Interfilm. The General Partner shall cease
to be a General partner forthwith upon Retirement. Notwithstanding any such
Retirement, the transfer, sale, alienation, assignment or other disposition of
all or any part of the interest of the General Partner shall be subject to the
provisions of Section 9.2.
(b)The General Partner may be removed at any time by the
Limited Partners (acting by Consent of the Limited Partners).
9.2 Effects of Retirement or Removal of General Partner. Upon the
Retirement of a General partner or the removal of a General Partner pursuant
to Section 9.1(b), the capital account and Capital Contribution shall
thereupon be treated for all purposes as the capital account and Capital
Contribution as the case may be, of a Limited Partner hereunder. All other
right, title and interest of the General Partner in and to the Partnership
shall automatically be transferred, without further action on the part of the
Retired or removed General Partner, to a successor General Partner if any
admitted in accordance with this Article IX for an aggregate purchase price of
One Dollar ($1.00). For purposes of this Agreement, a Retired or removed
General Partner shall have the rights of a Limited Partner.
9.3 Successor General Partner. A successor General Partner shall,
upon Consent to his or its admission by the Limited Partners be admitted as a
General Partner to the Partnership upon his or its agreeing to be bound by the
provisions of this Agreement to the same extent and on the same terms and
conditions as the General Partner most recently Retired. Any such successor
General partner shall, as a condition of receiving any interest in the
Partnership, also agree to be bound by the Delaware Act, and any agreements,
contracts, instruments or other documents theretofore executed and delivered
on behalf of the
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Partnership to the same extent and on the same terms and conditions as the
General Partner most recently Retired.
ARTICLE X
TRANSFER OF LIMITED PARTNERSHIP INTERESTS
10.1 Transfer by Limited Partners. Subject to Section 10.2, a Limited
Partner may assign or otherwise transfer all or any portion of its economic
interest in the Partnership to another person (an "Assignee"). No person shall
be admitted to the Partnership as a Substitute Limited Partner other than an
Assignee, and no Assignee shall have the right to become a Substitute Limited
Partner unless all of the following conditions are satisfied:
(a)The duly executed and acknowledged written instrument of
assignment shall have been filed with the Partnership;
(b) The transferring Limited Partner and such Assignee shall
have executed and acknowledged such other instruments and taken such other
action as the General Partner shall deem necessary or desirable to effect such
substitution.
(c) The conditions set forth in Section 10.3 have been
satisfied, and, if requested by the General Partner, the transferring Limited
Partner or such Assignee shall have obtained an opinion of counsel reasonably
satisfactory to the General Partner as to the legal matters set forth therein;
and
(d) The General Partner shall have consented in writing to
the admission of such Assignee to the Partnership as a Substitute Limited
Partner, which consent may be withheld in the sole discretion of the General
Partner.
10.2 Certain Restrictions on Transfers. Notwithstanding any other
provision of this Agreement, no Partner may assign or otherwise transfer in
any manner all or any part of its interest in the Partnership, and no
attempted or purported assignment or transfer of such interest shall be
effective, unless (a) after giving effect thereto, the aggregate of all such
assignments or transfers by the Partners within the twelve (12) months
preceding the proposed date of such assignment or transfer would not equal or
exceed fifty percent (50%) of the total interests of the Partners in the
capital or profits of the Partnership, and such assignment or transfer would
not otherwise terminate the Partnership for the purposes of Section 708 of the
Code; (b) such assignment or transfer would not result in a violation of
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applicable law, including the Federal securities laws, or any or term or
condition of this Agreement; and (c) if such assignment or transfer is to an
employee benefit plan within the meaning of ERISA, the General Partner shall
have consented thereto.
10.3 Documents. No sale, assignment, transfer or other disposition by
a Limited Partner of an interest in the Partnership (by conveyance, operation
or law or otherwise) shall be effective to convey the subject matter thereof
until the assignee or other successor thereto executes all necessary
certificates or other documents and performs all acts required by the laws of
the State of Delaware and any other states in which the Partnership is then
doing business and executes any and all documents as shall be required from
time to time by the rules and regulations of any regulatory body or commission
having jurisdiction over the Partnership, to the full extent the same may be
necessary to constitute such assignee or successor a Substitute Limited
Partner and to preserve the status of the Partnership as a limited partnership
after the completion of such sale, assignment or transfer in accordance with
such laws. Each assignee, whether or not he becomes a Substitute Limited
Partner, shall by his acceptance of such assignment, be deemed to be bound by
all of the terms and conditions of this Agreement, including, without
limitation, this Article X. Each assignee or successor agrees upon the request
of the General Partner to execute such certificates or other documents and to
perform such acts as the General Partner may, from time to time, reasonably
request in connection with the foregoing.
ARTICLE XI
DISSOLUTION OF THE PARTNERSHIP
11.1 Dissolution.
(a) Except as otherwise provided in Section 11.1(b), the
Partnership shall be dissolved upon the Retirement or removal of the General
Partner as set forth in Section 9.1 above. The Partnership shall not dissolve
upon the death, incompetency, dissolution, liquidation, bankruptcy or
assignment for the benefit of creditors of any Limited Partner.
(b) In the case of a Retirement or removal of the General
Partner, the Partnership shall dissolve unless the Limited Partners elect by
Consent a successor General Partner. The election to continue the Partnership
as a limited partnership (or, if necessary, as a successor limited
partnership) shall be exercisable only within ninety
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(90) days after the occurrence of the Retirement or removal of the General
Partner.
(c) Upon the dissolution of the Partnership or any
reconstituted or successor partnership, as applicable, the General Partner
(or, if there shall not be any remaining General Partner(s), a special
liquidator (herein called the "Liquidator") appointed by the Limited Partners
(acting by Consent of the Limited Partners) shall proceed with the liquidation
of the Partnership, including, without limitation, the sale or other
disposition of the assets of the Partnership. The gain or loss on any sale of
Partnership assets shall be credited or charged to the capital accounts of all
Partners in accordance with the provisions of Section 5.1. The General Partner
shall then apply and distribute the proceeds of such liquidation (including
the proceeds of the sale of all or substantially all of the assets of the
Partnership, which sale shall have caused the dissolution of the Partnership)
in the following order of priority:
(i) To the payment of any debts and liabilities of
the Partnership;
(ii) To the setting up of any reserve which the
General Partner (or the Liquidator, where applicable) shall reasonably deem
advisable to provide for any contingent or unforeseen liabilities or
obligations of the Partnership, including, without limitation, any
indemnification reserves pursuant to Section 8.1(b) of the Merger Agreement;
(iii) To each of the Partners the amount, if any,
by which the aggregate distributions to them pursuant to Section 5.2 is less
than their aggregate Capital Contributions paid to the Partnership (which
amounts shall be charged against their respective capital accounts) which
amounts will be distributed to the Partners only after such Partners agree in
writing that such distribution be held by each of the Partners pursuant to the
obligations of the Limited Partnership pursuant to Section 7.5 hereof, if such
Section then applies; and
(iv) To the Partners in payment of the
balance of their respective capital accounts which amounts will be distributed
to the Partners only after such Partners agree in writing that such
distribution be held by each of the Partners pursuant to the obligations of
the Limited Partnership pursuant to Section 7.5 hereof, if such Section then
applies.
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At the expiration of such period of time as the General Partner(s) (or, where
applicable, the Liquidator) shall deem advisable, the remaining balance of any
reserve established in accordance with clause (ii) shall be distributed in the
manner set forth in clause (iii).
11.2 Distributions in Kind. In the event the Partnership shall, at
any time, whether pursuant to the dissolution of the Partnership or otherwise,
distribute any property in kind, the difference, if any, between the fair
market value of such property and the value at which such property is carried
on the books of the Partnership shall be credited (or charged) to the capital
accounts of the Partners in accordance with the manner in which the Partners
would have shared in the gain or loss from the sale of such property prior to
such distribution; provided, however, that notwithstanding the foregoing no
such distribution in kind shall be made by the Partnership without the Consent
of the Limited Partners and of the General Partner.
ARTICLE XII
POWER OF ATTORNEY
Each of the Limited Partners hereby constitutes and appoints the
General Partner as its true and lawful attorney-in-fact, with full power of
substitution, and with power to act in its name and on its behalf, to make,
execute and deliver, swear to, acknowledge, file and record (a) copies of the
Certificate pursuant to which the Limited Partners shall be admitted as
Limited Partners and any amendments thereto or restatements thereof adopted
pursuant to the provisions hereof (including without limitation any such
amendment required upon the admission of a substituted or additional Limited
Partner, as additional Limited Partners of a different class or a successor or
additional general partner, the continuation of the Partnership, the formation
of a successor limited partnership or the doing of any act requiring the
amendment of this Agreement under the laws of the State of Delaware or under
the applicable laws of any other jurisdiction, or by any regulatory agency, in
which the General Partner deems said filing to be necessary or desirable and
any such amendment relating to a successor limited partnership, (b) any
certificate of fictitious name, if required by law, (c) such other
certificates or instruments as may be required under the laws of the State of
Delaware or any other jurisdiction, or by any regulatory agency, as the
General Partner may deem necessary or advisable, and (d) such other
instruments as the General Partner may deem necessary or desirable fully to
carry out the provisions hereof in accordance with the terms hereof; provided,
however, that none of the foregoing acts shall
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increase the liability of any Limited Partner beyond that expressly set forth
in this Agreement; and provided further, however, that such attorney-in-fact
shall, as such, not have any right, power or authority to act in such
capacity, except as specifically provided in this Agreement.
The power of attorney granted in this Section is a special power of
attorney coupled with an interest and is irrevocable, shall not be affected by
the subsequent disability or incapacity of the principal, may be exercised by
the attorney-in-fact by its signature on behalf of all Limited Partners, and
shall survive the delivery of an assignment by a Limited Partner of the whole
or any portion of its economic interest, except that where the assignee of any
such interest has been approved, pursuant to the provisions of Section 10.1,
for admission to the Partnership as a Substitute Limited Partner, the power of
attorney shall survive the delivery of such assignment solely for the purpose
of enabling the attorney-in-fact to execute, acknowledge and file any
instrument necessary to effect such substitution.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Amendment. This Agreement may be amended only by a written
instrument executed by the General Partner and approved by the Consent of the
Limited Partners, provided that this Agreement shall not be amended (a) to
increase the Limited Partners' liability or to change the contributions
required of Limited Partners, their rights and interests, as a class, in net
profits, net losses, cash flow and income tax allocations of the partnership,
or their rights, as a class, upon liquidation here thereof, without the
written consent of the General Partner and any Limited Partner adversely
affected thereby, or (b) to amend any provision of this Agreement to change a
voting requirement of Limited Partners without the written consent of all
Limited Partners.
13.2 Partition. Each Partner irrevocably waives, on behalf of
himself, his successors, heirs and permitted assigns, during the term of the
Partnership, any right that it may have to maintain any action for a partition
with respect to Partnership property.
13.3 Enforcement and Specific Performance. If any Partner proposes to
transfer all or any part of such Partner's interest in the Partnership by
sale, assignment, encumbrance, or other transfer in violation of the terms of
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this Agreement, the Partnership or any other Partner may apply to any court of
competent jurisdiction for an injunctive order prohibiting such proposed
disposition except upon compliance with the terms of this Agreement. The
Partnership or any other Partner may institute and maintain any action or
proceeding against the Partner proposing to make such transfer, to compel the
specific performance of this Agreement. Any attempted transfer in violation of
this Agreement shall be void and have no force or effect. Similar injunctive
relief and specific performance may be obtained by the Partnership or any
Partner against any third party to compel compliance with the terms of this
Agreement. The party against whom such action or proceeding is brought hereby
waives the claim or defense that an adequate remedy at law exists, and such
party shall not urge in any such action or proceeding the claim or defense
that such remedy at law exists.
13.4 Notices. All notices given under this Agreement shall be made in
writing. All periods of time shall begin or end on the day such notice is
personally delivered to any recipient or five days after being sent by
certified mail, return receipt requested, postage prepaid (with a postmark no
later than the day specified for such notice), addressed to the Partnership at
its principal business office as set forth in Section 1.4 or to any Partner at
the address set forth in Schedule A (or at such other address as such Partner
may provide to the other Partners in writing). Any Partner may waive, in
writing, any notice required to be given pursuant to this Agreement, whether
before or after such required notice.
13.5 Binding Effect. Except as otherwise provided in this Agreement,
this Agreement shall be binding upon, and shall inure to the benefit of, the
Partners and their respective personal representatives, successors and
permitted assignees, and any such personal representative, successor in
interest or assignee shall succeed to the benefits and burdens of such
person's predecessor in interest in proportion to the interest transferred.
13.6 Waiver. Neither the failure nor any delay on the part of any
party hereto to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by
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or on behalf of the party asserted to have granted such waiver.
13.7 Severability. If any provision of this Agreement shall be held
or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction, or in all jurisdictions or
in all cases, because of the conflicting of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or
provisions in question invalid, inoperative or unenforceable in any other
jurisdiction or in any other case or circumstance or of rendering any other
provision or provisions herein contained invalid, inoperative or unenforceable
to the extent that such other provision or provisions are not themselves
actually in conflict with such constitution, statute or rule of public policy.
This Agreement shall, in such event, be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative or unenforceable
provision had never been contained herein and such provision reformed so that
it would be valid operative and enforceable to the maximum extent permitted.
in such jurisdiction or in such case.
13.8 Entire Agreement. This Agreement contains the entire
understanding among the Partners and supersedes any prior understandings,
inducements or conditions, expressed or implied, written or oral, among them
respecting the subject matter contained herein. There are no representations,
agreements, arrangements or understandings, oral or written, between and among
the parties hereto relating to the subject matter of this Agreement which are
not fully expressed or referred to herein. The express terms hereof control
and supersede any course of performance or usage of the trade inconsistent
with any of the terms hereof.
13.9 Agreement in Counterparts; Execution. This Agreement may be
executed in several counterparts, and all such counterparts, as so executed,
shall constitute one agreement binding upon all the parties hereto,
notwithstanding that all the parties are not signatories to the original or
the same sign counterpart. It sh all not be necessary that any counterpart be
signed by all of the parties hereto so long as each counterpart be signed by
the General Partner, and the General Partner and one or more Limited Partners
sign at least one counterpart.
13.10 Amendments to Certificate. Upon the admission of a new Limited
Partner in accordance with the provisions of this Agreement, any certificate
of amendment to the Certificate, reflecting such admission, and all other
26
<PAGE>
appropriate documents which are required by law or this Agreement, shall be
filed by the General Partner on behalf of the Partnership.
13.11 Trustee Liability; Status of Successor Trustees as Partners.
When this Agreement is executed by the Trustee of any trust, including the
Trust, such execution is by the trustee, not individually, but solely as
trustee in the exercise of and under the power and authority conferred upon
and invested in such trustee. It is expressly understood and agreed that
nothing herein contained shall be construed as creating any liability on any
such trustee personally to pay any amounts required to be paid hereunder, or
to perform any covenant, either express or implied, contained herein, all such
liability, if any, being expressly waived by the parties hereto by their
execution hereof. For Partners which are trusts, any liability of any such
Partner to the Partnership or to any third person shall be only that of such
trust to the extent of its trust estate and shall not be a personal liability
of any trustee, grantor or beneficiary thereof. Any successor trustee or
trustees of any trust as a Partner of the Partnership shall be entitled to
exercise the same rights and privileges and be subject to the same duties and
obligations of his predecessor trustee. As used in this Agreement, the term
"trustee" shall include any and all such successor trustees.
13.12 Headings. The section and other headings contained in this
Agreement are inserted only as a matter of convenience and for reference and
in no way shall affect, -define or limit the scope, meaning, intent or
interpretation of the text of this Agreement.
13.13 Miscellaneous. The laws of the State of Delaware, including the
Delaware Act, shall govern this Agreement and the construction of its terms.
In the event of any conflict between any provision of this Agreement and any
non-mandatory provision of the Delaware Act, the provision of this Agreement
shall control and take precedence. If any provision is unenforceable or
invalid for any reason, the remainder of this Agreement shall continue in
effect. Any pronoun used in the masculine, feminine, or neuter shall be
interpreted as the context requires, words used in the
27
<PAGE>
singular shall denote the plural and words used in the plural shall denote the
singular when the context so requires.
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
of Limited Partnership to be executed, to be effective as of the date first
above written.
GENERAL PARTNER:
FAB FIVE, INC.
By: /s William Franzblau
-----------------------
Name: William Franzblau
Title: President
Agreed as to Sections
7.4, 7.5, 7.6, 7.7 and 7.19
INTERFILM, INC.
By: /s/ William Franzblau
-----------------------
LIMITED PARTNERS:
THE INTERFILM STOCKHOLDERS TRUST
By: /s/ William Franzblau
-----------------------
Name: William Franzblau
Title: Trustee
28
<PAGE>
/s/ Bob Bejan
- ---------------------------
Bob Bejan
29
<PAGE>
singular shall denote the plural and words used in the plural shall denote the
singular when the context so requires.
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
of Limited Partnership to be executed, to be effective as of the date first
above written.
GENERAL PARTNER:
FAB FIVE, INC.
By:
-----------------------
Name: William Franzblau
Title: President
Agreed as to Sections
7.4, 7.5, 7.6, 7.7 and 7.19
INTERFILM, INC.
By:
-----------------------
LIMITED PARTNERS:
THE INTERFILM STOCKHOLDERS TRUST
By:
-----------------------
Name: William Franzblau
Title: Trustee
Vivaldi Ltd.
By: /s/ Larry Kuppin
-----------------
General Partner
30
<PAGE>
/s/ Bob Rehme
- ---------------------------
Bob Rehme
31
<PAGE>
/s/ Brian T. Cooper
- ---------------------------
Brian T. Cooper
32
<PAGE>
/s/ David L. Goret
- ---------------------------
David L. Goret
33
<PAGE>
/s/ Paul Selwyn
- ---------------------------
Paul Selwyn
34
<PAGE>
Fuller Family Trust
By:/s/ Irv Fuller
-----------------
Trustee
35
<PAGE>
SCHEDULE A
No. of Shares Percentage
Name and Address (pre-reverse split) Interest
- ---------------- ------------------- --------
Bob Bejan 395,612 9,142
4015 South Court Street
Seattle, WA 98144
Vivaldi Ltd. 670,311 15,490
c/o Fifth Avenue Entertainment
9615 Brighton Way
Beverly Hills, CA 90210
Bob Rehme 213,437 4,932
c/o Neufeld Rehme Productions
5555 Melrose Avenue
Dressing Room Bldg. 112
Los Angeles, CA 90038
Brian T. Cooper 83,903 1,939
15 West 11th Street
Apt 9E
New York, New York 10011
David Goret 97,653 2,257
44 Kayser Lane
West Orange, NJ 07052
Paul Selwyn 141,290 3,264
300 North Swall Drive
Beverly Hills, CA 90211
Fuller Family Trust 282,580 6,530
c/o Fullvest Corp.
8727 West 3rd Street
Los Angeles, CA
The Interfilm Stockholders Trust 2,047,102 47,304
c/o William Franzblau
110 Greene Street, Suite 601
New York, NY 10012
<PAGE>
No. of Shares Percentage
Name and Address (pre-reverse split) Interest
- ---------------- ------------------- --------
Fab Five, Inc. 395,612 9,142
c/o William Franzblau
110 Greene Street, Suite 601
New York, NY 10012
<PAGE>
EXHIBIT A
---------
ASSETS
---------
1. All of the rights and responsibilities in connection with the
litigation captioned "Interfilm, Inc. and Interfilm Technologies, Inc. against
Advanced Exhibition Corporation, et. al.," Index No. 601990/96, in the
Superior Court of the State of New York, including, but not limited to, the
right to receive all net proceeds of any judgment or settlement thereof, and
the responsibility to pay any out-of-pocket expenses in excess of the amount
that has been escrowed for such expenses.
2. U.S. Patent No. 5,465,384 and U.S. Patent No. 4,746,994.
3. All IT Systems located in various theaters owned by Seller and any
revenue received from the sale thereof.
4. Any refund to Seller of an insurance premium by Sedgewick Insurance
Company.
5. Any refund of bond posted with the State of California relating to
sales tax.
6. Any net proceeds generated by the enforcement of any judgment or
settlement relating to the litigation between Interfilm, Inc. and Ground
Control.
7. the cash balance contained in Account No. 266011809 with the Republic
National Bank of New York, 415 Madison Avenue, New York, New York 10017.
<PAGE>
Sony Electronics ............................................$1,587.73
Sony Theatres ...............................................$2,221.84
THE INTERFILM STOCKHOLDERS TRUST
INTERFILM, INC. a Delaware corporation ("Interfilm") and
Interfilm Technologies, Inc., a New York corporation, hereby establish this
Trust as of this 11th day of June, 1996, (the "Trust") with reference to the
following:
A. Pursuant to that certain Agreement and Plan of
Reorganization dated as of April 12, 1996 (the "Merger Agreement") by and
among RhoMed Incorporated, ("RhoMed"), Interfilm, Inc. ("Interfilm") and
Interfilm Acquisition Corp. ("InSub"), concurrently herewith, InSub will merge
(the "Merger") with and into RhoMed and each issued and outstanding share of
the Preferred Stock and Common Stock of RhoMed will be converted into shares
of Interfilm Series A Preferred Stock and Interfilm Series B Preferred Stock.
B. In connection with the Merger and pursuant to the Merger
Agreement, the assets of Interfilm and Interfilm Technologies, Inc. ("ITI")
set forth on Exhibit A attached hereto (the "Interfilm Assets") are being
transferred herewith to a limited partnership (the "Limited Partnership")
effective immediately after the effective time of the Merger (the "Effective
Time") to hold, liquidate and distribute the same as set forth in that certain
Agreement of Limited Partnership dated as of June 11, 1996 between Fab Five,
Inc., as general partner, and certain other persons as limited parties.
The Trust is being established herein to receive a limited
partnership interest in the Partnership (the "Limited Partnership Interest").
NOW, THEREFORE, pursuant to the Merger Agreement, Interfilm
and ITI hereby establish this Trust, and Interfilm and ITI irrevocably assign,
set over and deliver to the Trust the Trust Assets (as hereinafter defined).
1
<PAGE>
ARTICLE 1. NAME AND DEFINITIONS
1.1 The Trust shall be known as The Interfilm
Stockholders Trust.
1.2 For purposes of the Trust, unless the context
otherwise requires:
(a) "Beneficiaries" shall mean the holders
of record of the shares of Common Stock of Interfilm as of the close of
Interfilm's stock transfer books on June 21, 1996 (the "Record Date"), and/or
such other persons not holders of record of such shares who can establish
valid title to the liquidating distributions payable hereunder in view of
their beneficial interest in such shares as of the Record Date, and the
respective successors in interest of any of the foregoing; provided, however,
that no partner of the Limited Partnership shall be deemed to be a Beneficiary
hereunder.
(b) "Trust Estate" shall mean the Limited
Partnership Interest.
(c) "Trust Receipts" shall mean all rents,
royalties, income proceeds and other receipts of or from the
Trust Estate.
(d) "Trustee" shall mean William Franzblau
or his successor(s) appointed pursuant to Article 9 hereof.
ARTICLE 2. PURPOSE AND LIMITATIONS OF THE
TRUST AND THE TRUST AGREEMENT.
2.1 The Trust has been organized pursuant to the Merger
Agreement for the primary purpose of receiving, liquidating and distributing
the Trust Estate, and, subject to the limitations set forth herein, its
activities shall be limited to those reasonably necessary to, and consistent
with, the accomplishment of such purpose. The Trust shall not be an
organization having as its purpose the carrying on of a profit-making
business.
2.2 Except as provided herein, in no event shall
any part of the Trust Estate revert or be distributed to
2
<PAGE>
Interfilm, ITI or to any stockholder of Interfilm or ITI as such other than a
Beneficiary entitled thereto under the terms of this Trust. Any unclaimed part
of the Trust Estate shall be subject to disposition in accordance with
applicable laws.
2.3 No part of the Trust Estate or the Trust Receipts shall
be used or disposed of by the Trustee for any purpose other than (i) for the
purposes for which this Trust was created as set forth in Section 2.1 hereof,
and (ii) the distribution thereof to the Beneficiaries in accordance with the
terms of this Trust. In order to preserve and protect the Trust Estate pending
disposition or distribution thereof, the Trustee shall not invest monies
forming a part of the Trust Estate except in demand and time deposits in
federally insured banks or savings institutions or short term certificates of
deposit.
ARTICLE 3. TRANSFER TO THE TRUSTEE.
The Trustee agrees to accept the Trust and the
assets constituting the Trust Estate. However, the Trustee shall be
responsible only for the assets delivered to him or registered in the Trust's
name and shall have no duty to make, nor incur any liability for failing to
make, any search for unknown assets. The Trustee shall be responsible for only
those liabilities of which it is informed, and shall have no duty to make, nor
incur any liability for failing to make, any search for unknown liabilities.
The Trustee shall hold the Trust Estate without provision for or the payment
of any interest thereon to any Beneficiary, except that interest earned on any
assets of the Trust shall become a part of the Trust Estate.
3
<PAGE>
ARTICLE 4. PAYMENT OF LIABILITIES AND
EXPENSES.
4.1 Prior to any distribution to the Beneficiaries, the
Trustee shall pay from the Trust Estate, or otherwise discharge or provide
for, all expenses, charges, liabilities, and obligations of the Trust, and any
taxes imposed on the Trust. The Trustee may, in his sole discretion, make
provisions by reserve or otherwise out of the Trust Estate, for such amount as
the Trustee may determine to be necessary to meet present or future
liabilities of the Trust, whether fixed or contingent.
4.2 Subject to Section 4.1 above, the Trustee shall withhold
from time to time from that portion of the Trust Estate otherwise
distributable to the Beneficiaries such sums as may be sufficient to pay any
taxes or other charges which have been or may be imposed on the Bene ficiaries
under the income tax laws or other laws of the United States or any state or
political subdivision by reason of distributions which have been or will be
made to the Beneficiaries, and the Trustee may, in his discretion, enter into
agreements with taxing or other authorities for the payment of such amounts as
may be withheld in accordance with the provisions of this Section.
ARTICLE 5. DISTRIBUTIONS TO BENEFICIARIES.
5.1 Subject to Article 4 hereof, the Trustee shall, as the
Trustee in his sole discretion deems appropriate, distribute and pay, or cause
to be distributed and paid, to the Beneficiaries on a date set by the Trustee,
all or part of the Trust Estate that remains after payment of, or provision
for, expenses, liabilities, obligations, and reserves for contingent claims
arising hereunder and for potential claims of unlocated Beneficiaries, as
provided herein and after the withholding of the taxes or charges, if any, as
provided herein. Such distributions shall be made in proportion to the
respective interest of the
4
<PAGE>
Beneficiaries in the Trust, based on the percentage that the number of shares
of Interfilm Common Stock beneficially owned by each Beneficiary (or such
Beneficiary's predecessor in interest) bears to the total number of shares of
Interfilm Common Stock outstanding, each determined as of the Record Date (as
to each Beneficiary, the "Pro Rata Interest").
5.2 If any conflicting claims or demands are made or
asserted to any interest of any Beneficiary herein, the Trustee shall be
entitled, at his sole election, to refuse to comply with any such conflicting
claims or demands. The Trustee shall be entitled to refrain and refuse to act
until (i) the rights of the adverse claimants have been adjudi cated by a
final judgment of a court of competent jurisdic tion, or (ii) all differences
have been adjusted by valid written agreement between all of such parties, and
the Trustee shall have been furnished with an executed counterpart of such
agreement; the Trustee may, in his absolute discretion, require that there be
furnished a surety bond or other security satisfactory to the Trustee to fully
indemnify him as between all conflicting claims or demands.
5.3 Any portion of the Trust Estate which shall be available
to, but unclaimed or refused by, any Bene ficiary shall be deemed to be
subject to applicable escheat laws, and the Trustee is expressly authorized to
pay and/or deliver such portion of the Trust Estate at such time or times as
may be consonant with such laws and in accordance with the provisions thereof.
5.4 The Trustee shall make such reports in writing to each
of the Beneficiaries as the Trustee deems appropriate.
5
<PAGE>
ARTICLE 6. TERM AND TERMINATION.
6.1 The Trust will terminate as soon as
practicable following liquidation of substantially all the known assets of the
Trust Estate and the satisfaction of all probable transferee liabilities of
the Trust or the Bene ficiaries known to exist at the time of such
termination.
6.2 After the termination of the Trust, and for the purpose
of liquidating and winding up the affairs of the Trust, the Trustee shall
continue to act as such until his duties have been fully performed. Upon the
distribution of all of the Trust Estate to the Beneficiaries and the payment
and discharge of, or other adequate provision for, all debts, liabilities, and
obligations of the Trust, the Trustee shall have no further duties or
obligations hereunder.
ARTICLE 7. POWERS OF THE TRUSTEES.
7.1 The Trustee shall have the power to hold, and
shall hold, the legal and equitable title to all assets which at any time
constitute the Trust Estate, and the Trustee shall hold and administer such
assets and property in trust, pursuant to the terms of this Trust.
7.2 Subject to the limitations imposed by
Articles 2 and 4 herein, the Trustee shall have the
following specific powers:
(a) To sell, transfer, assign, convey, or
invest the Trust Estate or any part thereof.
(b) To collect and receive any and all property and
assets due to or owing or belonging to Interfilm as of the Effective
Time or the Trust, to give full discharge and release therefor.
(c) To collect, liquidate or otherwise convert into
cash all property, assets and rights in the Trust Estate, and to pay,
discharge and satisfy all remaining liabilities, expenses and
obligations of, and claims against the Trust and the Trustee.
6
<PAGE>
(d) To retain or receive on behalf of, and for the
benefit of, those Beneficiaries who have not been located or have
refused payment, all liquidating distributions, unclaimed dividends,
and other payments to which they may be entitled hereunder, and to
make disposition thereof in accordance with applicable laws.
(e) To do and perform any acts or things reasonable
or appropriate for the continued operation and the conservation,
protection and orderly adminis tration of the Trust Estate, and, in
connection therewith, to employ such agents, attorneys and counsel,
and to confer upon them such authority as the Trustee may deem
expedient, and to pay reasonable compensation therefor.
(f) The exercise of any discretionary power vested
in the Trustee shall be final and conclusive upon all Beneficiaries
hereunder and upon all persons whomsoever.
(g) The Trustee shall, to the extent neces sary,
cause the preparation and filing of appropriate federal and state
income tax returns and other returns and reports required by
applicable law on behalf of the Trust.
The enumeration of powers in this Section shall not be
considered in any way to limit or control the power of the Trustee to act as
specifically authorized by any other Section or provision of this Agreement
and to act in such manner as the Trustee may in his absolute discretion deem
reasonable or appropriate to conserve, protect and administer the Trust Estate
or to confer on the Bene ficiaries the benefits intended to be conferred upon
them by this Trust.
7
<PAGE>
ARTICLE 8. DUTY OF CARE AND LIABILITIES OF
TRUSTEE.
8.1 The Trustee hereby agrees to accept and undertake to
discharge the Trust created hereby, upon the terms and conditions hereof. In
so doing it shall act in all matters in his absolute discretion and shall be
liable only for his own willful misconduct. Without prejudice to the
generality of the foregoing provisions of this Section 8.1, it is further
provided that:
(a) No successor Trustee shall be in any way
responsible for the acts or omissions of the Trustee in office prior
to the date on which it became a Trustee.
(b) The Trustee shall not be deemed bound by any
duties or obligations other than those specifically set forth in this
Trust, and no implied covenants or obligations shall be read into
this Trust against the Trustee.
(c) In the absence of bad faith or gross negligence
on the part of the Trustee, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the
Trustee.
(d) The Trustee shall not be liable for any
error of judgment made in good faith.
(e) If any controversy arises between the parties
hereto or with any third person with respect to the subject matter of
this Trust or its terms or condi tions, the Trustee shall not be
required to determine the same or take any action, but may await the
settle ment of any such controversy by final appropriate legal
proceedings or otherwise as may be reasonably required by it.
8.2 Except as otherwise provided in Section 8.1:
8
<PAGE>
(a) The Trustee may rely and shall be protected in
acting upon any notice, resolution, certificate, credential,
statement, instrument, opinion, report, notice, request, consent,
order, or other paper or document believed by him to be genuine and
to have been signed or presented by the proper party or parties.
(b) The Trustee shall have the right to rely upon
and shall be fully protected in acting upon the advice or opinion of
any attorney, auditor or other expert at any time employed by him in
connection with any matter concerning the Trust or the Trust Estate.
(c) Persons dealing with the Trustee shall look
only to the Trust Estate to satisfy any liability incurred by the
Trustee to such person in carrying out the terms of this Trust, and
the Trustee shall have no other obligation to satisfy any such
liability except in the event of the Trustee's willful misconduct
hereunder.
8.3 No bond shall be required of the Trustee.
8.4 The Trustee shall be indemnified by and
receive reimbursement from the Trust Estate against and for any and all loss,
lability, expense, or damage, including without limitation his attorneys' fees
and costs, which the Trustee may incur or sustain in the exercise and
performance of any of its powers and duties under this Trust in accordance
with the terms hereof.
8.5 Notwithstanding anything herein to the contrary, all
amounts to be paid hereunder except for the payment of Trust expenses of
$3,000 or less or as set forth on Exhibit B attached hereto shall be made
pursuant to instructions by the Trustee through a third party paying agent
reasonably acceptable to Interfilm.
9
<PAGE>
ARTICLE 9. SUCCESSOR TRUSTEE.
9.1 The Trustee may resign, and be discharged
from the Trust hereby created by giving written notice. Such resignation shall
become effective upon the appointment of the Trustee's successor and such
successor's acceptance of such appointment.
9.2 In case at any time a Trustee shall resign or be removed
by a majority vote of the Beneficiaries (based on their Pro Rata Interest), a
vacancy shall be deemed to exist in the office of such Trustee, and a
successor shall be appointed by majority vote (based on their Pro Rata
Interest) of the Beneficiaries upon written notice to the Trustee and the
consent (not to be unreasonably withheld or delayed) of Interfilm.
9.3 Any successor Trustee appointed hereunder shall execute
counterparts of this Trust. Thereupon such successor Trustee shall, without
any further act, be deemed to have accepted its appointment, and become vested
with all the estates, properties, rights, powers, trusts, and duties of its
predecessor in the Trust hereunder with like effect as if originally named
therein; but the retiring Trustee shall nevertheless, when requested in
writing by the successor Trustee and upon payment of any expenses in
connection therewith, execute and deliver an instrument or instruments
conveying and transferring to such successor Trustee upon the trusts herein
expressed, all the estates, properties, rights, powers, and trust of such
retiring Trustee and shall duly assign, transfer, and deliver to such
successor Trustee all property and money held by it hereunder.
10
<PAGE>
ARTICLE 10. COMPENSATION AND EXPENSES OF
TRUSTEE.
10.1 The Trustee shall be entitled to reasonable
compensation for his services hereunder, in the amount of $10,000 per year out
of the first proceeds of the Trust Receipts.
10.2 The Trustee shall be reimbursed monthly first from the
Trust Receipts and then from the Trust Estate for all expenses reasonably
incurred by him in the exercise of powers or in the performance of his duties
in accordance with the Trust.
ARTICLE 11. AMENDMENT OF TRUST.
This Trust may be amended by the Trustee without a
vote of the Beneficiaries solely for the purpose of qualifying or continuing
to qualify the Trust as a "liquidating trust" as distinguished from an
"association" for purposes of the Internal Revenue Code, as amended from time
to time. In all other cases, the Trust may be amended only by a majority vote
of the Beneficiaries (in accordance with their Pro Rata Interest) with the
consent of Interfilm which shall not be unreasonably withheld or delayed.
ARTICLE 12. MISCELLANEOUS.
12.1 This Trust shall be administered in, and
under the laws of, the State of Delaware, and this Trust and the validity
thereof shall be governed by and construed in accordance with the laws of that
State.
12.2 In the event any provision of this Trust or the
application thereof to any person or in any circum stances shall be finally
determined by a court of proper jurisdiction to be invalid or unenforceable to
any extent, the remainder of this Trust, or the application of such provision
to persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each remaining provision of
this Trust
11
<PAGE>
shall be valid and enforced to the fullest extent permitted
by law.
12.3 Any notice required or provided for in this Trust shall
be in writing and be deemed to have been given when deposited in a United
States Post Office or letter box, first class postage prepaid registered or
return receipt, or personally delivered.
12.4 Each Beneficiary's interest in the Trust and/or the
Trust Estate, and his rights thereto, shall not be assignable or transferable
in any manner, except by will, intestate succession, or operation of law.
12.5 Except as provided in Article 11 above, the Trust
created hereunder shall be irrevocable and no person shall have the right or
power, whether alone or in conjunction with others, in whatever capacity, to
alter, amend, revoke or terminate this Trust, or any of the terms of this
Trust in whole or in party, or to designate the persons who shall possess or
enjoy the trust property or the income therefrom.
12.6 For purposes of this Trust, unless the context shall
indicate or require otherwise, words of the masculine gender shall be deemed
and construed to include correlative words of the feminine and neuter gender,
words of the neuter gender shall be deemed and construed to
12
<PAGE>
include correlative words of the masculine and feminine gender, and words of the
singular shall be deemed and construed to mean words of the plural and vice
versa.
IN WITNESS WHEREOF, Interfilm and the Trustee have executed
this Trust at New York, New York on the day and year first above written.
INTERFILM, INC.
By: /s/ William Franzblau
------------------------------------
An Authorized Officer
/s/ William Franzblau
-------------------------------------
William Franzblau,
Trustee
INTERFILM TECHNOLOGIES, INC.
By: /s/ William Franzblau
------------------------------------
An Authorized Officer
13
<PAGE>
EXHIBIT A
---------
ASSETS
---------
1. All of the rights and responsibilities in connection with the
litigation captioned "Interfilm, Inc. and Interfilm Technologies, Inc. against
Advanced Exhibition Corporation, et. al.," Index No. 601990/96, in the
Superior Court of the State of New York, including, but not limited to, the
right to receive all net proceeds of any judgment or settlement thereof, and
the responsibility to pay any out-of-pocket expenses in excess of the amount
that has been escrowed for such expenses.
2. U.S. Patent No. 5,465,384 and U.S. Patent No. 4,746,994.
3. All IT Systems located in various theaters owned by Seller and any
revenue received from the sale thereof.
4. Any refund to Seller of an insurance premium by Sedgewick Insurance
Company.
5. Any refund of bond posted with the State of California relating to
sales tax.
6. Any net proceeds generated by the enforcement of any judgment or
settlement relating to the litigation between Interfilm, Inc. and Ground
Control.
7. the cash balance contained in Account No. 266011809 with the Republic
National Bank of New York, 415 Madison Avenue, New York, New York 10017.
GENERAL BILL OF SALE
ASSIGNMENT AND ASSUMPTION AGREEMENT
This General Bill of Sale, Assignment and Assumption
Agreement is made and entered into as of the 25th day of June, 1996, by and
between, on the one hand, Interfilm, Inc., a Delaware corporation ("IFI"), and
Interfilm Technologies, Inc., a New York corporation (collectively, "Seller"),
and, on the other hand, the Interfilm Stockholders Limited Partnership, a
Delaware limited partnership ("Buyer") with reference to the following:
A. IFI has entered into that certain Agreement and Plan of
Reorganization, dated as of April 12, 1996, as amended, by and among IFI,
Interfilm Acquisition Corp., a New Mexico corporation and wholly-owned
subsidiary of Interfilm, Inc., and RhoMed Incorporated, a New Mexico
corporation (the "Agreement").
B. Pursuant to the Agreement, IFI has agreed to transfer to
Buyer certain interests and assets of IFI and its subsidiaries (the "Assets")
described on Exhibit A, which Exhibit A is attached hereto and incorporated
herein by this reference.
C. Buyer has agreed to assume from Seller, certain
"Obligations" of Seller defined below.
D. Buyer and Seller desire to consummate the transfer of the
Assets and the assumption of the Obligations immediately after the "Effective
Time" as such term is defined in the Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals
and of the mutual agreements hereinafter set forth, the parties hereto agree
as follows:
1. Assignment. For valuable consideration, the
receipt and sufficiency of which Seller hereby acknowledges, Seller, pursuant
to and in compliance with the Agreement, does hereby sell, convey, transfer,
assign and deliver to Buyer, and Buyer does hereby accept from Seller, all of
Seller's right, title and interest in and to all of the Assets:
TO HAVE AND TO HOLD all such Assets hereby assigned,
transferred and conveyed unto Buyer, its successors and assigns, to its and
their own use and behalf forever.
<PAGE>
2. Assumption.
In consideration of such transfer, and subject in each case
to the provisions of the Agreement with respect thereto, Buyer hereby agrees
to assume those liabilities set forth on Exhibit B attached hereto (the
"Obligations").
3. Benefits of Agreement.
This General Bill of Sale, Assignment and Assumption
Agreement shall not constitute an assignment of any claim, contract, permit,
franchise or license if the attempted assignment thereof without the consent
of the other party thereto would constitute a breach thereof. If such consent
is not obtained, or if any attempted assign ment thereof would be ineffective
so that Buyer would not in fact receive all such rights, then, upon reasonable
notice to Seller, Buyer may act as the attorney-in-fact of Seller in order to
obtain for Buyer the benefits thereunder, as provided in the following
Paragraph 3.
4. Further Assurances. Seller shall, at any time and from
time to time after the date hereof, upon the request of Buyer, execute,
acknowledge and deliver all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances, and take all such further
actions, as shall be necessary or desirable to give effect to the transactions
hereby consummated and to collect and reduce to the possession of Buyer any
and all of the interests and assets hereby transferred to Buyer. Subject to
the terms of the Agreement and without limiting the generality of the
foregoing, Seller hereby appoints Buyer, and its successors and assigns, the
true and lawful attorney of Seller, in the name of Buyer or in the name of
Seller but for the benefit and at the expense of Buyer, to demand and receive
any and all interests and assets hereby transferred; to give releases and
acquittances for or in respect of the same or any part thereof; to endorse,
collect and deposit any checks, drafts or other instruments payable to Seller
which constitute accounts receivable hereby assigned or which relate to
payments for goods and/or services provided by Seller or Buyer in connection
with the accounts or rights under contract hereby assigned; to institute and
prosecute at Buyer's expense, in the name of Seller or otherwise, any and all
proceedings at law, in equity or otherwise, which Buyer, or its successors and
assigns, may deem necessary or advisable to collect, assert or enforce any
claim, right, title, debt or account hereby assigned; and to defend and
compromise any and all actions, suits or proceedings in respect of any of the
interests and assets hereby assigned that Buyer, or its successors or assigns,
shall deem necessary or advisable. Assignor hereby declares that the foregoing
powers are coupled with an interest and shall be irrevocable. Buyer shall keep
Seller regularly and promptly informed of all of its actions taken herein with
respect to the litigation described on Exhibit A, Section 1, the Patents
described on Exhibit A, Section 2,
2
<PAGE>
any equipment described on Exhibit A, Section 3 (provided any such equipment
is sold for a minimum of $5,000) and any litigation involving any of the
assets set forth on Exhibit A or any of the liabilities set forth on
Exhibit B.
5. Other Instruments. It is understood that Seller,
contemporaneously with the execution and delivery of this General Bill of Sale,
Assignment and Assumption Agreement, is further executing and delivering to
Buyer certain other assign ments and instruments of transfer which in
particular cover certain of the interests and assets hereinabove assigned, the
purpose of which is to supplement, facilitate and other wise implement the
transfers intended hereby.
3
<PAGE>
6. Successors and Assigns. This Instrument and the covenants
and agreements herein contained shall inure to the benefit of and shall bind
the respective parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this
General Bill of Sale, Assignment and Assumption Agreement as of the date set
forth above.
"Seller"
Interfilm, Inc.
By: /s/ William Franzblau
-------------------------------
Its: COO/EVP
---------------------------
Interfilm Technologies, Inc.
By: /s/ William Franzblau
-------------------------------
Its: EVP
---------------------------
"Buyer"
Interfilm Stockholders Limited Partnership
By: Fab Five, Inc., general partner
By: /s/ William Franzblau
-------------------------------
Its: President
-------------------------------
4
<PAGE>
EXHIBIT A
---------
ASSETS
------
1. All of the rights and responsibilities in connection with
the litigation captioned "Interfilm, Inc. and Interfilm Technologies, Inc.
against Advanced Exhibition Corporation, et. al.," Index No. 601990/96, in the
Superior Court of the State of New York, including, but not limited to, the
right to receive all net proceeds of any judgment or settlement thereof, and
the responsibility to pay any out-of-pocket expenses in excess of the amount
that has been escrowed for such expenses.
2. U.S. Patent No. 5,465,384 and U.S. Patent No. 4,746,994.
3. All IT Systems located in various theaters owned by Seller
and any revenue received from the sale thereof.
4. Any refund to Seller of an insurance premium by Sedgewick
Insurance Company.
5. Any refund of the bond posted with the State of
California relating to sales tax.
6. Any net proceeds generated by the enforcement of any
judgment or settlement relating to the litigation between Interfilm, Inc. and
Ground Control.
7. The cash balance contained in Account No. 266011809 with
the Republic National Bank of New York, 415 Madison Avenue, New York, New York
10017.
<PAGE>
EXHIBIT B
---------
Sony Electronics 1,587.73
Sony Theaters 2,221.84
Loeb & Loeb LLP all unpaid bills, if any
Contingent Liabilities
- ----------------------
Pioneer Electronics 13,000 (approximate)
CFI 5,000 (approximate)
Amounts due under Employment Contracts dated October 28, 1993 between
Interfilm, Inc. and each of William Franzblau, Bob Bejan, Brian Cooper, Jim
Sorensen and David Goret, all as revised by Amendments dated March, 1996 with
respect to payment of accrued compensation as reflected on the February 28,
1996 Consolidated Balance Sheet.
Note to Irv Fuller - Principal Amount: 176,000 plus accrued interest
Note to Paul Selwyn - Principal Amount: 88,000 plus accrued interest
<PAGE>
PATENT ASSIGNMENT
WHEREAS, Interfilm, Inc., a Delaware corporation, having a
principal place of business at 110 Greene Street, Suite 601, New York, New
York 10012, hereinafter referred to as the Assignor, is the owner of the
entire right, title and interest in and to U.S. Patent No. 4,746,994,
hereinafter referred to as the Patent;
WHEREAS, the Interfilm Stockholders Limited Partnership, a
Delaware limited partnership, having a general partner Fab Five, Inc. located
at 110 Greene Street,Suite 601, New York, New York 10012, hereinafter referred
to as the Assignee, is desirous of acquiring the entire right, title and
interest in and to said Patent;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor hereby presents, sells, transfers,
conveys and assigns to Assignee, its successors and assigns, its entire right,
title, and interest in and to the patent and inventions described and claimed
therein, and in and to any divisions or continuations or continuations-in-part
or reissues of said Patent, together with, but not limited to, all rights to
profits and damages for past infringements of said Patent, the same to be held
and enjoyed by Assignee for its own use and for the use of its successors and
assigns as fully and entirely as the same would have been held and enjoyed by
Assignor if this assignment and sale had not been made.
Signed and sealed this 25 day of June, 1996.
INTERFILM, INC.
By: /s/ William Franzblau
-------------------------------
Name: /s/ William Franzblau
--------------------------
Title: COO/EVP
-------------------------
County of New York )
------------ ) ss.
State of New York )
------------
Subscribed and sworn before me this day of June, 1996
/s/Robert P. Wessely
- --------------------
Notary Public (OFFICIAL SEAL)
[NOTARY STAMP]
<PAGE>
PATENT ASSIGNMENT
WHEREAS, Technologies, Inc., a New York corporation, having a
principal place of business at 110 Greene Street, Suite 601, New York, New
York 10012, hereinafter referred to as the Assignor, is the owner of the
entire right, title and interest in and to U.S. Patent No. 35,465,384,
hereinafter referred to as the Patent;
WHEREAS, the Interfilm Stockholders Limited Partnership, a
Delaware limited partnership, having a general partner Fab Five, Inc. located
at 110 Greene Street,Suite 601, New York, New York 10012, hereinafter referred
to as the Assignee, is desirous of acquiring the entire right, title and
interest in and to said Patent;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor hereby presents, sells, transfers,
conveys and assigns to Assignee, its successors and assigns, its entire right,
title, and interest in and to the patent and inventions described and claimed
therein, and in and to any divisions or continuations or continuations-in-part
or reissues of said Patent, together with, but not limited to, all rights to
profits and damages for past infringements of said Patent, the same to be held
and enjoyed by Assignee for its own use and for the use of its successors and
assigns as fully and entirely as the same would have been held and enjoyed by
Assignor if this assignment and sale had not been made.
Signed and sealed this 25 day of June, 1996.
INTERFILM, TECHNOLOGIES, INC.
By: /s/ William Franzblau
-------------------------------
Name: /s/ William Franzblau
--------------------------
Title: EVP
-------------------------
County of New York )
------------ ) ss.
State of New York )
------------
Subscribed and sworn before me this day of June, 1996
/s/Robert P. Wessely
- --------------------
Notary Public (OFFICIAL SEAL)
ROBERT P. WESSELY
NOTARY PUBLIC, State of New York
No. 4624535
Qualified in New York County
Commission Expires Oct. 31, 1996
