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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1999
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OR
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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Commission File No. 0-23678
BIOSPHERE MEDICAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE 04-3216867
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
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111 LOCKE DRIVE, MARLBOROUGH, MASSACHUSETTS 01752
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (508) 357-7500
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01
PAR VALUE
Title of class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of voting Common Stock held by non-affiliates of
the registrant was $132,729,835, based on the last reported sale price of the
Common Stock on the OTC: Bulletin Board on March 15, 2000.
Number of shares outstanding of the registrant's class of Common Stock as of
March 15, 2000 was 9,236,622.
DOCUMENTS INCORPORATED BY REFERENCE:
Proxy Statement for the 2000 Annual Meeting of Stockholders--Part III.
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PART I
ITEM 1. BUSINESS
We are pioneering the use of our proprietary bioengineered acrylic beads,
known as microspheres, for medical applications including embolotherapy and a
broad range of tissue engineering applications. Our initial applications for
these microspheres are in embolotherapy. Embolotherapy is a minimally invasive
procedure in which embolic materials, such as our microspheres, are delivered
through a catheter into the blood vessels to inhibit blood flow to tumors or
vascular defects or to control blood loss presurgically. We intend that our
first products will target the treatment of hypervascularized tumors, which are
tumors that have a large number of blood vessels feeding them. Hypervascularized
tumors include certain tumors affecting the brain and spinal cord, tumors in the
uterus, known as uterine fibroids, and tumors associated with primary liver
cancer. By selectively blocking the tumor's blood supply, embolotherapy is
designed to cause the tumor to shrink. We believe that our microsphere
technology platform may also be used to develop products to deliver drugs to
targeted sites.
Our microspheres have a variety of characteristics that we believe make them
preferable to other embolic materials currently used in embolotherapy. These
characteristics are designed to make our product easier to use and its delivery
to the tumor more targeted and controlled, which we believe will result in
better procedural outcomes for the patient. By improving the practice of
embolotherapy, we believe that currently untreated patients and patients who are
seeking treatment with existing embolotherapy or more invasive surgical
procedures may seek treatment with our product.
We believe that our platform microsphere technology also has broad medical
applications in tissue engineering, such as tissue bulking, repair and
regeneration. In this context, we are exploring and/or developing microspheres
for use in the treatment of a number of conditions, including stress urinary
incontinence, facial wrinkles and gastroesophageal reflux disease. We are
exploring the use of microspheres for treatment in certain bone conditions and
tissue and bone regeneration.
INDUSTRY OVERVIEW
EMBOLOTHERAPY MARKETS
Embolotherapy has been used for more than 20 years by interventional
radiologists to treat certain peripheral tumors, arteriovenous malformations and
to control blood loss. Interventional neuroradiologists practice embolotherapy
for procedures in the brain in order to block the blood supply to inoperable
tumors or to block the blood supply to the tumor region to minimize bleeding
during surgery. Applications in the brain are important medically and we believe
demonstrate the safety and efficacy of embolotherapy in high-risk procedures. In
recent years, interventional radiologists in the United States, Europe and Japan
have begun to expand the scope of embolotherapy to include uterine artery
embolization and the treatment of certain cancers, including liver cancer. In
addition, affected people have become more proactive in seeking treatment
alternatives, particularly with the general awareness and use of Internet
medical sites. As a result, the potential market for embolotherapy has expanded
considerably from niche neurological applications to broader medical
opportunities.
Passive embolotherapy refers to the use of microspheres to mechanically
block the flow of blood to tumors, vascular defects and hemorrhage sites. We are
also researching the development of microspheres which have drugs or genes
embedded into them which will be designed to be released from the microspheres
at the targeted site, a process we refer to as active embolotherapy.
UTERINE FIBROIDS
Uterine fibroids are non-cancerous tumors growing in or on the uterus. Their
cause is unknown. Most patients with uterine fibroids do not initially have
symptoms and remain untreated until the patient experiences abnormal bleeding,
urinary frequency, pain, swelling or difficulty with fertility.
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Until now, women suffering from uterine fibroids have had few treatment
options. These existing treatment options include the following:
- HYSTERECTOMY: Hysterectomy is a surgical procedure to remove the uterus.
While hysterectomy has a relatively low complication rate, it requires a
hospital stay of four to five days, and recovery period of five to six
weeks, and results in loss of fertility for women of child-bearing age.
This frequently has adverse psychological effects on the patient, and can
lead to early menopause.
- MYOMECTOMY: Myomectomy is the surgical removal of the uterine fibroids
without removal of the uterus. It is usually performed on women who wish
to preserve their fertility. In addition to the invasiveness of the
procedure, the most significant disadvantage of the myomectomy is a 20 to
40 percent recurrence rate. Even though myomectomy has been the only
available procedure for a woman with severe symptoms from uterine fibroids
who wish to preserve fertility, the recurrence rate and invasiveness have
resulted in resistance from both third party payors and patients for the
procedure. Relatively few myomectomies are performed in relation to the
number of eligible patients.
- MEDICAL MANAGEMENT AND "WATCHFUL WAITING:" About 95 percent of symptomatic
fibroid patients either receive hormone treatment on a temporary basis to
relieve symptoms or remain untreated and tolerate the symptoms. Even if
the patient receives treatment, once treatment ceases the uterine fibroids
usually regrow. While hormone treatment temporarily reduces symptoms,
patients often experience side effects associated with the accompanying
hormonal changes. Additionally, women cannot conceive while taking the
hormones. Women with less severe symptoms who are, therefore, not
candidates for hormone treatment, and those seeking to conceive have few
satisfactory options. In these circumstances, physicians usually monitor
symptoms and will administer therapy only if the condition worsens.
The therapies currently available for treating uterine fibroids may have
significant drawbacks including:
- temporary or permanent loss of fertility for women of child-bearing age,
- lengthy recovery periods,
- premature menopause and related symptoms,
- high costs, including costs of medications, surgical procedures, and
frequent and long hospital stays,
- discomfort and side effects from invasive surgical procedures and hormone
therapy, and/or
- risk of recurrence of the fibroids.
Another method of treatment for uterine fibroids, more recently adopted, is
uterine artery embolization. The embolic material most commonly used today in
uterine artery embolization is polyvinyl alcohol, or PVA. Polyvinyl alcohol has
several limitations, including:
- INCONVENIENCE AND LIMITED EFFECTIVENESS. Polyvinyl alcohol often clogs in
the catheter and the blood vessel, resulting in less than optimal
occlusions of the blood supply to targeted tumors as well as undesired
necrosis, or death, of the surrounding tissues. Because of its imprecise
size and shape, polyvinyl alcohol may not fully occlude the blood vessel,
allowing the blood to circumvent the embolic material and continue to feed
the tumor.
- LIMITED CONTROL. Polyvinyl alcohol often fragments and aggregates, or
clumps, in the blood vessel, causing vessel blockages prior to reaching
the desired site of blood flow occlusion. Clumping during embolization is
problematic for two reasons. First, if clumping occurs in the catheter
during the procedure, more frequent catheter flushing or catheter
replacement may be required, adding to the length and cost of the
procedure. Second, if clumping occurs at non-targeted sites in the vessel
after
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injection into the artery, incomplete embolization can occur. In addition,
occlusions can block normal desired blood supply to the tissues.
- CHRONIC INFLAMMATORY RESPONSE. Polyvinyl alcohol often stimulates an
inflammatory response by the body that persists for an extended period of
time.
As a result, we believe there is a significant need for a new treatment
option for patients with uterine fibroids which addresses the shortcomings of
current therapies.
PRIMARY LIVER CANCER
Primary liver cancer refers to liver cancer originating in the liver, rather
than traveling to the liver from another cancer site in the body. Over
70 percent of primary liver cancers are inoperable and are treated primarily
with radiation or chemotherapy:
- RADIATION: While radiation therapy can shrink or eliminate certain
individual tumors, it is seldom used to treat liver cancer. Since it is
difficult to isolate radiation exposure to the liver tumor, radiation
therapy often results in damage to the surrounding non-tumorous tissue.
Radiation injury can also damage the natural anti-tumor defenses of the
body,
- CHEMOTHERAPY: Chemotherapy seeks to control cancer by selectively killing
the more-rapidly-dividing cancer cells and is widely used for treating
cancer elsewhere in the body. The use of systemically delivered
chemotherapy agents, however, has shown little benefit in treating liver
cancer. Similar to the limitations of radiation therapy, therapeutic doses
of chemotherapy to the cancerous tissue have a damaging effect on the
normal surrounding tissue.
Other treatments currently under investigation to treat primary liver cancer
are tumor ablation, which seeks to kill the tumor by means of destructive
electrical energy, and embolization using polyvinyl alcohol. Interventional
radiologists are also currently using chemoembolotherapy to treat liver cancer.
Chemoembolotherapy refers to the delivery of drugs in a mixture that contains
embolic materials to create a higher localized concentration of the drug.
TISSUE ENGINEERING MARKETS
Advances in cell biology are resulting in rapid advances in the fields of
organ repair and tissue repair, reconstruction and regeneration, which we
generally refer to as tissue engineering. These developments in tissue
engineering are targeted at persuading the body to heal itself through the
delivery of molecular signals, cells and supporting structures to the
appropriate sites in the body.
In certain conditions including stress urinary incontinence,
gastroesophageal reflux disease, urinary reflux in infants and certain skin
conditions, the normal anatomic supports are not present in the body. By
injecting fillers into the existing structures to bulk them up, referred to as
tissue bulking, the missing anatomic supports are recreated, thereby eliminating
the condition.
Tissue repair and regeneration involves the development of bioartifical
cells, tissues and supporting matrixes, which are scaffolds that hold the cells
or tissues together. These tissue scaffolds may also be developed from synthetic
polymers. Tissue scaffold products have a number of potential applications,
including cartilage and bone repair and organ replacement.
PRODUCTS
Our innovative microsphere technology evolved out of approximately 15 years
of research and development of polymer formulations used in the field of
biological separations and drug purification. In 1999, we made a strategic
decision to focus exclusively on microsphere technologies for medical
applications. We believe that our microsphere technology is a platform
technology which can be configured in
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several different ways to have applications as a pure embolic material, an
embolic material linked to a gene or drug, a bulking agent and a scaffold for
tissue engineering.
PASSIVE EMBOLOTHERAPY
EMBOSPHERE MICROSPHERES
Our initial product, Embosphere Microspheres, is intended for use in passive
embolotherapy to block the blood supply to hypervascularized tumors and
arteriovenous malformations. Embosphere Microspheres have been used in Europe in
hypervascularized tumors, arteriovenous malformations and to presurgically
control blood loss. We believe that, pending FDA clearance or approval the
principal application of the Embosphere Microspheres will be as an alternative
therapy for uterine fibroids.
Uterine artery embolization is a minimally invasive procedure performed by
interventional radiologists. In this procedure, microspheres are injected
through a small catheter into the blood vessels feeding the fibroid tumor,
preferentially blocking the blood supply to the fibroids, but not to the
surrounding healthy tissues. The goal of the uterine artery embolization
procedure is to eliminate the flow of blood to the uterine fibroid, thereby
alleviating related symptoms, while preserving normal uterine and ovarian
function.
We believe that embolotherapy is attractive relative to current therapy
alternatives for uterine fibroids, which include invasive surgical procedures,
such as hysterectomy and myomectomy, hormone therapy and "watchful waiting."
Current therapies can have significant drawbacks including temporary or
permanent loss of fertility, lengthy recovery periods, high costs, discomfort,
side effects and risk of recurrence of fibroids.
Although the effect of uterine artery embolization on future fertility has
not been established, we believe that uterine artery embolization has the
potential to preserve the fertility of the patient that would be lost through
hysterectomy or may be compromised by the use of current therapies or
technologies and to eliminate the risk of recurrence of the uterine fibroid
tumor and the complications associated with myomectomy. Most uterine artery
embolization procedures can be performed in under one hour, and the patient is
sedated but awake. The patient generally stays overnight in the hospital and
typically returns to everyday activities within the next few days. In contrast,
hysterectomy patients undergo general anesthesia, stay in the hospital for four
to five days and have a five to six week recovery period.
Current embolotherapy using polyvinyl alcohol also has several limitations
associated with its imprecise size and shape, including less effective occlusion
of the blood supply to the tumor, inflammation and untargeted embolization
resulting in the injury of the surrounding normal tissue. Independent studies
have indicated that Embosphere Microspheres have a variety of characteristics
that may make them preferable to polyvinyl alcohol. These include:
- PERFECT SPHERICAL SHAPE/CALIBRATED PARTICLE SIZE. We are able to
synthesize beads with uniform sizing and a spherical shape. When beads are
irregularly shaped or sized, as is the case with polyvinyl alcohol,
clinicians find vessel targeting more difficult, and the possibility of
unwanted embolization of blood vessels away from the site of the tumor may
increase.
- COMPLIANT AND RESILIENT PROPERTIES. We have developed a soft, elastic
microsphere which has the capability to compress to up to 30 to
50 percent of its original shape. Consequently, clinicians can deliver
these beads through microcatheters. Many clinicians prefer using
microcatheters during embolization as small catheters minimize the
frequency of artery or vessel spasm during the procedure. Vessel spasm can
be of particular concern during uterine artery embolization as it can
disrupt the flow of blood. Clinicians rely on blood flow during
embolization to direct the microspheres to the vessel targeted for
occlusion.
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- HYDROPHILIC PROPERTIES. Based on the choice of materials used to
manufacture microspheres, our products are hydrophylic, which means that
they absorb moisture. This characteristic is important in that it prevents
the microspheres from clumping in the catheter and the artery during the
procedure.
- NON-BIODEGRADABILITY. Our microspheres are composed of a synthetic
three-component polymer which is compatible with the human body. This
polymer does not dissolve in any solvent, is non-biodegradable and
resistant to absorption or digestion by the body. We believe, therefore,
that our Embosphere Microspheres are an appropriate agent for permanent
vessel occlusion.
- CELL ADHESION. Our Embosphere Microspheres are crosslinked with a cell
adhesion promoter composed of gelatin. This material promotes cell
adhesion, resulting in a more rapid, stable and complete occlusion of the
vessel.
- CHARGED SURFACE PROPERTY. Our microspheres are positively charged,
enabling them to attach to the negatively-charged blood vessel wall. This
attachment to the vessel wall minimizes the potential for the microspheres
to migrate to non-targeted vessels.
Embosphere Microspheres are currently available in a range of product sizes,
from 40 to 1,200 microns, based on current customer requirements and targeted
applications. They are designed to precisely fit the blood vessels, resulting in
targeted and controlled occlusion. They can be used with existing, commercially
available catheters and delivery systems. We anticipate that subsequent
generations of Embosphere Microspheres will incorporate new product
characteristics, such as improved cell adhesion properties and an improved
ability for the physician to visualize the product on x-rays during
administration.
We received CE Mark approval of our Embosphere Microspheres in the European
Union in 1997 and more recently received marketing approval in Australia and
Canada. In May 1999, we filed a 510(k) premarket notification to obtain
marketing clearance from the FDA for our Embosphere Microspheres for
hypervascularized tumors, atriovenous malformations and control of hemorrhage.
The 510(k) notification did not include an indication for use in treating
uterine fibroids. We have commenced clinical trials under an Investigation
Device Exemption to support an application for clearance or approval from the
FDA for this specific indication.
HEPASPHERE MICROSPHERES
We are developing HepaSphere Microspheres, which are expandable microspheres
for injection via catheter in the blood vessels feeding the liver cancer tumor.
Once inside the tumor, they are designed to expand by absorbing water from the
blood and effectively plug the blood supply to the tumor. Liver embolotherapy is
intended to starve the liver tumor, without damaging the surrounding tissues or
causing any side effects on other parts of the body, such as those associated
with chemotherapy and radiation.
Over 100 primary liver cancer patients have been treated to date with
HepaSphere Microspheres on an investigational basis in Japan. In
September 1999, we obtained a worldwide exclusive license to HepaSphere
Microspheres from its Japanese inventor. We plan to apply to the Japanese
Ministry of Health and Welfare for marketing approval within the next
24 months.
ACTIVE EMBOLOTHERAPY
VIASPHERE MICROSPHERES
We are conducting research on our Viasphere Microspheres, which will be
precisely-sized highly hydrophilic microspheres to which are attached genetic
materials or drugs. These microspheres are being designed to be injected into
the blood vessels feeding the tumor. We expect that once the flow of blood to
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the tumor has been occluded, Viasphere Microspheres will start delivering
concentrated genes or drugs into the tumor.
We believe that our Viasphere Microspheres may have several advantages over
current gene therapy or drug delivery products, including the following:
- DIRECT DELIVERY TO TUMOR: Our Viasphere Microspheres will be designed to
deliver the drug or gene therapy product directly to the tumor, avoiding
the potential side effects associated with high levels of circulating
drugs or genes after an intravenous infusion through the blood vessel
system. Direct delivery should permit the use of higher, potentially more
effective, dosages of the product.
- NON-VIRAL: By using our Viasphere Microspheres, the physician may be able
to avoid the risk associated with viruses which are currently used in the
delivery of drug or gene therapy products to increase the likelihood of
killing the cancer cells.
We are currently conducting early-stage research on the development of our
Viasphere Microspheres.
OTHER EMBOLIZATION PRODUCTS
In addition, we intend to seek to develop and commercialize other
embolization products that include:
- delivery systems for embolic materials, such as specialty catheters and
guidewires,
- new procedure enhancing technologies that are designed to improve the
uniformity of microsphere dispersion during injection, reduce radiation
exposure and optimize efficiency of procedure time and implanted material,
and
- additional embolic materials such as innovative coils, embolics that
solidify upon injection and resorbable embolics to treat aneurysms and
large arteriovenous malformations, as well as for specific tumors based
upon their type or location.
TISSUE ENGINEERING
MATRX
Our MatrX product, currently under preclinical development, will include
highly hydrophilic synthetic microspheres that will be designed to cause tissue
bulking as a means to provide anatomic support in disease conditions where this
support is missing. MatrX preparations will be designed to be easily injectable
yet large enough to avoid digestion by the body. Once injected, we anticipate
that the microsphere matrix will be rapidly populated by surrounding cells and
provide a stable, mechanically resistant tissue bulking effect. Potential
applications of MatrX preparations for tissue bulking include:
- STRESS URINARY INCONTINENCE: Approximately four million adults in the U.S.
suffer from stress urinary incontinence, which is the involuntary loss of
urine during coughing, laughing, sneezing, jogging, or any other activity
which causes a sufficient increase in pressure within the abdomen. Stress
urinary incontinence is currently treated in a variety of ways, but the
majority of patients are managed with techniques that treat the symptoms,
but do not restore urinary continence. Most curative approaches to the
treatment of urinary incontinence require significant surgical
interventions.
Tissue bulking agents are either biologically derived or synthetic and are
designed to be injected in or near the bladder neck to increase tissue
bulk. While bulking procedures are gaining acceptance,
biologically-derived bulking agents are typically absorbed by the body,
requiring retreatment. Other limitations include migration of the
synthetic agents to other non-affected parts of the body causing adverse
health effects, incompatibility of the synthetic agents with the human
body, and difficulty in injecting the agents into the walls of the
urethra. Accordingly, current available therapies provide only limited
benefit in the treatment of stress urinary incontinence.
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We are currently developing our MatrX tissue bulking product, which is
designed to be injected into the urethral wall to reduce or eliminate the
incidence of urinary incontinence. We are conducting preclinical research
on the application of our MatrX tissue bulking product for stress urinary
incontinence.
- VESICOURETERAL REFLUX: Vesicoureteral reflux is a condition in which urine
may backflow from the bladder through the ureters and into the kidneys.
This condition affects over one percent of newborn children. MatrX would
be used to bulk the area of tissue at the junction of the ureter and
bladder to increase backflow resistance.
- DERMAL AUGMENTATION: Dermal augmentation refers to a procedure to inflate
an area beneath the skin to correct facial contour defects. MatrX
preparations are being designed to be injected under the skin with a
hypodermic needle to provide a bulking effect to erase facial wrinkles or
facial contour defects.
- GASTROESOPHAGEAL REFLUX DISEASE: In many cases, gastroesophageal reflux
disease is attributable to decreased tone of the lower esophageal muscle
tissue or to a congenitally small band of muscle tissue. We are conducting
research relating to the use of our MatrX tissue bulking product under
development to be injected into the muscle tissue to improve its function.
GENS(2) INJECTABLE TISSUE SCAFFOLD
We are seeking to design our GenS(2) injectable tissue scaffold product,
which is in the research phase, for such applications as cartilage and bone
repair and other tissue or organ replacement. Several companies are developing
and marketing bioartifical cells, tissues and supporting scaffoldings which hold
the cells or tissues together. However, the existing tissue scaffoldings are
either difficult to inject into the body, are digested by the body over time, or
do not adequately merge into the original tissue. In addition, most procedures
still require surgery to place the bioartifical tissues.
We believe that our microsphere technology can be formulated into injectable
microsphere scaffolds, which we call GenS(2), which may overcome many of the
limitations of tissue scaffolds currently commercially available. We are
designing this product to adhere to cells and to be small enough to be injected,
yet large enough after injection to avoid digestion.
OTHER NON-STRATEGIC PRODUCTS
In addition to our Embosphere Microsphere products, we sell barium and other
ancillary products. Barium is purchased from Guerbet Medical, Inc. and resold
for use in gastrointestinal medical tests. We sell other ancillary devices as
complimentary medical products for hospital and physician use. We generated a
significant portion of our revenue in 1999 from these non-strategic products. We
do not expect these products to be a significant component of our future sales.
MARKETING AND SALES
We intend to market our embolotheraphy products primarily through direct
sales efforts in the United States once we receive the required marketing
clearance or approval from the FDA, and through a combination of distributors,
field representatives and direct marketing support in other parts of the world.
We intend to build a direct sales force in the United States.
In Europe, we market our products through a vice-president of sales and
marketing, four field representatives in France, three in-house sales support
people, and distributors in markets outside of France. We are in the process of
expanding our sales and marketing management team in Europe, the United States
and Japan.
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We plan to attend major medical conventions pertaining to our targeted
markets and invest in market development, including physician training and
patient outreach. We are working closely with major academic centers to serve as
centers for excellence for physician training, product evaluation and ongoing
research. Many members of our Medical Advisory Board are associated with these
major academic centers.
RESEARCH AND DEVELOPMENT
Our research and development group consists of four direct employees and
four consultants. In addition, we have several development agreements with
outside product development contractors and study agreements with several
medical centers.
Our research and development group is developing our product technology in
three areas:
- continuous improvement of our core technology,
- complementary embolotherapy products, and
- new initiatives aimed at leveraging our core technology in new market
areas.
Our core technologies include patented and proprietary microsphere
technologies, licenses in the medical field for patented organic and inorganic
polymer and surface chemistries for microsphere design and development, a
license in the medical field for non-viral DNA transfection technology, and
expertise and know-how in microsphere manufacturing.
During the fiscal years ended December 31, 1997, 1998 and 1999, we spent
approximately $34,000, $34,000 and $968,000 on our research and development
efforts. We expect our research and development expenses to increase in the
future as we seek to increase our research and development staff, enhance our
existing products and develop additional products.
COMPETITION
PASSIVE EMBOLOTHERAPY
The primary competitive embolotherapy product sold by competitors is
polyvinyl alcohol, or PVA, a product introduced into the market more than
20 years ago. We encounter, and expect to continue to encounter, competition in
the sale of our current and future passive embolotherapy products. Our principal
competitors in the field of embolotherapy are Boston Scientific Corporation,
Johnson & Johnson, and Nycomed S.A., as well as companies selling or developing
non-embolotherapy solutions for the disease states targeted by us. These
competitors have, and our future competitors are likely to have, greater
financial, operational, sales and marketing resources and more experience in
research and development than we have. We compete primarily on the basis of
product performance, ease of use, degree of embolization control, and quality of
patient outcomes. Our future success will depend in large part on our ability to
gain market leadership at the early stage of the development and acceptance of
new procedures, and our ability to continue to develop and bring to market
differentiated products enhancing embolotherapy.
ACTIVE EMBOLOTHERAPY
Although we are not aware of any company selling or marketing active
embolotherapy products, we expect to encounter competition in the future sale of
any active embolotherapy products. We expect that our future competitors in this
area may have greater financial, operational, sales and marketing resources and
more experience in research and development than we have. In addition, we expect
to compete with companies which are developing and marketing other anticancer
therapies and gene therapy drugs. These competitors include several large
pharmaceutical companies. We believe that the principal competitive factors in
the active embolotherapy market will include the ability to deliver a highly
concentrated dose of
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gene or drug to the tumor without effects on other parts of the body, product
designs facilitating a minimally invasive outpatient procedure, and a sales and
marketing organization which is able to support interventional radiologists.
TISSUE ENGINEERING
In the field of tissue engineering, we believe that competition will come
from companies that are currently developing and marketing tissue bulking and
tissue repair and regeneration products. We believe our principal competitors in
the field of tissue engineering are companies such as Inamed Corporation and
Johnson & Johnson. These competitors have, and our future competitors are likely
to have, greater financial, operational, sales and marketing resources and more
experience in research and development than we have. We believe that the
principal competitive factors in the tissue engineering market will be the
ability to obtain durable effects while reducing the invasiveness of the
procedure.
GOVERNMENT REGULATION
FDA REGULATION. The FDA, and other federal, state, local, and foreign
authorities, regulate our products and manufacturing activities. Pursuant to the
Federal Food, Drug, and Cosmetic Act and the regulations promulgated thereunder,
the FDA regulates the development, clinical testing, manufacture, packaging,
labeling, storage, distribution and promotion of medical devices. Before a new
device can be introduced into the market, the manufacturer must generally obtain
marketing clearance through a 510(k) notification or approval through a
Premarket Approval. We generally will be required to obtain 510(k) clearance or
premarket approval prior to commercial distribution of future products or future
applications of current products. Our proposed active embolotherapy products
will likely be regulated as combination products, meaning they could be subject
to regulation as drugs or biological products, which may involve more extensive
clinical testing and rigorous premarket approval beyond that required for our
microspheres and ancillary products, and other proposed products.
CLASSIFICATION OF MEDICAL DEVICES. In the United States, medical devices
intended for human use are classified into three categories, Class I, II, or
III, on the basis of the controls deemed reasonably necessary by the FDA to
assure their safety and effectiveness. Class I devices are subject to general
controls, for example, labeling, premarket notification under Section 510(k),
unless exempt, and adherence to the FDA's Good Manufacturing Practice
regulations. Class II devices are subject to general and special controls, for
example, performance standards, postmarket surveillance, patient registries, and
FDA guidelines. Class III is the most stringent regulatory category for medical
devices. Class III devices are those which are subject to premarket approval
requirements and are intended to require, or must require, an FDA approval of
their safety and effectiveness prior to marketing. Class III devices include,
for example, devices which are life-sustaining, life-supporting or implantable
devices, or new devices which have not been found substantially equivalent to
legally marketed devices.
510(K) CLEARANCE. The FDA will clear a device under section 510(k) if the
submitted information establishes that the proposed device is "substantially
equivalent" to a legally marketed Class I or II medical device, or to a
Class III medical device for which the FDA has not yet called for a Premarket
Approval application. Commercial distribution can begin only after the FDA
issues an order that the device is substantially equivalent to a device that is
legally marketed and not subject to a Premarket Approval requirement. The FDA
may determine that a proposed device is not substantially equivalent to a
legally marketed device, in which case a Premarket Approval will be required to
market the device, unless additional information can be submitted to support a
substantial equivalence determination, or the FDA, pursuant to a request from a
timely 510(k) submitter, makes a risk based determination that a not
substantially equivalent device can be classified into Class I or II. An FDA
request for additional data could require that clinical studies of the device's
safety and effectiveness be performed. We have submitted a premarket
notification, or 510(k) notification, to the FDA for Embosphere Microspheres for
embolization of hypervascularized tumors, arteriovenous malformations, and
hemorrhage control. Clearance, if
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obtained, may be conditioned on labeling restrictions and our conducting a
lengthy postmarket surveillance study. The predicate devices are Class III
devices. Further, our embolotherapy device is classified into Class III by the
FDA, which means that even if we obtain 510(k) clearance to market the device,
the FDA could promulgate a regulation requiring PMA approval of the device to
allow it to remain on the market. A requirement for PMA approval will likely
require us to conduct costly clinical trials and there is no guarantee that we
can provide the FDA sufficient data for PMA approval in a timely fashion, if at
all. Failure to obtain PMA approval would result in removal of our product from
the United States market.
PREMARKET APPROVAL. A Premarket Approval application must be filed and
approved before a device can be marketed if a proposed device is not
substantially equivalent to a legally marketed device or, as discussed above, if
it is a pre-amendments Class III device, i.e., a device in commercial
distribution prior to May 28, 1976, for which the FDA has called for Premarket
Approvals. A Premarket Approval application must be supported by valid
scientific evidence, which typically includes extensive data, including
pre-clinical and clinical trial data, to demonstrate the safety and
effectiveness of the device. Obtaining approval can take several years and
approval may be conditioned on, among other things, substantial restrictions on
indications for use and the conduct of postmarket surveillance studies.
Notwithstanding the 510(k) and Premarket Approval pathways to the marketplace,
if human clinical trials of a device are required, and the device presents a
"significant risk," the sponsor, usually the manufacturer or the distributor of
a device, must obtain FDA approval of an Investigational Device Exemption
application prior to commencing human clinical trials. Sponsors of clinical
trials are permitted to charge for devices distributed in the course of a study
provided such charges do not exceed recovery of the costs of manufacture,
research, development and handling, but devices may not be commercialized, i.e.,
promoted as safe or effective, sold for profit or used beyond legitimate
research needs.
On October 4, 1999, the Obstetrics and Gynecology Devices Panel of the
Medical Devices Advisory Committee met to discuss requirements for clinical
studies to support submissions for clearances or approvals for products for
uterine artery embolization and other products used in the treatment of uterine
fibroids. The FDA has not formally classified the use of embolic particles for
this indication and may decide to require a PMA or, alternatively, may allow
commercial clearance via a 510(k) together with clinical support that
substantiates product safety and efficacy. See Premarket Approval above. We have
received an Investigational Devices Exemption, or IDE, which allows us to
commence a clinical study to investigate the safety and feasibility of the
Embospheres Microspheres for uterine artery embolization. IDE trials typically
proceed in three phases, are subject to extensive regulation, and may be placed
on hold or terminated by the FDA if, among other reasons, there is reason to
believe the risks do not outweigh the anticipated benefits. The IDE process may
take many years. We hope to expand this initial study into a pivotal phase
subsequent to accrual and follow-up of thirty patients. Expansion will require
FDA approval.
CHANGES IN APPROVED DEVICES. Device manufacturers must obtain new FDA
510(k) clearance when there is a major change or modification in the intended
use of a legally marketed device or a change or modification, including product
enhancements, and, in some case, manufacturing changes, to a legally marketed
device that could significantly affect its safety or effectiveness. Supplements
for approved Premarket Approval devices are required for device changes,
including some manufacturing changes, that affect safety or effectiveness. For
devices marketed pursuant to 510(k) determinations of substantial equivalence,
we must obtain FDA clearance of a new 510(k) notification prior to marketing the
modified device; for devices marketed with Premarket Approval, we must obtain
FDA approval of a supplement to the Premarket Approval prior to marketing the
modified device.
GOOD MANUFACTURING PRACTICES AND REPORTING. The Federal Food, Drug, and
Cosmetic Act requires us to comply with Good Manufacturing Practices or Quality
Systems regulations. We must comply with various quality control requirements
pertaining to all aspects of our product design and manufacturing process
including requirements for packaging, labeling and record keeping, including
complaint files. The FDA enforces these requirements through periodic
inspections of medical device manufacturing facilities.
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In addition, the Medical Device Reporting regulation obligates us to inform the
FDA whenever information reasonably suggests that one of our devices may have
caused or contributed to death or serious injury, or when one of our devices
malfunctions and, if the malfunction were to recur, the device would be likely
to cause or contribute to a death or a serious injury.
LABELING AND ADVERTISING. Labeling and promotional activities are also
subject to scrutiny by the FDA. Among other things, labeling is violative of the
law if it is false or misleading in any respect or it fails to contain adequate
directions for use. Moreover, any labeling claims that exceed the
representations either approved or cleared by the FDA will violate the Federal
Food, Drug, and Cosmetic Act.
Our product advertising is also subject to regulation by the Federal Trade
Commission under the Federal Trade Commission Act, which prohibits unfair
methods of competition and unfair or deceptive acts or practices in or affecting
commerce, as well as unfair or deceptive practices such as the dissemination of
any false advertisement pertaining to medical devices. Under the Federal Trade
Commission's "substantiation doctrine," an advertiser is required to have a
"reasonable basis" for all product claims at the time the claims are first used
in advertising or other promotions.
IMPORT REQUIREMENTS. Imported products must meet the same marketing
standards as domestic goods. The only exception is a product imported for
export. In this case, a product that would otherwise be refused entry can be
imported under certain conditions; specifically, the importer must declare that
the item is intended for incorporation or further processing by the initial
owner or consignee into a device that will be exported. The initial consignee or
owner must maintain records identifying the use of the article, and submit a
report regarding its disposition upon agency request. If an article is not
incorporated or further processed into a device, it must be destroyed or
exported.
To import a device, the importer must file an entry notice and bond with
Customs pending an FDA decision on the product's admissibility. All devices are
subject to FDA examination before release from Customs. Any article that appears
to be in violation of the Federal Food, Drug, and Cosmetic Act will be refused
admission and a notice of detention and hearing will be issued. A product also
can be detained without physical examination if the product has a past history
or other information indicates that it may be violative. Foreign firms must
register and list before their products may be imported, and a device must have
a cleared 510(k) or approved PMA if required.
EXPORT REQUIREMENTS. Products for export from the United States are subject
to foreign countries' import requirements and the FDA's exporting requirements.
The introduction of our products in foreign markets may subject them to foreign
regulatory clearances, which may impose additional product standards, packaging
and labeling requirements and import restrictions on devices. Regulatory
requirements to market devices vary from country to country. In addition, each
country has its own tariff regulations, duties, and tax requirements.
In addition to the import requirements of foreign countries, we must also
comply with the United States laws governing the export of products regulated by
the FDA. Devices that have obtained 510(k) clearance or Premarket Approval and
comply with the law in all other respects may be exported without further FDA
authorization. However, foreign countries often require, among other things, an
FDA certificate for products for export, also known as a CPE. To obtain this
certificate, the device manufacturer must certify to the FDA that the product
has been granted clearance or approval in the United States and that the
manufacturing facilities appeared to be in compliance with Good Manufacturing
Practices regulations at the time of the last FDA inspection.
Under the FDA Export Reform and Enhancement Act of 1996, an unapproved
Class III device, a device subject to an Investigational Device Exemption, or a
banned device may be exported to any country if the product complies with the
laws of that country and has valid marketing authorization in one of the
following countries or authorities: Australia, Canada, Israel, Japan, New
Zealand, Switzerland, South Africa, the European Union, or a country in the
European Economic Community, or EEC, if the device is marketed in an EEC country
or authorized for general marketing in the EEC. The FDA is authorized to
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add countries to this list in the future. Further, a device may be exported
under this provision only if, among other things, it is not adulterated, accords
to the specifications of the foreign purchaser, complies with the laws of the
importing country, is labeled for export, is manufactured in substantial
compliance with Good Manufacturing Practices regulations or recognized
international standards, is not sold in the United States, and meets other
conditions.
Another pathway to export an unapproved Class III device for which a
Premarket Approval would be required to market the product in the United States
is to satisfy the following requirements:
- the device accords to the specifications of the foreign purchaser,
- the device is not in conflict with the laws of the country to which it is
intended for export,
- the device is labeled that it is intended for export,
- the device is not sold or offered for sale in domestic commerce, and
- the FDA determines that the exportation of the device is not contrary to
the public health and has the approval of the country to which it is
intended for export. Compliance with these requirements will permit export
to countries where marketing authorization from a listed country or
authority is not obtained.
FINES AND PENALTIES FOR NONCOMPLIANCE. Our failure to comply with
applicable FDA regulatory requirements could result in, among other things,
Premarket Approval withdrawal, rescission of a 510(k) clearance, injunctions,
product withdrawals, voluntary or mandatory patient/physician notifications,
recalls, product seizures, civil penalties, fines and criminal prosecutions. In
addition, the Federal Trade Commission has a variety of processes and remedies
available to it for enforcement, both administratively and judicially, including
compulsory process, cease and desist orders and injunctions. Federal Trade
Commission enforcement can result in orders requiring, among other things,
limits on advertising, corrective advertising, consumer redress, divestiture of
assets, rescission of contracts and such other relief as may be deemed
necessary. Violation of such orders could result in substantial financial or
other penalties. Any such action by the FDA or the Federal Trade Commission
could materially adversely affect our ability to successfully market our
products.
Medical device laws are also in effect in many countries outside of the
United States. These range from comprehensive device approval requirements for
some or all of our medical device products to simpler requests for product data
or certification. The number and scope of these requirements are increasing.
Sales of medical devices in Europe are subject to the European Medical Device
Directive. This directive contains requirements for quality system and product
performance guidelines to which all manufacturers must comply. These guidelines
contain quality system guidelines and preproduction product design verification
that closely resemble current FDA guidelines. In 1997, we obtained ISO
9002/EN46001 international quality systems registration, a certification showing
that our procedures and manufacturing facilities comply with standards for
quality assurance and manufacturing process control. Our compliance with this
registration has been confirmed since 1997 in semi-annual surveillance audits.
The ISO 9002 certification, along with the EN 46001, the European Medical Device
Directive certification, signifies compliance with the requirements enabling us
to affix the CE Mark to our Embosphere Microsphere product. The CE Mark denotes
conformity with European standards for safety and allows certified devices to be
placed on the market in all European Union countries. After June 1998, medical
devices may not be sold in European Union countries unless they display the CE
Mark.
Failure to comply with applicable federal, state and foreign medical device
laws and regulations would likely have a material adverse effect on our
business. In addition, federal, state and foreign regulations regarding the
manufacture and sale of medical devices are subject to future changes. We cannot
predict what impact, if any, such changes might have on our business, but such
change could have a material impact.
We are subject to various federal, state and local laws and regulations
relating to the protection of the environment. In the course of our business, we
are involved in the handling, storage and disposal of certain
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chemicals. The laws and regulations applicable to our operations include
provisions that regulate the discharge of materials into the environment.
Usually these environmental laws and regulations impose "strict liability,"
rendering a person liable without regard to negligence or fault on the part of
such person. Such environmental laws and regulations may expose us to liability
for the conduct of, or conditions caused by, others, or for acts that were in
compliance with all applicable laws at the time the checks were performed. We do
not believe that we have been required to expend material amounts in connection
with our efforts to comply with environmental requirements or that compliance
with such requirements will have a material adverse effect upon our capital
expenditures, results of operations or competitive position. Because the
requirements imposed by such laws and regulations are frequently changed, we are
unable to predict the cost of compliance with such requirements in the future,
or the effect of such laws on our capital expenditures, results of operations or
competitive position.
PROPRIETARY TECHNOLOGY AND PATENT RIGHTS
To establish and protect our proprietary technologies and products, we rely
on a combination of patent, copyright, trademark and trade secrets laws, as well
as confidentiality provisions in our contracts. We have implemented a patent
strategy designed to maximize our intellectual property rights. We are pursuing
patent coverage in the United States and foreign countries to protect the
technology, inventions and improvements that we consider important to the
development of our products and business.
In connection with our acquisition of a 51% interest in Biosphere Medical
S.A., in April 1999 we assigned to Biosphere Medical S.A. our interest in
several United States and foreign patents and patent applications, including two
United States patents relating to microspheres, which we jointly owned with
L'Assistance Publique-Hopitaux De Paris, referred to as AP-HP. In January 1998,
Biosphere Medical S.A. entered into an agreement with AP-HP pursuant to which
AP-HP has granted to Biosphere Medical S.A. the exclusive right to use the
jointly-owned patents. Biosphere Medical S.A. is required to pay to AP-HP a
royalty on the sale of any products which incorporate embospheres which are
covered by the patents. Biosphere Medical S.A. may sublicense its exclusive
rights under the agreement with the prior written consent of AP-HP. The rights
granted to Biosphere Medical S.A. under the contract are for an initial period
which ends on September 16, 2009, and are renewable on the agreement of
Biosphere Medical S.A. and AP-HP. The agreement can be terminated on three
months notice by either party if the other party does not perform one or more of
its obligations under the agreement and fails to cure its nonperformance during
the notice period. These jointly-owned patents will expire in 2014.
In addition, as part of the sale of our former core business to Life
Technologies in May 1999, we entered into a cross-license agreement with Life
Technologies. Under that agreement, Life Technologies has granted to us an
exclusive, worldwide, perpetual, royalty-free license to its technology and
patents relating to our core field of development, including any improvement to
that technology made prior to May 2004. The patents licensed to us by Life
Technologies include a United States composition-of-matter patent relating to
various compounds containing trisacryl monomer, which is used in our Embosphere
Microspheres. This patent expires in 2001. Under the agreement, we also granted
to Life Technologies an exclusive, worldwide, perpetual, royalty-free license to
any improvements to the technology they have licensed to us which are useful in
Life Technologies' fields of development. The agreement, and all licenses
granted thereunder, can be terminated by either party on sixty day's notice in
the event of a breach of the agreement by the other party.
In 1999, we entered into an agreement with Dr. Shinichi Hori, pursuant to
which we have an exclusive royalty-bearing license to a Japanese
composition-of-matter patent relating to our HepaSphere Microsphere product.
This patent expires in 2012. There are no United States or other international
filings corresponding to this patent.
We have filed two United States method-of-use patent applications relating
to materials and methods for active embolotherapy. In addition, in July 1999, we
entered into an agreement with the Louis Pasteur University in Strasbourg,
France and Centre National de la Recherche Scientifique pursuant to which we
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received exclusive, royalty-bearing worldwide rights to three United States
patents relating to active embolotherapy technology.
We have filed three United States patent applications relating to tissue
bulking and the treatment of urinary incontinence, dermal augmentation, skin
wrinkles and gastroesophegeal reflux disease. We have also filed a United States
patent application relating to materials and methods for tissue regeneration.
Our success depends to a significant degree upon our ability to develop
proprietary products and technologies and to obtain patent coverage for the
products and technologies. We intend to continue to file patent applications
covering any newly-developed products and technologies. However, as discussed
above, there can be no guarantee that any of our pending or future filed
application will be issued as patents. There can be no guarantee that the United
States Patent and Trademark Office or some third party will not initiate an
interference proceeding involving any of our pending applications or issued
patents. Finally, there can be no guarantee that our issued patents or future
issued patents, if any, will provide adequate protection from competition, as
further discussed below.
Patents provide some degree of protection for our proprietary technology.
However, the pursuit and assertion of patent rights, particularly in areas like
medical device development, involve complex legal and factual determinations
and, therefore, are characterized by significant uncertainty. In addition, the
laws governing patentability and the scope of patent coverage continue to
evolve, particularly in life sciences. As a result, we cannot assure you that
patents will issue from any of our patent applications or from applications
licensed to us or that any of our issued patents will offer meaningful
protection. In addition, our issued patents or patents licensed to us may be
successfully challenged, invalidated, circumvented or rendered unenforceable so
that our patent rights might not create an effective competitive barrier.
Moreover, the laws of some foreign countries may not protect our proprietary
rights to the same extent as do the laws of the United States. There can be no
assurance that any patents issued to us will provide a legal basis for
establishing an exclusive market for our products or provide us with any
competitive advantages or that the patents of others will not have an adverse
effect on our ability to do business or to continue to use our technologies
freely. In view of these factors, our intellectual property positions bear some
degree of uncertainty.
We also rely in part on trade secret protection of our intellectual
property. We attempt to protect our trade secrets by entering into
confidentiality agreements with third parties, employees and consultants. Our
employees also sign agreements requiring that they assign to us their interests
in inventions and original expressions and any corresponding patents and
copyrights arising from their work for us. However, it is possible that these
agreements may be breached, invalidated or rendered unenforceable and if so our
trade secrets could be disclosed to others, including our competitors, and there
may not be an adequate corrective remedy available. Despite the measures we have
taken to protect our intellectual property, we cannot assure you that parties to
our agreements will not breach the confidentiality provisions in our contracts
or infringe or misappropriate our patents, copyrights, trademarks, trade secrets
and other proprietary rights. In addition, we cannot assure you that third
parties will not independently discover or invent competing technologies or
reverse engineer our trade secrets, or other technology. Therefore, the measures
we are taking to protect our proprietary technology may not be adequate.
Although we are not a party to any legal proceedings, in the future, third
parties may file claims asserting that our technologies or products infringe on
their intellectual property. We cannot predict whether third parties will assert
such claims against us or our licensees or against the licensors of technology
licensed to us, or whether those claims will harm our business. If we are forced
to defend against such claims, whether they are with or without any merit,
whether they are resolved in favor of or against us, our licensees or our
licensors, we may face costly litigation and diversion of management's attention
and resources. As a result of such disputes, we may have to develop at a
substantial cost non-infringing technology, or enter into licensing agreements.
These agreements, if necessary, may be unavailable on terms acceptable to us, or
at all, which could seriously harm our business or financial condition.
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EMPLOYEES
As of March 1, 2000, we employed 39 persons. Of these employees, four are
primarily engaged in research and development activities, 14 are engaged in
manufacturing, six are engaged in sales and marketing and the remainder are
engaged in administration and accounting. Of these 39 persons, eight are located
in the United States and 31 are located in France.
Our employees in the United States are not covered by a collective
bargaining agreement. In Europe, our employees are covered by the provisions of
an agreement setting forth national guidelines and standards for labor relations
in the metal industry, and which also governs the medical device industry. We
consider our relations with our employees to be good.
RISK FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
This Annual Report on Form 10-K contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be considered to be forward-looking statements. Although not
a complete list of words that might identify forward-looking statements, we use
the words "believes," "anticipates," "plans," "expects," "intends," and similar
expressions to identify forward-looking statements. There are a number of
important factors that could cause our actual results to differ materially from
those indicated by forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below, as well as those
discussed elsewhere in this Form 10-K.
OUR IMMEDIATE PRODUCT COMMERCIALIZATION EFFORTS ARE FOCUSED ON OUR EMBOSPHERE
MICROSPHERES, FOR WHICH WE HAVE RECEIVED ONLY LIMITED REGULATORY APPROVALS
OUTSIDE THE UNITED STATES TO DATE; WE HAVE NOT RECEIVED REGULATORY APPROVAL OR
CLEARANCE TO MARKET ANY OTHER PRODUCTS.
Our immediate product commercialization efforts are focused on our
Embosphere Microspheres. To date, this product has received regulatory approval
for marketing in Europe, Australia and Canada for use in the treatment of
arteriovenous malformations, hypervascularized tumors and control of blood loss.
In May 1999, we filed a 510(k) notification with the U.S. Food and Drug
Administration, or FDA, for marketing the use of our Embosphere Microspheres for
the embolization of hypervascularized tumors and arteriovenous malformations,
but not for the treatment of uterine fibroids. Clearance of this 510(k)
notification is pending, and we cannot assure you as to when this notification
will be cleared, if at all. Either a separate 510(k) notification or a premarket
approval will be required from the FDA with respect to the marketing in the
United States of Embosphere Microspheres for use in the embolization of uterine
fibroids. In either case, clinical studies will be required. The regulatory
approval process with respect to premarket approval can take years. We do not
have regulatory approvals or clearances to market any other product in any
country, other than approvals to market our Embosphere Microspheres in Europe,
Australia and Canada. If we do not receive required regulatory approval or
clearance to market our Embosphere Microspheres in the United States (including
an approval or clearance in the treatment of uterine fibroids) or for any other
product, or if required approvals or clearances are not received on a timely
basis, our business will be materially adversely affected. See
"Business--Government Regulation" for a more detailed discussion on the
regulatory approval process and regulatory compliance requirements.
IF THE MARKET IS NOT RECEPTIVE TO OUR EMBOSPHERE MICROSPHERES PRODUCT, WE WILL
BE MATERIALLY ADVERSELY AFFECTED.
We only recently began selling our Embosphere Microspheres product in Europe
and have not yet received regulatory approval or clearance for marketing our
Embosphere Microspheres in the United States. We cannot predict whether our
Embosphere Microspheres will be accepted in the market. The commercial success
of our Embosphere Microspheres product will depend upon its acceptance by the
medical community and third party payors as clinically useful, cost effective
and safe. Our Embosphere Microspheres are based upon new technologies and
therapeutic approaches. As a result, it may be difficult
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for us to achieve market acceptance of this product. In particular, our success
will depend upon obstetrics and gynecology physicians referring patients to
interventional radiologists to receive treatment using our products in lieu of
or in addition to receiving other forms of treatment which the obstetrics and
gynecology physicians can provide directly. However, unless and until we receive
the required regulatory approvals and clearances to market our Embosphere
Microspheres in the United States for uterine fibroids, we cannot label or
market our Embosphere Microspheres in the United States for uterine fibroids.
While we have begun clinical testing under an Investigational Device Exemption
in order to apply for clearance or approval from the FDA for this specific
indication, we cannot assure you that we will receive any required approval or
clearance on a timely basis, if at all. In addition, market acceptance of this
product may be adversely affected by negative publicity associated with any
adverse medical effects attributed to embolization treatments generally or our
product. If we fail to achieve market acceptance of this product, we will be
materially adversely affected.
IF OUR EMBOSPHERE MICROSPHERES PRODUCT DOES NOT PROVE TO BE SAFE OR EFFECTIVE
THEN WE MAY BE REQUIRED TO WITHDRAW IT FROM THE MARKET.
We may not discover all potential problems with our Embosphere Microspheres
product even after completing our testing or even after its use in the market.
For example, Embosphere Microspheres are designed to remain in the body
permanently. As a result, there may be some risk that some or all of the
Embosphere Microspheres used in a medical procedure may travel in the blood
system beyond the intended site of action and occlude, or block, other blood
vessels, resulting in significant adverse health effects on the patient or even
death. There is limited data concerning the long-term health effects on persons
resulting from embolotherapy using our Embosphere Microspheres. If our product
is found not to be safe or effective for any reason, we may be required to
withdraw it from the market or we could incur fines or other penalties, which
would have a material adverse effect on us.
OUR BUSINESS POTENTIALLY EXPOSES US TO SUBSTANTIAL PRODUCT LIABILITY CLAIMS,
WHICH MAY RESULT IN LARGE MONETARY AWARDS AGAINST US AND NEGATIVE PUBLICITY; IN
ADDITION, WE COULD BE SUBJECT TO PRODUCT RECALLS.
Our business exposes us to the risk of product liability claims, product
recalls and fines or other penalties and associated adverse publicity that are
inherent in the testing, manufacturing, marketing and sale of medical device
products. We currently carry liability insurance with only limited coverage. We
cannot predict our ability to maintain our current insurance coverage or to
secure greater or broader product liability insurance coverage on acceptable
terms or at reasonable costs when we need it. A successful product liability
claim against us could require us to pay a substantial monetary award and
subject us to negative publicity. Even if we maintain insurance coverage, our
liability for damages could exceed the amount of coverage. In addition, a
product recall could generate substantial negative publicity about our products
and company and inhibit or prevent commercialization of other product
candidates.
WE HAVE A HISTORY OF LOSSES AND OUR FUTURE PROFITABILITY IS UNCERTAIN.
We have incurred operating losses since our inception and, as of
December 31, 1999, had an accumulated deficit of approximately $36.1 million,
including discontinued operations. We expect to spend substantial funds to
continue research and product testing, to establish sales, marketing, quality
control, regulatory and administrative capabilities, and for other general
corporate purposes. We expect to incur increasing losses over the next several
years as we expand our commercialization efforts.
We cannot predict the size or duration of any future losses. We cannot be
certain that we will ever become profitable or that, if we do become profitable,
we will remain profitable on a continuing basis. Failure to become and remain
profitable would depress the market price of our common stock and impair our
ability to raise capital and continue our operations.
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WE HAVE RECENTLY UNDERTAKEN A STRATEGIC REDIRECTION OF OUR BUSINESS AND THERE
CAN BE NO ASSURANCE THAT OUR STRATEGIC SHIFT WILL PROVE TO BE SUCCESSFUL.
In early 1999, we decided to exit the chromatography business, which had
constituted our core business, to focus on the commercialization of microspheres
for use in embolotherapy and other applications. Consistent with this decision,
in February 1999 we acquired a 51% ownership interest in Biosphere Medical S.A.,
with an option to acquire the remaining 49% interest at a later date. In
May 1999, we sold substantially all of our assets relating to the chromatography
business and changed our name to BioSphere Medical, Inc. We have restated our
historical financial statements to reflect the discontinuation of our
chromotography business. In addition, over 70% of 1999 revenue included in our
restated financial statements is derived from the sale of products we consider
to be nonstrategic and which we do not expect to constitute a significant
portion of our revenue on an ongoing basis. We have no assurance that our
decision to exit the chromatography business and focus on the commercialization
of microspheres will prove to be successful.
WE MAY EXPERIENCE DELAYS, DIFFICULTIES OR UNANTICIPATED COSTS IN ESTABLISHING
THE SALES AND DISTRIBUTION CAPABILITIES NECESSARY TO GAIN MARKET ACCEPTANCE FOR
OUR PRODUCTS.
We currently lack sales, distribution and marketing capabilities in the
United States and have only limited sales, distribution and marketing
capabilities in Europe. To market our products directly, we must develop an
effective marketing and sales force with technical expertise and a supporting
distribution capability. Developing a marketing and sales force is expensive and
time-consuming and could delay a product launch. Moreover, we may choose or find
it necessary to enter into strategic partnerships to sell, market and distribute
our products. The terms of any partnership may not be favorable to us. We
currently rely on distributors to sell our products outside of France. We may
not be able to provide adequate incentive to these distributors to promote our
products. Our inability to successfully employ qualified marketing and sales
personnel and develop our sales and marketing capabilities, or the failure of
our distributors to promote our products would harm our business.
WE WILL INCUR SUBSTANTIAL COSTS TO EDUCATE PHYSICIANS ABOUT USING OUR PRODUCT
CORRECTLY.
To use our Embosphere Microspheres correctly for a particular medical
procedure, physicians must select and use the proper size and quantity of
Embosphere Microspheres. A physician's selection and use of the wrong size or
quantity of Embosphere Microspheres could have significant adverse health
effects on the patient, including death. It will be necessary for us to incur
substantial costs to educate physicians about the selection and use of the
proper size and quantity of Embosphere Microspheres in patient therapy. This
will involve spending significant amounts of money and allocating management
resources to this effort. If we are not able to successfully educate physicians
to properly use our product then we could be subject to substantial product
liability claims and we will not achieve widespread market acceptance or
significant product revenue.
WE HAVE ONLY ONE MANUFACTURING FACILITY, AND IF WE EXPERIENCE MANUFACTURING
DELAYS OR INTERRUPTIONS IN PRODUCTION, OUR BUSINESS WOULD BE ADVERSELY AFFECTED.
We currently produce all of our Embosphere Microsphere products in one
manufacturing facility in France. We would likely experience significant delays
or cessation in production of our products at this facility if a labor strike,
natural disaster, local or regional conflict or other supply disruption were to
occur. Moreover, we lease our manufacturing facility pursuant to an at-will
tenancy, and we could be required to relocate upon minimal advance notice. If we
are unable to manufacture our products at our facility in France, we may be
required to enter into arrangements with one or more contract manufacturing
companies. We do not currently have contingency plans in place and, if required,
we could encounter delays or difficulties establishing relationships with
contract manufacturers or in establishing agreements on terms that are favorable
to us. Also, in the same way that we must, third party manufacturers must adhere
to FDA's current good manufacturing practices, or GMP, regulations which are
enforced by the
17
<PAGE>
FDA through its facilities inspection program. We cannot assure you that third
party manufacturers will be able to comply or maintain compliance with GMP
regulations. Any failure to comply could significantly delay a 510(k) clearance
or premarket approval. For a premarket approval device, if we change our
manufacturing facility or switch to a third-party manufacturer we will be
required to submit a premarket approval application supplement. For a 510(k)
product, a change in our manufacturing location would require us to change our
registration with the FDA. If we fail to produce enough products at our own
manufacturing facility or at a third-party manufacturing facility, we may be
unable to deliver products to our customers on a timely basis, which could lead
to customer dissatisfaction and could harm our reputation and ability to
compete. In addition, if we are required to depend on third-party manufacturers,
our profit margins may be adversely affected.
BECAUSE WE HAVE LIMITED SOURCES OF PRODUCTION AND SUPPLY, OUR ABILITY TO PRODUCE
AND SUPPLY OUR PRODUCTS COULD BE IMPAIRED.
Certain key components of our Embosphere Microspheres are currently
purchased from a limited number of outside sources and may only be available
through a few sources. We generally do not have long-term agreements with any of
our suppliers.
Our reliance on our suppliers exposes us to risks including:
- the possibility that one or more of our suppliers could terminate their
services at any time without penalty,
- the potential inability of our suppliers to obtain required components,
- the potential delays and expenses of seeking alternative sources of supply
or manufacturing services,
- reduced control over pricing, quality and timely delivery due to the
difficulties in switching to alternative suppliers, and
- the possibility that one or more of our suppliers could fail to satisfy
any of the FDA's required current good manufacturing practices
regulations.
Consequently, in the event that components from our suppliers are delayed or
interrupted for any reason, our ability to produce and supply our products could
be impaired.
THE INTELLECTUAL PROPERTY RIGHTS WE RELY UPON TO PROTECT THE TECHNOLOGY
UNDERLYING OUR PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO
USE OUR TECHNOLOGY, OR VERY SIMILAR TECHNOLOGY, AND COULD REDUCE OUR ABILITY TO
COMPETE IN THE MARKET.
Our success will depend in part on our ability to obtain, protect and
enforce patents on our technology and to protect our trade secrets. Any patents
we own or license may not afford meaningful protection for our technology and
products. Others may challenge our patents and, as a result, our patents could
be narrowed, invalidated or rendered unenforceable. In addition, our current and
future patent applications may not result in the issuance of patents in the
United States or foreign countries. We cannot determine whether competitors have
similar patent applications on file, since filed patent applications are secret
until issued. The United States Patent and Trademark Office could initiate
interference proceedings involving our United States patent applications, issued
patents or patents that we license from third parties. Competitors may develop
products similar to ours which are not covered by our patents. Further, there is
a substantial backlog of patent applications at the United States Patent and
Trademark Office, and the approval or rejection of patent applications may take
several years.
We require our employees, consultants and advisors to execute
confidentiality agreements. However, we cannot guarantee that these agreements
will provide us with adequate protection against improper use or disclosure of
confidential information. In addition, in some situations, these agreements may
conflict with, or be subject to, the rights of third parties with whom our
employees, consultants or advisors have prior employment or consulting
relationships. Further, others may independently develop substantially
18
<PAGE>
equivalent proprietary information and techniques, or otherwise gain access to
our trade secrets. Our failure to protect our proprietary information and
techniques may inhibit or limit our ability to exclude certain competitors from
the market.
WE MAY BE INVOLVED IN LAWSUITS TO PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS. IF WE LOSE, WE MAY LOSE THE BENEFIT OF SOME OF OUR INTELLECTUAL PROPERTY
RIGHTS, THE LOSS OF WHICH MAY INHIBIT OR ELIMINATE OUR ABILITY TO EXCLUDE
CERTAIN COMPETITORS FROM THE MARKET.
In order to protect or enforce our patent rights, we may have to initiate
legal proceedings against third parties, such as infringement suits or
interference proceedings. By initiating legal proceedings to enforce our
intellectual property rights, we may also provoke these third parties to assert
claims against us. Furthermore, we may be sued for infringing on the
intellectual property rights of others, and we may find it necessary, if
threatened, to initiate a lawsuit seeking a declaration from a court regarding
the proprietary rights of others. Intellectual property litigation is costly,
and, even if we prevail, the cost of such litigation could adversely affect us.
In addition, litigation is time consuming and could divert management attention
and resources away from our business.
Our license agreement with L'Assistance Publique-Hopitaux De Paris, a French
hospital with which we jointly own certain patents, may require us to seek their
participation in any legal proceedings we initiate against third parties to
protect or enforce our rights under the jointly-owned patents. If we are not
able to obtain the cooperation of AP-HP in any infringement claim we may be
required to bring, then our ability to pursue such claim and protect our patent
rights could be harmed, which would have a material adverse effect on our
ability to market and sell our products and achieve profitability.
The patent position of companies like ours generally is highly uncertain,
involves complex legal and factual questions, and has recently been the subject
of much litigation. No consistent policy has emerged from the U.S. Patent and
Trademark Office or the courts regarding the breadth of claims allowed or the
degree of protection afforded under patents like those we own, have licensed,
may license or file in the future. As a result, we may not prevail in any
patent-related proceeding. If we do not prevail in any litigation, in addition
to any damages we might have to pay, we could be required to stop the infringing
activity or obtain a license. Any required license may not be available to us on
acceptable terms, or at all. In addition, some licenses may be nonexclusive, and
therefore, our competitors may have access to the same technology licensed to
us. If we fail to obtain a required license or are unable to design around a
patent, we may be unable to sell some of our products, which could have a
material adverse affect on us.
OUR RIGHT TO USE CERTAIN TECHNOLOGIES IS DEPENDENT ON LICENSES WHICH COULD BE
TERMINATED OR LOST.
We are a party to various license agreements that give us rights under
certain intellectual property rights of third parties. These licenses impose
various commercialization, sublicensing, royalty, insurance and other
obligations on us. Our failure to comply with our obligations under any license
could have a material adverse effect on our business, financial condition and
results of operations.
OUR BUSINESS IS SUBJECT TO AN EXTENSIVE AND POTENTIALLY COSTLY GOVERNMENTAL
APPROVAL PROCESS; WE HAVE NOT YET OBTAINED APPROVAL OR CLEARANCE TO MARKET OUR
PRODUCTS IN THE UNITED STATES.
The manufacture, packaging, labeling, advertising, promotion, distribution
and sale of our products are subject to governmental regulation by national and
local government agencies in the United States and abroad. Our products are
subject to approval or clearance by the FDA prior to marketing for commercial
use. We have not yet received any required approvals or clearances in the United
States. The process of obtaining necessary FDA approvals and clearances can be
time-consuming, expensive and uncertain. Further, approval or clearance may
place substantial restrictions on the indications for which the product may be
marketed or to whom it may be marketed. In addition, we may be required by the
FDA to conduct a postmarket surveillance study on our embolotherapy device, if
cleared. If such a study revealed an unexpected rate of type of adverse events,
the FDA could place further restrictions on the marketing of the device, or
rescind its clearance. Also some changes to legally marketed devices require new
regulatory
19
<PAGE>
submissions, for example, a change in intended use or a change that affects
safety or effectiveness. Assuming we receive 510(k) clearance for our Embosphere
Microspheres, we may in the future make certain enhancements to our Embosphere
Microspheres which we determine do not necessitate the filing of a new 510(k)
notification. However, if the FDA does not agree with our determination, it will
require us to file a new 510(k) notification or a premarket approval or a
premarket approval supplement, for a premarket approval application product, for
the modification and we would be prohibited from marketing the modified product
until we obtained FDA clearance or approval. The nature of marketing claims we
will be permitted to make in labeling or advertising regarding our Embosphere
Microspheres is limited to those specified in any FDA clearance or approval and
claims beyond those cleared or approved will constitute a violation of the
Federal Food, Drug and Cosmetic Act.
Further, our embolotherapy device is classified into Class III by the FDA,
which means that even if we obtain 510(k) clearance to market the device, the
FDA could promulgate a regulation requiring PMA approval of the device to allow
it to remain on the market. A requirement for PMA approval will likely require
us to conduct costly clinical trials and there is no guarantee that we can
provide the FDA sufficient data for PMA approval in a timely fashion, if at all.
Failure to obtain PMA approval would result in removal of our product from the
United States market.
Legally marketed products are subject to continuing FDA requirements
relating to quality control and quality assurance, maintenance of records and
documentation and labeling and promotion of medical devices. We are also
required to submit medical device reports to the FDA to report device-related
deaths, serious injuries and malfunctions, the recurrence of which would be
likely to cause or contribute to a death or serious injury. These reports are
publicly available and, therefore, can become a basis for private tort suits,
including class actions. Our inability to obtain required regulatory approval or
clearance on a timely or acceptable basis could harm our business. In addition,
failure to comply with applicable regulatory requirements could subject us to
enforcement action, including product seizures, recalls, withdrawals of
clearances or approvals, restrictions on or injunctions against marketing our
products or products based on our technology, and civil and criminal penalties.
Medical device laws and regulations are also in effect in many countries
outside the United States. These range from comprehensive device approval
requirements for some or all of our medical device products to requests for
product data or certifications. The number and scope of these requirements are
increasing. Failure to comply with applicable federal, state and foreign medical
device laws and regulations may harm our business, financial condition and
results of operations.
WE ARE SUBJECT TO RULES REGARDING LABELING AND ADVERTISING AND VIOLATION OF
THOSE RULES COULD ADVERSELY AFFECT OUR BUSINESS.
The federal, state and foreign laws and regulations regarding the
manufacture and sale of our products are subject to future changes, as are
administrative interpretations of regulatory agencies. If we fail to comply with
applicable federal, state or foreign laws or regulations, we could be subject to
enforcement actions, including product seizures, voluntary or mandatory recalls,
voluntary or mandatory patient or physician notification, seizure of our
products, withdrawal of product clearances or approvals, withdrawal of IDE
approvals, restrictions on or injunctions against marketing our products, fines,
injunctions, and civil and criminal penalties. In addition, if we fail to comply
with any applicable FDA requirements, the FDA could withdraw premarket approval
or rescind premarket notification clearance. The FDA also has the authority to
request repair, replacement or refund of the purchase price of any devices
manufactured or sold by us. Any of these sanctions may have a material adverse
effect on our business, financial condition and results of operations, and could
materially adversely affect our ability to successfully market our products.
20
<PAGE>
IT MAY TAKE LONGER THAN WE EXPECT TO COMPLETE CLINICAL TRIALS, MAKE REGULATORY
SUBMISSIONS AND RECEIVE REGULATORY APPROVALS.
Although for planning purposes we forecast the timing of completion of
clinical trials, regulatory submissions and regulatory approvals, the actual
timing of these events can vary dramatically due to factors such as delays,
scheduling conflicts with participating clinicians and clinical institutions,
the rate of patient accruals and the uncertainties inherent in the regulatory
approval process. Clinical trials involving our product candidates may not
commence or be completed and we may not make regulatory submissions or receive
regulatory approvals as forecasted.
We have limited experience in conducting clinical trials and in obtaining
regulatory approvals. In certain circumstances we rely on academic institutions
or clinical research organizations to conduct, supervise or monitor some or all
aspects of clinical trials involving our products. As a result, we will have
less control over the timing and other aspects of these clinical trials than if
we conducted them entirely on our own although we remain responsible for their
regulatory compliance and the accuracy of the data. These trials may not
commence or be completed as we expect and may not will be conducted
successfully. Failure to commence or complete, or delays in, any of our planned
clinical trials, regulatory submissions or regulatory approvals could undermine
investors' confidence in our ability to develop products, which would likely
cause our stock price to decrease.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY, WHICH COULD RESULT IN DECREASED
DEMAND FOR OUR PRODUCTS AND PRICE REDUCTIONS.
Medical devices and therapeutics are rapidly evolving fields in which
scientific and technological developments are expected to continue at a rapid
pace. We have many competitors in the United States and abroad, including
medical device and therapeutics companies, universities and other private and
public research institutions. Our success depends upon our ability to develop
and maintain a competitive position in the product categories and technologies
on which we focus. Many of our competitors have greater capabilities, experience
and financial resources than we do. Competition is intense and is expected to
increase as new products enter the market and new technologies become available.
Our competitors may:
- develop technologies and products that are more effective than ours,
- develop technologies that render our products obsolete or otherwise
noncompetitive,
- obtain regulatory approval for products more rapidly or effectively than
we can, and/or
- obtain patent protection or other intellectual property rights that would
block our ability to develop competitive products.
We may not be able to improve our products or develop new products or
technologies quickly enough to maintain a competitive position in our market and
continue to grow our business. Moreover, we may not be able to compete
effectively, and competitive pressures may adversely affect demand for our
products or our profitability.
WE MAY NOT BE ABLE TO MEET THE OPERATIONAL, LEGAL AND FINANCIAL CHALLENGES THAT
WE WILL ENCOUNTER IN OUR INTERNATIONAL OPERATIONS, WHICH MAY LIMIT THE GROWTH OF
OUR BUSINESS.
Our operations are currently conducted primarily through our French
subsidiary. Furthermore, we currently derive substantially all of our revenue
from the sale of our Embosphere Microspheres and other products in Europe. We
are increasingly subject to a number of challenges which specifically relate to
our international business activities. These challenges include:
- failure of local laws to provide the same degree of protection against
infringement of our intellectual property,
21
<PAGE>
- protectionist laws and business practices that favor local competitors,
which could slow our growth in international markets,
- potentially longer sales cycles to sell products, which could slow our
revenue growth from international sales, and
- potentially longer accounts receivable payment cycles and difficulties in
collecting accounts receivable.
Our international operations may not be successful if we are unable to meet
and overcome these challenges, which would limit the growth of our business.
WE MAY LOSE MONEY WHEN WE EXCHANGE FOREIGN CURRENCY RECEIVED FROM INTERNATIONAL
SALES INTO U.S. DOLLARS OR MAKE FOREIGN CURRENCY PAYMENTS.
Most of our business is conducted in currencies other than the U.S. dollar.
We recognize foreign currency gains or losses arising from our operations in the
period incurred. As result, currency fluctuations between the U.S. dollar and
the currencies in which we do business will cause foreign currency translation
gains and losses. We cannot predict the effects of exchange rate fluctuations
upon our future operating results because of the number of currencies involved,
the variability of currency exposure and the potential volatility of currency
exchange rates. We do not currently engage in foreign exchange hedging
transactions to manage our foreign currency exposure.
IF WE FAIL TO OBTAIN AN ADEQUATE LEVEL OF REIMBURSEMENT FOR OUR PRODUCTS BY
THIRD PARTY PAYORS, THERE MAY BE NO COMMERCIALLY VIABLE MARKETS FOR OUR
PRODUCTS.
The availability and levels of reimbursement by governmental and other third
party payors affects the market for any medical device. These third party payors
continually attempt to contain or reduce the costs of healthcare by challenging
the prices charged for medical products. Additionally, in both the United States
and certain foreign jurisdictions, there have been a number of legislative and
regulatory proposals to change the healthcare system. Further proposals are
likely. These proposals, if adopted, could affect our ability to market our
products. Also, in certain foreign countries, particularly the countries of the
European Union where our Embosphere Microspheres product is currently marketed
and sold, the pricing of medical devices is subject to governmental control and
the price charged for our products have in some instances been reduced as a
result of these controls. We may not be able to sell our products profitably if
reimbursement is unavailable or limited in scope or amount.
OUR PRODUCTS ARE TESTED IN LABORATORY ANIMALS, AND THIS FORM OF TESTING MAY BE
CURTAILED BY SOCIAL FACTORS AND REGULATORY CHANGES.
Our research and development efforts often involve the controlled use of
laboratory animals. Opposition to this practice by activist groups may interfere
with the use of animal testing. Negative publicity generated by activist groups
may harm companies using this practice, including us. In addition, physical
force and demonstrations may occur against us which could delay the testing of
our products. Lobbying efforts by activist groups and other groups and
individuals against the use of animals in testing is ongoing, and may result in
changes in laws, regulations or accepted clinical procedures that would restrict
the use of animals in testing. In the event of a change in laws, regulations or
accepted clinical procedures, delays in our product development will likely
result until we find other methods for effective testing. In addition,
preclinical testing in animals and in vitro is subject to Good Laboratory
Practices regulations. Failure to comply with Good Laboratory Practices
regulations could result in the inability to rely on data obtained in such
testing to support proposed trials in humans and/or to support applications for
marketing clearances or approvals.
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<PAGE>
WE DEPEND GREATLY ON THE INTELLECTUAL CAPABILITIES AND EXPERIENCE OF OUR KEY
EXECUTIVES AND SCIENTISTS, AND THE LOSS OF ANY OF THEM COULD ADVERSELY AFFECT
OUR ABILITY TO DEVELOP OUR PRODUCT CANDIDATES.
The loss of Jean-Marie Vogel, our Chairman, John M. Carnuccio, our President
and Chief Executive Officer, Jonathan McGrath, our Vice-President Worldwide
Research and Development or other key members of our staff could harm us. We
also depend on our scientific collaborators and advisors, all of whom have other
commitments that may limit their availability to us. In addition, we believe
that our future success will depend in large part upon our ability to attract
and retain highly skilled scientific, managerial and marketing personnel,
particularly as we expand our activities in clinical trials, the regulatory
approval process and sales and manufacturing. We face significant competition
for this type of personnel from other companies, research and academic
institutions, government entities and other organizations. We cannot predict our
success in hiring or retaining the personnel we require for continued growth.
IF WE MAKE ANY ACQUISITIONS, WE WILL INCUR A VARIETY OF COSTS AND MAY NEVER
REALIZE THE ANTICIPATED BENEFITS.
If appropriate opportunities become available, we may attempt to acquire
businesses, technologies, services or products that we believe are a strategic
fit with our business. If we undertake this or any other acquisition, the
process of integrating an acquired business, technology, service or product may
result in operating difficulties and expenditures and may absorb significant
management attention that would otherwise be available for ongoing development
of our business. Moreover, we may never realize the anticipated benefits of any
acquisition. Future acquisitions could result in potentially dilutive issuances
of equity securities, the incurrence of debt or a decrease in the cash available
for our operations, contingent liabilities and/or amortization expenses related
to goodwill and other intangible assets, which could adversely affect our
results of operations and financial condition.
We currently own 51% of the outstanding capital stock of Biosphere Medical,
S.A. and are in the process of negotiating the acquisition of an additional 34%
of Biosphere Medical S.A. We have the right to acquire the remaining 15% of
Biosphere Medical S.A. between December 31, 2003 and December 31, 2004. In
addition, the holder of the remaining outstanding capital stock of Biosphere
Medical S.A. has a "put" option to require us to purchase any shares then owned
by it between December 31, 2003 until December 31, 2004 at a price not less than
FF6,000,000 ($980,000 as of December 31, 1999).] The amount payable by us in the
event the "put" option is exercised will be determined by reference to worldwide
Embosphere Microspheres revenues and Biosphere Medical S.A. revenues and is not
subject to a cap. If we are compelled by the minority stockholder to acquire the
minority interest at a future date, we could be required to make a significant
cash payment, which could result in the incurrence of debt or a decrease in the
cash available for our operations.
IF WE FAIL TO MANAGE OUR GROWTH, OUR BUSINESS COULD BE IMPAIRED.
We expect to experience growth in the number of our employees and the scope
of our operating and financial systems. This growth has resulted in an increase
in responsibilities for both existing and new management personnel. Our ability
to manage growth effectively will require us to continue to implement and
improve our operational, financial and management information systems and to
recruit, train, motivate and manage our employees. We may not be able to manage
our growth and expansion, which would impair our business.
WE WILL CONTINUE TO NEED SUBSTANTIAL FUNDS, AND IF ADDITIONAL CAPITAL IS NOT
AVAILABLE, WE MAY HAVE TO CURTAIL OR CEASE OPERATIONS.
We will need to raise funds to successfully develop and commercialize our
products. Other than a $2.0 million credit line with a bank, we have no
committed source of capital. If we cannot raise funds, we could be required to
reduce our capital expenditures, scale back our product development, reduce our
workforce and license to others products or technologies that we otherwise would
seek to commercialize ourselves. We may not receive funding on reasonable terms
or at all. If we raise money by selling additional
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<PAGE>
capital stock, these sales of our capital stock are likely to dilute our
existing stockholders. Further, if we issue additional equity securities, the
new equity securities may have rights, preferences or privileges senior to those
of existing holders of our common stock. Alternatively, we may borrow money from
commercial lenders, possibly at high interest rates.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY FROM QUARTER TO QUARTER, WHICH
COULD CAUSE A DECLINE IN OUR STOCK PRICE.
Our operating results could fluctuate significantly from quarter to quarter.
We expect to continue to experience significant fluctuations as a result of a
variety of factors, many of which are outside of our control. The following
factors could affect our operating results:
- market acceptance of our products,
- the timing and scope of regulatory approvals or denials,
- the timing of revenue generated from product sales,
- the introduction and marketing of new products,
- changes in demand for our products,
- availability of the components used in our products, and
- general and medical device industry-specific business and economic
conditions.
In addition, a large portion of our expenses, including expenses for
facilities, equipment and personnel, are relatively fixed. Accordingly, if
revenues decline or do not grow as anticipated, we might not be able to improve
our operating margins. In addition, we plan to significantly increase operating
expenses in the next several years. Failure to achieve anticipated levels of
revenues could therefore significantly harm our operating results for a
particular fiscal period.
Due to the possibility of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. Our operating results in some
quarters may not meet the expectations of stock market analysts and investors.
In that case, our stock price would probably decline.
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<PAGE>
ITEM 2. PROPERTIES
Our facilities are located in Marlborough, Massachusetts and Louvres,
France. Effective April 1, 2000, we intend to relocate our Marlborough office to
Rockland, Massachusetts where we will lease approximately 8,000 square feet of
office and laboratory space pursuant to a lease for a term of five years. At our
facility in France, we lease approximately 10,000 square feet of office,
laboratory and manufacturing space. Approximately 7,000 square feet in our
facility in France are used for manufacturing operations, and the balance is
used for research and development and administration.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company,
through solicitation of proxies or otherwise, during the last quarter of the
year ended December 31, 1999.
EXECUTIVE OFFICERS
The executive officers of BioSphere, their respective ages as of
December 31, 1999 and their positions with BioSphere are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ----------------------------------------
<S> <C> <C>
John M. Carnuccio....................... 46 Chief Executive Officer, President and
Director
Jonathan R. McGrath..................... 45 Vice President, Worldwide Research and
Development
Robert M. Palladino..................... 45 Vice President and Chief Financial
Officer
Robert T. Phelps........................ 43 Vice President, Sales and Business
Development
Jean-Marie Vogel........................ 49 Chairman and Director
</TABLE>
JOHN M. CARNUCCIO, age 46, has served as a director of BioSphere since
June 1999. From January 1999 until May 1999, Mr. Carnuccio served as Executive
Vice President of BioSphere and President of the Medical Products Business of
BioSphere. In May 1999, he was appointed President and Chief Executive Officer
of BioSphere. From 1979 to January 1999, Mr. Carnuccio served in a number of
capacities at Boston Scientific Corporation, a medical device company, most
recently as Vice President, Market Development, Interventional Gynecology, from
April 1998 to January 1999 and as Vice President and General Manager,
Microvasive Urology Division from 1992 to April 1998.
JONATHAN R. MCGRATH, age 45, has served as the Vice President, Worldwide
Research and Development since August of 1999. From 1995 to 1998, Mr. McGrath
was the Vice President of Research and Development at Urologix, a urological
device company. From 1990 to 1995, Mr. McGrath was the Vice President of
Research and Development at Schneider/Pfizer, a cardiovascular device company.
From 1987 to 1990, Mr. McGrath was the Vice President of Product Development &
Operations at Harbor Medical, a surgical device company. From 1980 to 1987,
Mr. McGrath held various positions at Boston Scientific Corporation, most
recently as the Director of Metals Product Development.
ROBERT M. PALLADINO, age 45, has served as Chief Financial Officer and Vice
President since December of 1999. From March 1999 to December 1999,
Mr. Palladino served as Vice President and Chief Financial Officer of
Coretek, Inc. a fiber optics manufacturer. From 1995 to 1999, he served as Vice
President of
25
<PAGE>
Finance at C.P. Clare Corporation, a multinational electronics firm. He also
served as assistant treasurer at the Kendall Company, a health care manufacturer
from 1991 to 1995.
ROBERT T. PHELPS, age 43, has served as the Vice President, U.S. Sales and
Business Development since August of 1999. From 1993 to 1998, Mr. Phelps was the
Vice President of Sales, Orthopedic Division at Johnson & Johnson, a
pharmaceutical company. From 1990 to 1993, Mr. Phelps was the Group Controller,
Orthopedics Division at Johnson & Johnson.
JEAN-MARIE VOGEL, age 49, served as President, Chief Executive Officer and a
director of BioSphere from September 1994 until May 1999. In May 1999, he was
appointed Chairman. From January 1994 to September 1994, Mr. Vogel served as
Executive Vice President and Chief Operating Officer of BioSphere. From 1992 to
1993, Mr. Vogel served as President of the European Operations of Cuno, Inc., a
supplier of filtration processes, equipment and devices used in the production
of biological drugs and food products. From 1977 to 1992, Mr. Vogel served in
various capacities with Millipore Corporation, a manufacturer of membrane
filtration-based products, in its international operations with experience in
Asia, Latin America, the former Soviet Union, the Middle East and Australia,
including as Vice President and General Manager of Millipore's Asian operations.
Mr. Vogel is a French citizen.
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<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock of the Company traded on the Nasdaq National Market under
the symbol BSEP from March 25, 1994 through January 13, 1999, at which time it
moved to NASD's OTC: Bulletin Board. On January 14, 1999, the Common Stock of
the Company began trading on the OTC: Bulletin Board. On May 17, 1999, the
Company changed its symbol to BSMD to reflect the new business of BioSphere
Medical, Inc. On March 15, 2000, the last reported sale price of the Company's
Common Stock on the OTC: Bulletin Board was $35.00. On March 15, 2000, the
Company had approximately 1,139 stockholders of record. The following table sets
forth for the periods indicated the high and low sales prices per share of the
Common Stock as reported by the Nasdaq National Market for the last two fiscal
years.
<TABLE>
<CAPTION>
1999
-------------------
HIGH LOW
-------- --------
<S> <C> <C>
First Quarter............................................... $1.125 $0.688
Second Quarter.............................................. $1.313 $0.703
Third Quarter............................................... $2.156 $0.750
Fourth Quarter.............................................. $6.375 $ 1.50
</TABLE>
<TABLE>
<CAPTION>
1998
-------------------
HIGH LOW
-------- --------
<S> <C> <C>
First Quarter............................................... $2.875 $1.25
Second Quarter.............................................. $2.625 $1.50
Third Quarter............................................... $ 1.50 $0.50
Fourth Quarter.............................................. $1.063 $0.25
</TABLE>
The Company has never paid dividends on its Common Stock. The Company
currently intends to reinvest its earnings, if any, for use in the business and
does not expect to pay cash dividends in the foreseeable future.
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<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our financial statements and related notes to
those statements and other financial information included elsewhere in this
Annual Report on Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA: 1995 1996 1997 1998 1999
- ----------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenue:
Product sales.............................. $250 $97 $117 $155 $2,263
License fees............................... -- 25 35 47 3
----------- ----------- ----------- ----------- -----------
Total revenue............................ 250 122 152 202 2,266
----------- ----------- ----------- ----------- -----------
Cost and expenses:
Cost of product sales...................... 84 43 72 95 1,404
Research and development................... 42 39 34 34 968
Selling, general and administrative........ 1,307 1,505 1,195 1,364 4,003
----------- ----------- ----------- ----------- -----------
Total cost and expenses.................. 1,433 1,587 1,301 1,493 6,375
----------- ----------- ----------- ----------- -----------
Loss from operations......................... (1,183) (1,465) (1,149) (1,291) (4,109)
Other income (expense):
Interest income............................ 76 37 32 30 234
Interest expense........................... (381) (214) (72) (222) (134)
Other income............................... -- -- -- -- 15
----------- ----------- ----------- ----------- -----------
Loss from continuing operations.............. $(1,488) $(1,642) $(1,189) $(1,483) $(3,994)
Loss from discontinued operations............ (11,187) (478) (2,615) (330) (539)
----------- ----------- ----------- ----------- -----------
Net loss..................................... $(12,675) $(2,120) $(3,804) $(1,813) $(4,533)
=========== =========== =========== =========== ===========
BASIC AND DILUTED NET LOSS PER COMMON SHARE:
- ---------------------------------------------
Loss from continuing operations.............. $(0.21) $(0.21) $(0.14) $(0.17) $(0.47)
Loss from discontinued operations............ (1.60) (0.06) (0.31) (0.04) (0.06)
Net loss per common share.................... (1.81) (0.27) (0.45) (0.21) (0.53)
Weighted average number of common shares
outstanding................................ 7,004 7,832 8,423 8,437 8,456
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------------------
BALANCE SHEET DATA: 1995 1996 1997 1998 1999
- ------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Cash and cash equivalents.................... $2,079 $4,502 $2,370 $2,235 $5,368
Working capital.............................. (1,511) 3,648 3,835 2,552 4,490
Total assets................................. 15,876 16,312 12,787 12,664 7,496
Minority interest............................ -- -- -- -- 945
Long-term debt and capital leases............ -- 245 164 82 --
Shareholders' equity......................... 10,672 14,329 10,716 9,136 4,588
</TABLE>
28
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS TOGETHER WITH OUR FINANCIAL STATEMENTS AND RELATED
NOTES APPEARING ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K.
OVERVIEW
We are pioneering the use of our proprietary bioengineered acrylic beads,
known as microspheres, for medical applications including embolotherapy and a
broad range of tissue engineering applications.
We were formed as BioSepra Inc., a wholly-owned subsidiary of Sepracor Inc.
in December 1993. In 1994, we completed our initial public offering. As of
March 15, 2000 Sepracor owns approximately 59% of our outstanding common stock.
From our inception to May 1999, our core business was focused on the
commercialization of proprietary microsphere beads and instruments used in the
design, production and purification of pharmaceuticals.
In early 1999, we decided to focus on the commercialization of microspheres
for use in embolotherapy and other medical applications. Consistent with this
decision, in February 1999, we acquired a 51% ownership interest in Biosphere
Medical S.A., our majority-owned French subsidiary, with an option to acquire
the remaining 49% interest at later dates. In May 1999, we sold substantially
all of our assets relating to our former core business and changed our name to
BioSphere Medical, Inc. We have restated our historical financial statements to
present the operations of our former core business as a discontinued operation.
In 1999, we hired a new senior management team with expertise in the medical
device area.
We received CE Mark approval of our Embosphere Microsphere product in the
European Union in 1997 and more recently received marketing approval in
Australia and Canada. In May 1999, we filed a 510(k) premarket notification to
obtain marketing clearance from the FDA for our Embosphere Microspheres for
hypervascularized tumors and arteriovenous malformations, which are abnormal
connections in certain blood vessels. The 510(k) notification did not include an
indication for use in treating uterine fibroids. We have commenced clinical
testing under an Investigational Device Exemption in order to apply for
clearance or approval from the FDA for this specific indication. We expect to
file for marketing approval in Japan for our HepaSphere Microspheres product for
the treatment of primary liver cancer in the next 24 months. Based on the number
of vials of our Embosphere Microspheres product that we have sold to date, we
estimate that 5,000 patients have been treated with our Embosphere Microspheres
product outside of the United States.
Our revenue is currently generated from product sales in Europe of our
Embosphere Microspheres, and from the sale of barium and other ancillary devices
manufactured by us or by third parties. We recognize revenue upon shipment of
these products to our distributors and customers. Our products are sold by a
direct sales force in France and Canada and by distributors elsewhere in Europe
and Australia. Approximately 73% of our 1999 revenue was derived from barium and
other ancillary devices. We do not expect these products to be a significant
component of our future sales. We expect our future revenues to consist
primarily of sales of Embosphere Microspheres worldwide. Sales in the U.S. are
subject to the receipt of FDA regulatory and marketing clearance.
Cost of product sales consist of our manufacturing costs and the costs
relating to any licenses, royalties, or payments to third parties for the use or
sale of third-party products or technologies. Manufacturing costs consist of the
direct labor and an overhead allocation related to certain indirect costs of our
manufacturing facility in France.
Research and development expenses consist primarily of personnel, clinical
trial and regulatory expenses related to product development. We anticipate
research and development expenses to increase
29
<PAGE>
for the foreseeable future due to our pre-clinical and clinical studies
necessary to prove product feasibility and obtain regulatory approval.
Sales and marketing expenses consist primarily of personnel, travel, product
promotion and other expenses relating to our sales and marketing efforts. We
anticipate that these expenses will increase for the foreseeable future in
connection with our plan to develop a direct sales force in North America. Also,
subject to receipt of regulatory approval, we intend to increase our marketing
efforts to promote Embosphere Microspheres in the United States. We expect that
our sales and marketing expenses will also increase as a result of our efforts
to distribute and promote our products in the Far East.
General and administrative expenses consist primarily of personnel, travel,
professional fees, and other supporting overhead expenses. We expect that
general and administrative expenses will increase in the future to support the
growth of our business.
We have experienced operating losses in each fiscal period since our
inception. As of December 31, 1999, we had an accumulated deficit of
$36.1 million. We expect to experience increasing losses for the foreseeable
future in connection with the execution of our business plan.
The sale of our former core business has been accounted for in accordance
with Accounting Principles Board (APB) Opinion No. 30, REPORTING THE RESULTS OF
OPERATIONS -- REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND
EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS.
Accordingly, the operating results of this business have been presented as
discontinued operations in the accompanying selected financial data.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
Total revenue increased to $2,266,000 for the year ended December 31, 1999
compared to $202,000 in 1998 and $152,000 in 1997. The increase from 1998 to
1999 is primarily attributable to revenue resulting from product sales generated
through the acquisition of 51% of Biosphere Medical S.A. These incremental
revenues are directly attributable to sales of Embosphere Microspheres for
medical applications, as well as sales of barium and other ancillary devices.
Cost of product sales increased to $1,404,000 for the year ended
December 31, 1999 compared to $95,000 in 1998 and $72,000 in 1997, representing
62%, 61%, and 62% of product revenue, respectively. The increase in cost of
product sales during 1999 is primarily attributable to the increase in revenues
associated with the acquisition of 51% of Biosphere Medical S.A. Margins were
impacted by the addition of higher margin Embosphere Microspheres for medical
uses, offset by lower margin barium and other ancillary devices and the one time
purchase of inventory in connection with the acquisition of Biosphere Medical
S.A.
Research and development expenses increased to $968,000 in 1999 from $34,000
in 1998 and from $34,000 in 1997. The increase in research and development
expenses in 1999 is largely due to regulatory expenses incurred in connection
with seeking Embosphere Microspheres product approval in the United States.
Selling, general and administrative expenses increased to $4,003,000 in 1999
from $1,364,000 in 1998 and from $1,195,000 in 1997. The increase in selling,
general and administrative expenses in 1999 was due primarily to the acquisition
of 51% of Biosphere Medical S.A. and expenses related to the implementation of
our new strategic plan, including personnel costs, recruiting expenses and other
expenses associated with developing a new business. The increase in 1998 from
1997 was due primarily to increased staffing and professional fees.
Interest income increased to $234,000 in 1999 from $30,000 in 1998 and
decreased from $32,000 in 1997 to $30,000 in 1998. The increase in 1999 from
1998 was due primarily to interest earned on the
30
<PAGE>
proceeds from the sale of assets relating to our former core business to Life
Technologies, Inc. The decrease in 1998 from 1997 was due to lower cash balances
available for investment.
Interest expense decreased to $134,000 in 1999 from $222,000 in 1998 due to
the retirement of all of our then outstanding debt in the second quarter of
1999. The increase in interest expense to $222,000 in 1998 from $72,000 in 1997
was due to higher outstanding balances under our line of credit during 1998.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have funded our operations through net proceeds provided
from our initial public offering, funds provided by Sepracor, bank financing and
revenues from product sales. Since May 1999, we have funded our operations
primarily from the proceeds provided from the sale of assets related to our
former core business to Life Technologies, Inc. As of December 31, 1999 we had
cash and cash equivalents of $5,368,000, an increase of $3,133,000 from
$2,235,000 of cash and cash equivalents as of December 31, 1998. This increase
primarily resulted from proceeds of approximately $11,000,000 from the sale of
assets related to our former core business to Life Technologies, Inc., offset by
the cash used to fund operating, investing and financing activities for 1999. As
of December 31, 1999 we had $4,490,000 of working capital.
Our operating activities resulted in a net cash outflow of $3,740,000 in
1999, primarily as a result of our operating losses. Our investing activities
resulted in a net cash outflow of approximately $100,000 in 1999 due to the
purchase of approximately $382,000 of property and equipment, partially offset
by $283,000 of cash received through the acquisition of 51% of Biosphere Medical
S.A. Our financing activities resulted in a net cash outflow of $2,664,000 in
1999, consisting primarily of repayment of borrowings outstanding under our line
of credit and repayments to Sepracor under a note payable.
Our discontinued operations resulted in a net cash inflow of $9,643,000 in
1999 as a result of proceeds of $11,000,000 from the sale of assets related to
our former core business to Life Technologies, Inc., offset by the costs
associated with this sale and net cash used in our discontinued operations prior
to the sale in May 1999.
Our French subsidiary has available an overdraft credit line aggregating
FF1,000,000 (approximately $155,000 at December 31, 1999), and is currently
negotiating a bank line of credit for FF1,000,000. At December 31, 1999, there
was no indebtedness outstanding under these credit facilities.
On December 31, 1999, in collaboration with Sepracor, we amended our
revolving credit agreement with a bank under which we may borrow up to
$2,000,000, subject to limitations defined in the agreement and on borrowings
outstanding by Sepracor. There was no indebtedness outstanding under this
agreement as of December 31, 1999. Interest on outstanding borrowings is payable
monthly in arrears at prime (8.5% at December 31, 1999) or the LIBOR rate (6.5%
at December 31, 1999) plus 0.75%. We are required to pay a commitment fee equal
to 0.25% per annum on the average unused line available to us. Our ability to
borrow under this credit line is dependent upon Sepracor's maintenance of
certain financial ratios and levels of cash and cash equivalents and tangible
capital bases. This facility is available until December 31, 2000. Sepracor is
guarantor of any amounts outstanding under the agreement. We have entered into a
security agreement with Sepracor pursuant to which we have pledged to Sepracor
all of our assets, including our equity ownership of Biosphere Medical S.A., as
collateral for Sepracor's guarantee to the bank. Biosphere Medical S.A. is not a
party to the agreement with Sepracor and, therefore, has not pledged its assets
to the bank.
As of December 31, 1999, we had net operating loss carryforwards of
approximately $22,507,000 and research and development credit carryforwards of
$342,000, which will expire through the year 2019 and 2013, respectively. Under
the provisions of the Internal Revenue Code, substantial changes in our
ownership may limit the amount of net operating loss carryforwards that could be
utilized annually in the future to offset taxable income. A full valuation
allowance has been established in our financial statements to reflect the
uncertainty of our ability to use available tax loss carryforwards and other
deferred tax assets.
31
<PAGE>
In February 2000, we completed a private equity placement of common stock
and warrants for net proceeds of approximately $5,785,000. Investors purchased
653,887 shares of our common stock at a price of $9.00 per share, which included
warrants to purchase up to an additional 163,468 shares of common stock at an
exercise price of $20.00 per share. These warrants expire on February 4, 2005.
We intend to use the net proceeds from this private placement for general
corporate purposes, including research and development, sales and marketing
activities.
We believe that our existing funds will be sufficient to fund our operating
expenses and capital requirements as currently planned through 2000. However,
our cash requirements may vary materially from those now planned because of
results of research and development, the scope and results of pre-clinical and
clinical testing, changes in the focus and direction of our research and
development programs, competitive and technological advances, the FDA's
regulatory process, the market acceptance of any approved products and other
factors.
We expect to incur substantial additional costs, including costs related to
on-going research and development activities, pre-clinical studies, clinical
trials and the expansion of our laboratory and administrative activities. In
order to achieve commercialization of our potential future products, we will
need additional funds. We may also need additional funds for possible future
strategic acquisitions of businesses, products or technologies. We may raise
such funds from time to time through public or private sales of equity or from
borrowings. We cannot assure you that we will be able to obtain any additional
funding that we may require on acceptable terms, if at all.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1999, the Financial Accounting Standards Board (FASB) issued SFAS
No. 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES --
DEFERRAL OF THE EFFECTIVE DATE OF FASB STATEMENT NO.133, which defers the
effective date of SFAS No. 133 to all fiscal quarters of all fiscal years
beginning after June 15, 2000. SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, issued in June 1998, establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. We
do not anticipate the adoption of this statement will have a material impact on
our financial position or results of operations.
In March 1999, the FASB issued a proposed interpretation, ACCOUNTING FOR
CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION -- AN INTERPRETATION OF APB
OPINION NO. 25. The proposed interpretation would clarify the application of
Opinion No. 25 in certain situations, as defined. The proposed interpretation
would be effective upon issuance (expected to be early 2000) but would cover
certain events having occurred after December 15, 1998. To the extent that
events covered by this proposed interpretation occur during the period after
December 15, 1998, but before issuance of the final interpretation, the effects
of applying this proposed interpretation would be recognized on a prospective
basis from the effective date. Accordingly, upon initial application of the
final interpretation, (a) no adjustments would be made to the financial
statements for periods before the effective date and (b) no expense would be
recognized for any additional compensation cost measured that is attributable to
periods before the effective date. We expect that the adoption of this
interpretation would not have any effect on the accompanying financial
statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements.
SAB No. 101, as amended by SAB 101(a), is effective for the second quarter of
all fiscal periods beginning after December 15, 1999. Adoption of SAB No. 101 is
not expected to have a material impact on our consolidated financial position or
results of operations.
32
<PAGE>
YEAR 2000 COMPLIANCE
We have not experienced any difficulties that we are aware of related to the
Year 2000 problem. Our operations have not, to date, been adversely affected by
any such difficulties experienced by any of our suppliers or customers in
connection with the Year 2000 problem. We will continue to monitor our systems
for potential difficulties for the remainder of calendar year 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are subject to market risk in the form of interest rate risk and foreign
currency risk. Our investments in short-term cash equivalents are subject to
interest rate movements. We do not believe these exposures are material. We sell
and distribute our products worldwide and the payable may be due in French
currency or other local currencies. Therefore we may experience gains or losses
upon the payment of this account payable obligation.
33
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of BioSphere Medical, Inc. and subsidiaries:
We have audited the accompanying consolidated balance sheets of BioSphere
Medical, Inc. (A Delaware Corporation) and subsidiaries as of December 31, 1998
and 1999 and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1999. 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 in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BioSphere Medical, Inc. and
subsidiaries as of December 31, 1998 and 1999 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
/s/ Arthur Andersen LLP
Boston, Massachusetts
February 7, 2000
34
<PAGE>
BIOSPHERE MEDICAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1999
-------- --------
(IN THOUSANDS,
EXCEPT PAR VALUE
AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $2,235 $5,368
Accounts receivable....................................... -- 645
Inventories............................................... -- 389
Prepaid and other current assets.......................... 55 51
Net current assets of discontinued operations............. 3,708 --
-------- --------
Total current assets.................................... 5,998 6,453
-------- --------
Property and equipment, net................................. 42 322
Goodwill, net............................................... -- 713
Other assets................................................ 7 8
Net long term assets of discontinued operations............. 6,617 --
-------- --------
Total assets............................................ $12,664 $7,496
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital leases...... $2,082 $--
Accounts payable.......................................... 142 616
Accrued expenses.......................................... 792 1,279
Payable to Sepracor....................................... 430 68
-------- --------
Total current liabilities............................... 3,446 1,963
Long-term debt and capital leases, net of current portion... 82 --
-------- --------
Total liabilities....................................... 3,528 1,963
-------- --------
Minority interest in Biosphere Medical S.A.................. -- 945
Commitments and contingencies (Notes 3 and 9)
Shareholders' equity:
Preferred stock, $0.01 par value, 1,000 shares authorized;
none issued and outstanding............................. -- --
Common stock, $0.01 par value, 25,000 shares authorized;
issued and outstanding 8,456 shares in 1998 and 1999.... 84 84
Additional paid-in capital................................ 40,587 40,587
Accumulated deficit....................................... (31,535) (36,068)
Cumulative translation adjustment......................... -- (15)
-------- --------
Total shareholders' equity.............................. 9,136 4,588
-------- --------
Total liabilities and shareholders' equity.................. $12,664 $7,496
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
35
<PAGE>
BIOSPHERE MEDICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenue:
Product sales............................................. $117 $155 $2,263
License fees.............................................. 35 47 3
------- ------- -------
Total revenue............................................... 152 202 2,266
------- ------- -------
Costs and expenses:
Cost of product sales..................................... 72 95 1,404
Research and development.................................. 34 34 968
Selling, general and administrative....................... 1,195 1,364 4,003
------- ------- -------
Total costs and expenses.................................... 1,301 1,493 6,375
------- ------- -------
Loss from operations........................................ (1,149) (1,291) (4,109)
Other income (expense):
Interest income........................................... 32 30 234
Interest expense.......................................... (72) (222) (134)
Other income.............................................. -- -- 15
------- ------- -------
Loss from continuing operations............................. (1,189) (1,483) (3,994)
Loss from discontinued operations........................... (2,615) (330) (539)
------- ------- -------
Net loss.................................................... $(3,804) $(1,813) $(4,533)
======= ======= =======
Basic and diluted net loss per common share:
Continuing operations..................................... $(0.14) $(0.17) $(0.47)
Discontinued operations................................... (0.31) (0.04) (0.06)
------- ------- -------
$(0.45) $(0.21) $(0.53)
======= ======= =======
Basic and diluted weighted average number of common shares
outstanding............................................... 8,423 8,437 8,456
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
36
<PAGE>
BIOSPHERE MEDICAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
---------------------------------------------------
COMMON STOCK ADDITIONAL
$.01 PAR PAID-IN DEFERRED
SHARES VALUE CAPITAL COMPENSATION
-------- ------------ ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1996.......................... 8,416 $84 $40,485 $(322)
Deferred compensation amortization.................. -- -- -- 161
Issuance of common stock under stock plans.......... 15 -- 30 --
Net loss............................................ -- -- -- --
Comprehensive net loss for the year ended
December 31, 1997.................................
------ ------- -------- --------
Balance at December 31, 1997.......................... 8,431 84 40,515 (161)
Deferred compensation amortization.................. -- -- -- 161
Issuance of common stock under stock plans.......... 25 -- 41 --
Compensation for common stock warrants.............. -- -- 31 --
Net loss............................................ -- -- -- --
------ ------- -------- --------
Comprehensive net loss for the year ended
December 31, 1998.................................
Balance at December 31, 1998.......................... 8,456 84 40,587 --
Change in translation adjustment.................... -- -- -- --
Net loss............................................ -- -- -- --
Comprehensive net loss for the year ended December
31, 1999..........................................
------ ------- -------- --------
Balance at December 31, 1999.......................... 8,456 $84 $40,587 --
====== ======= ======== ========
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
---------------------------------------------------------
CUMULATIVE TOTAL
ACCUMULATED TRANSLATION SHAREHOLDERS' COMPREHENSIVE
DEFICIT ADJUSTMENT EQUITY LOSS
----------- ----------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1996.......................... $(25,918) $-- $14,329
Deferred compensation amortization.................. -- -- 161
Issuance of common stock under stock plans.......... -- -- 30
Net loss............................................ (3,804) -- (3,804) $(3,804)
Comprehensive net loss for the year ended
December 31, 1997................................. (3,804)
--------- ------ --------- =========
Balance at December 31, 1997.......................... (29,722) -- 10,716
Deferred compensation amortization.................. -- -- 161
Issuance of common stock under stock plans.......... -- -- 41
Compensation for common stock warrants.............. -- -- 31
Net loss............................................ (1,813) -- (1,813) (1,813)
--------- ------ ---------
Comprehensive net loss for the year ended
December 31, 1998................................. (1,813)
=========
Balance at December 31, 1998.......................... (31,535) -- 9,136
Change in translation adjustment.................... -- (15) (15) (15)
Net loss............................................ (4,533) -- (4,533) (4,533)
---------
Comprehensive net loss for the year ended December
31, 1999.......................................... $(4,548)
--------- ------ --------- =========
Balance at December 31, 1999.......................... $(36,068) $(15) $4,588
========= ====== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
37
<PAGE>
BIOSPHERE MEDICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(3,804) $(1,813) $(4,533)
Less: Net loss from discontinued operations............... (2,615) (330) (539)
------- ------- -------
Net loss from continuing operations....................... (1,189) (1,483) (3,994)
Adjustments to reconcile net loss from continuing
operations to net cash used in operating activities:
Depreciation and amortization........................... 14 17 102
Compensation for common stock warrants.................. -- 31 --
Changes in operating assets and liabilities:
Accounts receivable..................................... -- -- 121
Inventories............................................. -- -- 5
Prepaid and other current assets........................ (3) 2 4
Accounts payable........................................ 204 (346) 103
Accrued expenses........................................ (204) 27 282
Related parties payable................................. 168 105 (362)
------- ------- -------
Net cash used in operating activities................... (1,010) (1,647) (3,739)
------- ------- -------
Cash flows from investing activities:
Decrease in marketable securities......................... 360 -- --
Purchase of property and equipment........................ (5) -- (382)
Decrease (increase) in restricted cash.................... (1) 146 --
Increase in other assets.................................. -- (2) (1)
Cash acquired through acquisition of Biosphere SA......... -- -- 283
------- ------- -------
Net cash provided by (used in) investing activities....... 354 144 (100)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock.................... 30 41 --
Net borrowings (repayments) under line of credit
agreements.............................................. -- 2,000 (2,000)
Repayments on long-term debt and capital leases........... (81) (454) (664)
------- ------- -------
Net cash (used in) provided by financing activities....... (51) 1,587 (2,664)
------- ------- -------
Effect of exchange rate changes on cash and cash
equivalents............................................... -- -- (7)
------- ------- -------
Net (decrease) increase in cash and cash equivalents........ (707) 84 (6,510)
Net cash (used in) provided by discontinued operations...... (1,065) (219) 9,643
Cash and cash equivalents at beginning of year.............. 4,142 2,370 2,235
------- ------- -------
Cash and cash equivalents at end of year.................... $ 2,370 $ 2,235 $ 5,368
======= ======= =======
Supplemental disclosure of Cash Flows Information:
Cash paid for interest.................................... $ 73 $ 207 $ 134
======= ======= =======
Supplemental Disclosure of Noncash Investing Activities:
Acquisition of 51% of Biosphere Medical SA:
Fair Value of Assets Acquired............................. $ -- $ -- $ 1,493
Liabilities Assumed....................................... -- -- (1,493)
Put option of Minority Interest........................... -- -- 771
------- ------- -------
Goodwill.................................................. $ -- $ -- $ 771
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
38
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF THE BUSINESS:
BioSphere Medical, Inc. (The Company) is pioneering the use of proprietary
bioengineered acrylic beads known as microspheres, for medical applications
including embolotherapy, and a broad range of tissue engineering applications.
The Company was formed as BioSepra Inc., a wholly-owned subsidiary of
Sepracor, Inc., in December 1993. In 1994, the Company completed its initial
public offering. From its inception to May 1999, the Company was focused on the
commercialization of proprietary microsphere beads and instruments used in the
design, production and purification of pharmaceuticals.
In early 1999, the Company decided to focus on the commercialization of
microspheres for use in embolotherapy and other medical applications. Consistent
with this decision, in February 1999 the Company acquired a 51% ownership
interest in Biosphere Medical S.A. with an option to acquire the remaining 49%
interest at later dates. In May 1999, the Company sold substantially all of its
assets relating to its prior business and changed the Company's name to
BioSphere Medical, Inc. The Company has restated its historical financial
statements to reflect the presentation of its prior business as a discontinued
operation.
The Company is subject to risks common to companies in its industry,
including but not limited to obtaining regulatory approval by the FDA,
commercial acceptance of the Company's products, development by the Company or
its competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology and the need to obtain adequate financing
to fund future operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the accounts of the Company
and its 51% owned subsidiary, Biosphere Medical S.A. All material intercompany
balances and transactions have been eliminated in consolidation.
(b) TRANSLATION OF FOREIGN CURRENCIES
The accounts of the Company's international subsidiary are translated in
accordance with Statement of Financial Accounting Standards (SFAS) No. 52,
"FOREIGN CURRENCY TRANSLATION". Accordingly, the assets and liabilities of the
Company's international subsidiary is translated into U.S. dollars using the
exchange rate at each balance sheet date. Statements of operations amounts are
translated at average exchange rates prevailing during the period. The resulting
translation adjustment is recorded in the cumulative translation adjustment
account in shareholders' equity. Foreign exchange transaction gains and losses
are not material and are included in other income (expense) in the accompanying
statement of operations.
(c) USE OF ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles in the United States, requires management to make
estimates and assumptions that affect the following: (1) the reported amounts of
assets and liabilities, (2) the disclosure of contingent assets and liabilities
at the date of the financial statements and (3) the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ from
those estimates.
39
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(d) CASH AND CASH EQUIVALENTS
The Company applies SFAS No. 115, "ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES". The Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents. Cash
equivalents primarily consist of U.S. Treasury Notes of approximately $1,526,000
and $4,500,000 at December 31, 1998 and 1999, respectively.
(e) CONCENTRATION OF CREDIT RISK
SFAS No. 105, "DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT
RISK", requires disclosure of any significant off-balance-sheet or credit risk
concentrations. The Company has no significant off-balance-sheet concentration
of credit risk such as foreign exchange contracts, option contracts or other
foreign hedging arrangements. The Company maintains the majority of its cash
balances with financial institutions. Financial instruments that subject the
Company to credit risk consist primarily of trade accounts receivable. No
customers represented 10% or greater of revenue or had amounts due to the
Company that represent greater than 10% of the accounts receivable balance for
the years ended December 31, 1997, 1998 and 1999 and as of December 1998 and
1999, respectively.
For financial information by geographic area see Note 9.
(f) FINANCIAL INSTRUMENTS
SFAS No. 107, "DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,"
requires disclosure about fair value of financial instruments. Financial
instruments consist of cash and cash equivalents, accounts receivable and
accounts payable. The estimated fair value of these financial instruments
approximates carrying value.
(g) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The costs of major additions and
betterments are capitalized. Maintenance and repairs that do not improve or
extend the life of the respective assets are charged to operations. Depreciation
is computed using the straight-line method over the estimated useful lives of
the assets. All laboratory, manufacturing and office equipment have estimated
useful lives of three to ten years. Leasehold improvements are amortized over
the shorter of the estimated useful lives of the improvements or the remaining
term of the lease.
(h) GOODWILL AND OTHER ASSETS
Goodwill, which was generated through the purchase of BioSphere Medical S.A.
(see Note 3), is amortized using the straight-line method over 10 years.
Accumulated amortization was approximately $53,000 at December 31, 1999.
The Company applies the provisions of SFAS No. 121, "ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF".
SFAS No. 121 requires that long-lived assets be reviewed for impairment by
comparing the fair value of the assets with their carrying amount. Any write-
downs are to be treated as permanent reductions in the carrying amount of the
assets. Accordingly, the Company evaluates the possible impairment of goodwill
and other long lived assets at each reporting period based on the undiscounted
projected cash flows of the related asset. In 1998 and 1999, the Company's
analysis indicated that there was no impairment.
40
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(i) REVENUE RECOGNITION
Revenues from product sales are recognized when goods are shipped.
(j) RESEARCH AND DEVELOPMENT
Research and development costs are expensed in the period incurred.
(k) NET LOSS PER SHARE
The Company applies the provisions of SFAS No. 128, "EARNINGS PER SHARE".
SFAS No. 128 establishes standards for computing and presenting earnings per
share and requires presentation of both basic and dilutive earnings per share on
the consolidated statement of operations. Basic net loss per common share is
computed by dividing the net loss by the weighted average number of common
shares outstanding during the year. Diluted loss per share is the same as basic
loss per share as the effects of potential common stock equivalents are
antidilutive for all periods presented. Potential common stock consists of
options and warrants to purchase a total of 1,588,000, 1,627,000, and 3,782,780
common shares which have been excluded from the computation of dilutive weighted
average shares outstanding for the years ended December 31, 1997, 1998 and 1999,
respectively.
(l) NEW ACCOUNTING PRONOUNCEMENTS
In June 1999, the Financial Accounting Standards Board (FASB) issued SFAS
No. 137, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES-DEFERRAL
OF THE EFFECTIVE DATE OF FASB STATEMENT NO. 133", which defers the effective
date of SFAS No. 133 to all fiscal quarters of all fiscal years beginning after
June 15, 2000. SFAS No. 133 issued in June 1998 establishes accounting and
reporting standards for derivative instruments including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. It requires the recognition of all
derivatives as either assets or liabilities in the statement of financial
position and to measure those instruments at fair value. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999. The Company does not
expect the adoption of this statement to have a material impact on its
consolidated financial position or results of its operations.
In March 1999, the FASB issued a proposed interpretation, "ACCOUNTING FOR
CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION--AN INTERPRETATION OF APB
OPINION NO. 25". The proposed interpretation would clarify the application of
APB Opinion No. 25 in certain situations, as defined. The proposed
interpretation would be effective upon issuance (expected to be early 2000) but
would cover certain events having occurred after December 15, 1998. To the
extent that events covered by this proposed interpretation occur during the
period after December 15, 1998, but before issuance of the final interpretation,
the effects of applying this proposed interpretation would be recognized on a
prospective basis from the effective date. Accordingly, upon initial application
of the final interpretation, (a) no adjustments would be made to the financial
statements for periods before the effective date and (b) no expense would be
recognized for any additional compensation cost measured that is attributable to
periods before the effective date. We expect that the adoption of this
interpretation would not have any effect on the accompanying financial
statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "REVENUE RECOGNITION IN FINANCIAL
STATEMENTS". SAB No. 101, as amended by SAB No. 101(a), is effective for the
second quarter of all fiscal periods beginning after December 15, 1999. Adoption
of SAB
41
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
No. 101 is not expected to have a material impact on the Company's consolidated
financial position or results of operations.
3. ACQUISITION OF BIOSPHERE MEDICAL S.A.:
On February 25, 1999, the Company acquired 51% of the outstanding capital
stock of Biosphere Medical S.A. ("Biosphere S.A."), a French SOCIETE ANONYME.
The Company acquired the 51% ownership by granting an exclusive license
pertaining to certain patents and technology and the transfer of certain other
technology to Biosphere S.A. The Company has the option to acquire the remaining
49% of the outstanding capital stock of Biosphere S.A. through December 31,
2004. The price per share of this purchase option is based on Biosphere S.A.'s
rolling twelve month sales and worldwide embosphere sales from the date the
purchase option is exercised, divided by the number of common shares of
Biosphere S.A. then outstanding. This purchase option may be exercised in two
intervals; initially, 70% of the remaining minority interest from the date of
acquisition through December 31, 2003 thereafter, the remaining 30% of the
minority interest through December 31, 2004.
Additionally, the holder of the remaining 49% of the outstanding capital
stock of Biosphere S.A. has an option (the Put Option) to require the Company to
purchase its shares from December 31, 2003 until December 31, 2004 at a price of
not less than FF 6,000,000 ($980,000 December 31, 1999). The Company has
recorded the present value of the Put Option as a component of minority interest
in the accompanying financial statements.
The Company has accounted for this acquisition in accordance with APB
No. 16, ACCOUNTING FOR BUSINESS COMBINATIONS. In accordance with APB No. 16, the
Company has allocated the purchase price, including the present value of the Put
Option, based on the fair value of assets acquired and liabilities assumed, as
follows:
<TABLE>
<S> <C> <C>
Assets $ 1,493
Liabilities (1,493)
Put option of minority
interest 771
-------
Goodwill $ 771
=======
</TABLE>
The results of operations of Biosphere S.A. have been included in the
accompanying consolidated financial statements from the date of acquisition.
Operating results, prior to the date of the acquisition, are not material to the
financial statements taken as a whole.
4. COMMON STOCK FINANCING:
In February 2000, the Company completed a private equity placement of common
stock and warrants for net proceeds of approximately $5,785,000. Investors
purchased 653,887 shares of our common stock at a price of $9.00, which included
warrants to purchase up to an additional 163,468 shares of common stock. The
warrants have an exercise price equal to $20.00 per share and expire on
February 4, 2005. We intend to use the net proceeds from this private placement
for general corporate purposes, including research and development, sales and
marketing activities.
42
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. ALLOCATIONS FROM AND AGREEMENTS WITH SEPRACOR:
Since the Company's inception, support services of U.S. operations,
including administrative support, have been provided by Sepracor. For these
services, the Company was charged approximately $208,000, $155,000, and $119,000
for the years ended December 31, 1997, 1998, and 1999, respectively. These
charges represent an allocation of the Company's proportionate share of
Sepracor's overhead costs using formulas which management believes are
reasonable based upon the Company's use of such facilities and services.
Under a Sublease Agreement, the Company had the ability to lease office
space from Sepracor through 2007 in exchange for monthly rent payments which
increase at various dates and which approximate the Company's proportionate
share of Sepracor's cost of providing the facilities, including building
maintenance, utilities and other operating costs (see Note 9). The rental
payments made by the Company under this Agreement were approximately $320,000 in
1997, $285,000 in 1998 and $269,000 in 1999. On January 7, 2000 the Company
entered into a lease agreement to occupy new office space commencing on
April 3, 2000. At such time, the Company and Sepracor intend to terminate the
Sublease Agreement.
Net amounts payable to Sepracor under these two agreements at December 31,
1998 and 1999 were $430,000 and $67,891, respectively.
Sepracor is entitled to certain rights with respect to the registration
under the Securities Act for a total of 4,000,000 shares of our common stock.
These rights provide that Sepracor may require the Company, on two occasions, to
register the shares having an aggregate offering price of at least $5,000,000,
subject to certain conditions and limitations. As of December 31, 1999, Sepracor
has not exercised such rights.
6. INVENTORIES:
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw material................................................ $ -- $119
Work in progress............................................ -- 25
Finished goods.............................................. -- 245
---- ----
Total inventory........................................... $ -- $389
==== ====
</TABLE>
43
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Office equipment............................................ $ 77 $289
Laboratory and manufacturing equipment...................... -- 72
Leasehold improvements...................................... -- 45
---- ----
77 406
Less: accumulated depreciation and amortization............. (35) (84)
---- ----
Total property and equipment.............................. $ 42 $322
==== ====
</TABLE>
Depreciation and amortization expense was $13,000, $14,000 and $49,000 for
the years ended December 31, 1997, 1998, and 1999, respectively.
8. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS:
Long-term Debt and Capital Lease Obligations consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Note payable to a bank under revolving credit agreement..... $ 2,000 $ --
Non-interest bearing promissory note payable to Sepracor.... 164 --
------- -------
2,164 --
Less current portion........................................ (2,082) --
------- -------
Total long-term debt........................................ $ 82 $ --
======= =======
</TABLE>
On December 31, 1999, the Company and Sepracor amended their revolving
credit agreement with a bank under which the Company may borrow up to
$2,000,000, subject to limitations defined in the agreement and on borrowings
outstanding by Sepracor. There were no borrowings outstanding under this
agreement as of December 31, 1999. Interest is payable monthly in arrears at
prime (8.5% at December 31, 1999) or LIBOR (6.5% at December 31, 1999) plus
0.75%. The Company is required to pay a commitment fee equal to 0.25% per annum
on the average unused line. The Company's ability to borrow under this credit
line is dependent upon Sepracor's maintenance of certain financial ratios and
levels of cash and cash equivalents and tangible capital bases. This facility is
available until December 31, 2000. Sepracor is guarantor of any amounts
outstanding under the agreement. The Company has entered into a security
agreement with Sepracor pursuant to which it has pledged to Sepracor all of its
assets, including its equity ownership of Biosphere Medical S.A., as collateral
for Sepracor's guarantee to the bank. Biosphere Medical S.A. is not a party to
the agreement with Sepracor and, therefore, has not pledged its assets to the
bank.
The Company's French subsidiary has available overdraft protection
aggregating FF1,000,000 (approximately $155,000 at December 31, 1999). At
December 31, 1999 there were no borrowings outstanding under this credit
facility.
44
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS:
Under a Sublease Agreement, the Company leases office space from Sepracor in
exchange for monthly payments which increase at various dates and which
approximate the Company's proportionate share of Sepracor's cost of providing
the facilities, including building maintenance, utilities and other operating
costs. On January 7, 2000, the Company entered into a five year lease with 1050
Hingham Street Realty Trust to occupy 8,000 square feet, commencing April 3,
2000. The Sublease Agreement with Sepracor terminates with the move of the
Company into the new facility. Under the terms of the lease, the Company is
obligated to pay base rental payments of $156,000 per year for the first three
years, and $162,000 per year for the last two years. The Company has no other
existing non-cancellable capital or operating leases as of December 31, 1999.
10. INCOME TAXES:
The Company accounts for income taxes in accordance with SFAS No. 109,
"ACCOUNTING FOR INCOME TAXES" which requires the recognition of deferred tax
assets or deferred tax liabilities for the expected future tax consequences of
events that have been included in the Company's consolidated financial
statements. Deferred tax assets and liabilities are determined based on the
difference between the financial statement carrying amounts and tax basis of
existing assets and liabilities, using enacted tax rates in effect in the years
in which the differences are expected to reverse.
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $22,507,000, which will expire through the year 2019. At
December 31, 1999, the Company had research and experimentation credit
carryforwards of approximately $342,000, which will expire in the year 2013.
Net operating losses of the Company incurred while operating as a division
of Sepracor are not available for carryforward because the Company's results for
those periods were included in the consolidated tax return of Sepracor.
The components of the Company's net deferred tax asset are as follows at:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Assets
Domestic NOL carryforwards................................ $ 6,667 $ 9,003
Foreign NOL carryforwards................................. 3,504 --
Inventory reserve......................................... 135 --
Tax credit carryforwards.................................. 347 342
Other..................................................... 1,017 116
Liabilities
Property and equipment.................................... -- (6)
------- --------
Subtotal.................................................... 11,670 9,455
Valuation allowance....................................... (11,670) (9,455)
------- --------
Net deferred tax asset...................................... $ -- $ --
======= ========
</TABLE>
Due to uncertainty of the realization of these potential tax benefits, the
Company has recorded a valuation allowance against its entire deferred tax
asset.
45
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SEGMENT INFORMATION:
The Company applies the provisions of SFAS No. 131, "DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION". SFAS No. 131 requires
certain financial and supplementary information to be disclosed on an annual and
interim basis for each reporting segment. The Company develops microspheres for
use in the treatment of hypervascularized tumors. The Company operates
exclusively in the medical device business, which the Company considers as one
business segment. Financial information by geographic area is as follows for:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUE
Europe................................................. $ 152 $ 202 $ 2,266
======= ======= =======
OPERATING LOSS INCOME
United States.......................................... $(1,149) $(1,291) $(3,965)
Europe................................................. -- -- (144)
------- ------- -------
Total operating loss................................... $(1,149) $(1,291) $(4,109)
======= ======= =======
TOTAL ASSETS
United States.......................................... $ 2,638 $ 2,339 $ 6,712
Europe................................................. -- -- 1,323
Net assets from discontinued operations................ 10,149 10,325 --
Elimination and adjustments............................ -- -- (539)
------- ------- -------
Total assets........................................... $12,787 $12,664 $ 7,496
======= ======= =======
</TABLE>
12. SHAREHOLDERS' EQUITY:
COMMON STOCK
The Company's authorized capital stock includes 25,000,000 shares of common
stock, par value $0.01 per share. At December 31, 1998 and 1999, 5,369,788
shares (64%) of the Company's common stock outstanding is held by Sepracor. The
common stock has no preemptive, subscription, redemption or conversion rights.
PREFERRED STOCK
The Company's authorized capital stock includes 1,000,000 shares of
preferred stock, par value $0.01 per share, with such rights, restrictions and
specifications as the Board of Directors may determine. As of December 31, 1998
and 1999, no shares of preferred stock have been issued.
46
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. STOCK PLANS AND WARRANTS:
STOCK OPTION PLANS
The 1994 stock option plan (the "1994 Plan") provides for the grant of both
incentive stock options ("ISOs") and nonstatutory stock options ("NSOs") to
officers, directors, advisors and key employees of the Company. The 1994 Plan
also provides for the grant of NSOs to consultants of the Company who are not
also employees of the Company. The exercise price for ISOs must be at least
equal to the fair market value of the stock on the date of grant, and the
exercise price of NSOs must be at least equal to 50% of the fair market value of
the stock on the date of grant. Options generally become exercisable in five
equal annual installments beginning on the first anniversary of the date of
grant. ISOs have a maximum term of ten years from the date of grant. A total of
1,000,000 shares were available for issuance under the 1994 Plan. There were no
shares available for issuance at December 31, 1999.
In 1997, the shareholders approved the 1997 Stock Option Plan (the "1997
Plan"). The 1997 Plan provides for the grant of both ISOs and NSOs to officers,
directors, advisors and key employees of the Company. The 1997 Plan also
provides for the grant of NSOs to consultants of the Company who are not also
employees of the Company. A total of 5,000,000 shares of common stock may be
issued upon the exercise of options granted under the 1997 Plan, of which
2,463,500 are available for issuance at December 31, 1999. Options generally
become exercisable in five equal annual installments beginning on the first
anniversary of the date of grant.
The Director Option Plan (the "Director Plan") provides for the granting of
NSOs to directors of the Company who are not officers or employees of the
Company or of any subsidiary of the Company. A total of 150,000 shares of common
stock may be issued under the Director Plan subject to adjustments as provided
therein. Except as noted below, the exercise price per share will equal the fair
market value of a share of common stock on the date on which the option is
granted. Options granted under the Director Plan will vest in either two or five
equal installments beginning on the first anniversary of the date of the grant
depending on the nature of the grant. There are 142,000 options available for
issuance under the Director Plan at December 31, 1999.
The following table summarizes all stock option activity under the three
stock option plans for the three years ended December 31, 1999:
<TABLE>
<CAPTION>
1997 1998 1999
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT OPTION PRICE)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of the year............ 977 $2.74 1,543 $2.63 1,582 $2.51
Granted....................................... 603 2.46 294 1.89 2,549 0.94
Exercised..................................... (1) 2.00 -- -- -- --
Canceled...................................... (36) 2.94 (255) 2.76 (393) 2.15
------ ----- ------ ----- ------ -----
Outstanding at December 31...................... 1,543 $2.63 1,582 $2.51 3,738 $1.42
====== ===== ====== ===== ====== =====
Options exercisable at the end of the
year-end...................................... 470 $2.58 719 $2.60 1,016 $2.39
====== ===== ====== ===== ====== =====
Weighted average fair value of options granted
during the year............................... $2.10 $1.28 $0.94
====== ====== ======
</TABLE>
47
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. STOCK PLANS AND WARRANTS: (CONTINUED)
The range of exercise prices for options outstanding and options exercisable
under the three stock option plans at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE PER SHARE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ----------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.81-$0.81............................... 1,983,500 9.0 $0.81 --
$1.01-$1.01............................... 350,000 9.6 1.01 --
$1.31-$1.31............................... 34,000 9.5 1.31 26,000 $1.31
$1.50-$1.50............................... 70,000 9.8 1.50 --
$1.75-$1.75............................... 14,000 9.4 1.75 7,000
$1.88-$1.88............................... 350,000 7.8 1.88 350,000 1.88
$2.00-$2.00............................... 433,480 4.5 2.00 351,080 2.00
$2.31-$2.31............................... 145,000 9.7 2.31 --
$2.50-$2.50............................... 51,500 4.7 2.50 51,500 2.50
$2.63-$2.63............................... 5,000 7.3 2.63 2,000 2.63
$2.75-$2.75............................... 20,000 7.4 2.75 10,000 2.75
$2.88-$3.88............................... 185,000 6.4 3.62 139,000 3.64
$4.00-$4.50............................... 74,300 5.6 4.24 59,440 4.24
$5.38-$5.38............................... 12,000 6.4 5.38 12,000 5.38
$6.13-$6.13............................... 10,000 5.8 6.13 8,000 6.13
--------- ------ ------ --------- ------
$1.31-$6.13............................... 3,737,780 8.1 $1.42 1,016,020 $2.39
========= ====== ====== ========= ======
</TABLE>
The weighted average remaining contractual life of outstanding options under
these plans is 8.00 years, 7.27 years and 8.12 years as of December 31, 1997,
1998 and 1999, respectively.
In October 1995, the FASB issued SFAS No. 123, "ACCOUNTING FOR STOCK-BASED
COMPENSATION." SFAS No. 123 requires that companies either recognize
compensation expense for grants of stock, stock options, and other equity
instruments to employees based on fair value, or provide pro forma disclosure of
net income and earnings per share in the notes to the financial statements. The
Company adopted the disclosure provisions of SFAS No. 123 in 1996 and has
applied Accounting Principles Board (APB) Opinion No. 25 and related
interpretations in accounting for its plans.
The fair value of each stock option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Risk-free interest rate................................. 6.0%-6.9% 5.5%-5.9% 4.9%-6.7%
Expected dividend yield................................. -- -- --
Expected lives.......................................... 10 years 7 years 7 years
Expected volatility..................................... 80% 65% 106%
</TABLE>
48
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. STOCK PLANS AND WARRANTS: (CONTINUED)
Had compensation cost for the Company's stock based compensation plans and
employee stock purchase plan been determined consistent with SFAS No. 123, the
Company's net loss and net loss per share would have been increased to the
following pro forma amounts:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Net loss
As reported............................................... $(3,804) $(1,813) $(4,533)
Pro Forma................................................. (4,219) (2,321) (7,612)
Basic and Diluted net loss per share
As reported............................................... (0.45) (0.21) (0.53)
Pro Forma................................................. (0.50) (0.27) (0.90)
</TABLE>
Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the input of highly
subjective assumptions including expected stock price volatility. Because the
Company's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
EMPLOYEE STOCK PURCHASE PLAN
In 1997 the shareholders approved the 1997 employee stock purchase plan
("Purchase Plan"). Under the Purchase Plan, an aggregate of 50,000 shares of
common stock may be purchased by employees at 85% of the fair market value on
the first or last day of each six month offering period, whichever is lower. An
eligible employee may elect to have up to a maximum of 10% deducted through
payroll deductions from his or her regular salary. During 1997, 1998 and 1999,
there were 13,085, 25,478, and 4,876 shares, respectively, issued under the
Purchase Plan. At December 31, 1999, no shares of common stock were reserved for
future issuance under the Purchase Plan.
STOCK WARRANTS
In 1997, the Company issued a warrant to purchase 45,000 shares of the
Company's common stock at $3.00 per share. The warrant expires on June 5, 2002.
As of December 31, 1999, the warrant had vested with respect to 30,000 shares.
It will vest with respect to an additional 10,000 shares on June 5, 2000. The
remaining 5,000 shares are unexercisable due to the failure of the holder to
satisfy certain vesting requirements.
49
<PAGE>
BIOSPHERE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. EMPLOYEES SAVINGS PLAN:
The Company adopted a 401(k) savings plan for all domestic employees in
1994. Under the provisions of the plan, employees may voluntarily contribute up
to 15% of their compensation subject to statutory limitations. In addition, the
Company matches 50% of the first $3,000 contributed by employees up to $1,500
maximum per employee. Employer matching contributions amounted to $28,000,
$20,406 and $10,838 for the years ended December 31, 1997, 1998 and 1999,
respectively.
15. DISCONTINUED OPERATIONS
On May 17, 1999, the Company sold substantially all of its assets and
business, other than such assets and business relating to intracorporeal and
"on-line" extracorporeal therapies or any autologous treatment, for
approximately $11 million in cash, and the assumption of certain liabilities.
Upon the consummation of the sale, BioSepra Inc. changed its name to BioSphere
Medical, Inc. The Company utilized a portion of the proceeds to pay
approximately $880,000 of transaction costs, to repay approximately
$2.0 million of outstanding bank debt, and to repay approximately $143,000 due
to Sepracor.
The net assets included in the sale had a net book value of approximately
$10.5 million on May 17, 1999, which was included in calculating a net loss for
the sale of approximately $70,000. The operations, assets and liabilities of the
business have been presented in accordance with APB Opinion No. 30, "REPORTING
THE RESULTS OF OPERATIONS--REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A
BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND
TRANSACTIONS" in the accompanying financial statements. Accordingly, the
operating results of the discontinued business for the year ended December 31,
1997, 1998 and 1999 have been segregated from the continuing operations and
reported as a separate line item on the consolidated statements of operations.
The consolidated balance sheet as of December 31, 1998 has also been restated to
reflect the net assets of the sold business.
16. VALUATION AND QUALIFYING ACCOUNTS
A rollforward of the allowance for doubtful accounts for the years ended
December 31, 1997, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
BALANCE, BALANCE,
BEGINNING OF CHARGED TO COSTS END OF
PERIOD AND EXPENSES DEDUCTIONS PERIOD
------------ ---------------- ---------- --------
<S> <C> <C> <C> <C>
Year Ended December 31, 1997................... 233,000 150,000 (14,000) 369,000
Year Ended December 31, 1998................... 369,010 1,388 (264,438) 105,960
Year Ended December 31, 1999................... 105,960 -- (105,960) --
</TABLE>
These allowances for all periods presented are included in Net Assets of
Discontinued Operations as they appear on the balance sheet included herein.
50
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company had no disagreement with its independent auditor, Arthur
Andersen LLP, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure in connection with the
audits of the Company's financial statements during the last two fiscal years.
PART III
ITEMS 10-13.
The information required for Part III in this Annual Report on Form 10-K is
incorporated by reference from the Company's definitive proxy statement for the
Company's 2000 Annual Meeting of Stockholders. Such information will be
contained in the sections of such proxy statement captioned "Stock Ownership of
Certain Beneficial Owners and Management", "Election of Directors", "Board and
Committee Meetings", "Compensation for Directors", "Compensation of Executive
Officers", "Compliance with Section 16 Reporting Requirements", and "Certain
Relationships and Related Transactions". Information regarding executive
officers of the Company is also furnished in Part I of this Annual Report on
Form 10-K under the heading "Executive Officers."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are included as part of this Annual Report on
Form 10-K.
1. Reference is made to the Index to Financial Statements under Item 8 of this
Annual Report on Form 10-K.
2. The Schedule listed below and the Reports of Independent Accountants on
financial statement schedules are filed as part of this Annual Report on
Form 10-K.
All other schedules are omitted as the information required is inapplicable
or the information is presented in the consolidated financial statements or the
related notes.
3. The Exhibits listed in the Exhibit Index immediately preceding the Exhibits
are filed as a part of this Annual Report on Form 10-K.
(b) There were no Current Reports on Form 8-K filed during the last quarter of
the fiscal year.
------------------------
The following trademarks of the Company are mentioned in this Annual Report
on Form 10-K: Biosphere Medical-TM-, Embosphere-Registered Trademark-,
HepaSphere-TM-, MatrX-TM- and GenS(2)-TM-.
51
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
<C> <S>
3.1 Certificate of Incorporation, as amended, of the Company.
(Incorporated herein by reference to the Company's
Registration Statement on Form S-1, as amended (File No.
33-75212)).
3.2 By-Laws of the Company. (Incorporated herein by reference to
the Company's Registration Statement on Form S-1, as amended
(File No. 33-75212)).
4* Specimen Certificate for shares of Common Stock, $.01 par
value, of the Company.
(1)10.1 1994 Director Option Plan. (Incorporated herein by reference
to the Company's Registration Statement on Form S-1, as
amended (File No. 33-75212)).
10.2 Form of Technology Transfer and License Agreement dated as
of January 1, 1994 between the Company and Sepracor Inc.
(Incorporated herein by reference to the Company's
Registration Statement on Form S-1, as amended (File No.
33-75212)).
10.3 Form of Corporate Services Agreement dated as of January 1,
1994 between the Company and Sepracor Inc. (Incorporated
herein by reference to the Company's Registration Statement
on Form S-1, as amended (File No. 33-75212)).
10.4* Share Purchase Agreement by and between Marie-Paule
Leroy-Landercy and the Company dated December 31, 1998.
10.5+* Joint Ownership Contract between the Company and
L'Assistance Publique Hopitaux de Paris dated January 5,
1998, together with amendment dated February 10, 2000
(translated from French).
10.6+* License of SAP-MS rights, including JP 6056676 between
Shinichi Hori and the Company dated September 21, 1999
(translated from Japanese).
10.7* Second Amended and Restated Revolving Credit and Security
Agreement by and among Fleet National Bank, Sepracor Inc.
and the Company dated as of December 31, 1999.
10.8* Amendment No. 1 and Consent dated February 14, 2000 to
Second Amended and Restated Revolving Credit Security
Agreement by and among Fleet National Bank, Sepracor Inc.
and the Company.
10.9* Reimbursement and Security Agreement between the Company and
Sepracor Inc. dated December 22, 1999.
10.10+* Exclusive License and Know How Agreement No. L99037 by and
between Le Centre National de la Recherche Scientifique,
L'Universite Louis Pasteur Strasbourg and the Company dated
July 15, 1999 (translated from French).
10.11 Sublease dated January 1, 1996 by and between Sepracor Inc.
and the Company. (Incorporated herein by reference to the
Company's 10-K for the year ended December 31, 1994).
10.12* Form of Stock and Warrant Purchase Agreement dated as of
February 4, 2000, between the Company (together with
schedule of purchasers thereto).
10.13* Form of Warrant Agreement dated as of February 4, 2000,
between the Company and certain purchasers (together with
schedule of purchasers thereto).
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
<C> <S>
10.14 Senior Management Retention Agreement dated October 3, 1997
by and between the Company and Jean-Marie Vogel.
(Incorporated herein by reference to the Company's Form 10-Q
for the quarter ended September 30, 1997).
10.15* Sublease Agreement between Guerbet S.A. and of Biosphere
Medical, S.A. (translated from French to English).
10.16* Lease Agreement by and between 1050 Hingham Street Realty
Trust and the Company.
21 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP
27 Financial Data Schedule.
</TABLE>
- ------------------------
(1) Management contract or compensatory plan or arrangement filed as an exhibit
to this Form 10-K pursuant to Items 14(a) and 14(c) of Form 10-K.
+ Confidential treatment requested as to certain portions.
* Filed herewith.
53
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
BIOSPHERE MEDICAL, INC.
BY: /S/ JOHN M. CARNUCCIO
-----------------------------------------
John M. Carnuccio
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: March 29, 2000
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOHN M. CARNUCCIO President, Chief Executive Officer,
- ------------------------------------ Director (Principal Executive March 29, 2000
John M. Carnuccio Officer)
/s/ ROBERT M. PALLADINO Chief Financial Officer (Principal
- ------------------------------------ Financial and Accounting Officer) March 29, 2000
Robert M. Palladino
/s/ JEAN-MARIE VOGEL Director, Chairman of the Board
- ------------------------------------ March 29, 2000
Jean-Marie Vogel
/s/ TIMOTHY J. BARBERICH Director
- ------------------------------------ March 29, 2000
Timothy J. Barberich
/s/ WILLIAM M. COUSINS, JR. Director
- ------------------------------------ March 29, 2000
William M. Cousins, Jr.
/s/ ALEXANDER M. KLIBANOV Director
- ------------------------------------ March 29, 2000
Alexander M. Klibanov, Ph.d.
/s/ PAUL A. LOONEY Director
- ------------------------------------ March 29, 2000
Paul A. Looney
/s/ RICCARDO PIGLIUCCI Director
- ------------------------------------ March 29, 2000
Riccardo Pigliucci
/s/ DAVID P. SOUTHWELL Director
- ------------------------------------ March 29, 2000
David P. Southwell
</TABLE>
54
<PAGE>
NUMBER SHARES
BSU
BIOSPHERE MEDICAL, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK CUSIP 09066V 10 3
THIS CERTIFIES THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
is the owner of
fully paid and non-assessable shares of the Common stock, $0.01 par value, of
BIOSPHERE MEDICAL, INC.
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this certificate properly
endorsed or assigned.
This certificate and the shares of Common Stock represented hereby are issued
and held subject to the laws of the State of Delaware and to the Certificate of
Incorporation and the By-laws of the Corporation, each as from time to time
amended. This certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by the facsimile signatures of its duly authorized officers and sealed with
the facsimile seal of the corporation.
DATED:
BIOSPHERE MEDICAL, INC.
/S/ /S/
- ------------------------ ------------------------
SECRETARY PRESIDENT
BIOSPHERE MEDICAL, INC. 1993 DELAWARE
AMERICAN BANK NOTE COMPANY.
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, N.Y.)
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
EXHIBIT 10.4
- --------------------------------------------------------------------------------
SHARE PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
BETWEEN THE UNDERSIGNED:
MARIE-PAULE LEROY-LANDERCY,
residing 5, ter rue Casteja, 92100 Boulogne Billancourt, France,
hereinafter referred to as "MPLL",
OF THE FIRST PART,
AND:
BIOSEPRA INC.,
a company organized under the laws of Delaware, having its registered
office at 111 Locke Drive, Marlborough, MA 01752, United States of
America,
represented by Mr. Jean-Marie Vogel,
hereinafter referred to as "BIOSEPRA",
OF THE SECOND PART.
<PAGE>
RECITALS:
A) At the date hereof MPLL holds 9,940 shares representing 99.4% of the
capital and voting rights in Biosphere Medical SA (the "Company"), a
French SOCIETE ANONYME with a share capital of FF. 1.000.000,
divided into 10,000 shares of FF. 100 each, having its registered
office at Zone Industrielle de Louvres, Rue de la Briqueterie, 95380
Louvres, registered at the Registre du Commerce et des Societes of
Pontoise under no. 418.584.033 and guarantees that she will hold 100%
of the shares in the Company on the Closing Date.
BIOSEPRA has informed MPLL of its Interest in acquiring 51% of the
shares of the Company hereafter referred to as the "Shares".
MPLL has informed BIOSEPRA of its desire to sell the 51% shares
BIOSEPRA is interested in acquiring.
The Parties have agreed to enter into this Agreement in order to define
the terms and conditions of their respective undertakings for the
purposes of and in connection with the sale and acquisition of the
Shares.
B) DEFINITIONS
"Agreement" means the present document.
"BIOSEPRA" means BIOSEPRA Inc, or any legal entity(ies) of the BIOSEPRA
Group substituted by BIOSEPRA Inc. in accordance with the provisions of
Article 1.1 hereinafter.
"Closing Date" means the date fixed for the Transfer of the Shares
under Article 1.2 hereof.
"Company" means Biosphere Medical SA.
"Confidential Information" means information concerning or relating to
all or any of the following matters relating to or connected with the
affairs of the Company details of which are not in the public domain:
the intellectual property and any other property of the Company and/or
the Subsidiaries in the nature of intellectual property or any other
know-how, technical processes, customer, client and supplier lists,
price lists, details of contractual arrangements and any other matters
concerning the business affairs, or finances of the Company or clients
or customers or other persons having dealings with the Company (however
stored).
"MPLL" means Marie-Paule Leroy-Landercy.
"Option" means the promise to sell the Remaining Shares granted to
BIOSEPRA by MPLL stipulated in Article 2.5.
"Parties" means BIOSEPRA and MPLL.
<PAGE>
"Price" means the price mentioned in Article 1.3.1 hereafter.
"Promise" means the promise to buy the Remaining Shares granted by
BIOSEPRA to MPLL stipulated in article 2.6.
"Related Securities" means the securities defined in clause 2.5.4
hereafter.
"Remaining Shares" means the shares of the Company held by MPLL after
the Closing Date as defined in article 2.5 hereafter.
"Sales of the Company" means aggregate sales of Biosphere, increased by
any additional sales of Specialities as defined in the exclusive
license contract mentioned in article 1.3.1 hereafter realized
worldwide by BIOSEPRA and/or its affiliates, except for intra-group
sales.
"Shares" means the 5,100 shares of a par value of FF. 100 each in the
capital of the Company representing 51 % of the share capital which
MPLL has agreed to transfer to the BIOSEPRA under the Agreement.
The Exhibits form part of the Agreement.
The headings in this Agreement are for ease of reference only and shall
not affect the construction or interpretation of this Agreement.
References to persons shall include bodies corporate, unincorporated,
associations and partnerships.
References to the parties hereto include their respective successors in
title assigns and legal personal representatives.
ARTICLE 1: SALE
1.1 SALE OF THE SHARES
MPLL sells to BIOSEPRA and BIOSEPRA acquires from MPLL a number of
shares in the Company representing 51% of its capital and voting rights
under the terms and conditions set forth hereinafter.
Any legal entity(ies) of the BIOSEPRA Group may be substituted by
BIOSEPRA Inc. in the benefit of this Agreement as the purchaser of the
Shares, in whole or in part, by giving notice thereof to MPLL by
registered letter with an acknowledgment of receipt, or any equivalent
means, at the latest one day before the Closing Date, as defined in
Article 1.2 hereinafter. In the above mentioned notice, the buyer will
guarantee the commitments resulting from the Agreement of all
substituted persons.
The Shares are on the Closing Date, free of any pledge or other
security interest, option or other right in favor of third parties.
<PAGE>
1.2 TRANSFER OF THE SHARES
The transfer of the Shares shall take place as of this date hereinafter
referred to as the "Closing Date". The transfer of the shares shall
occur at the latest 60 days as of the date of signature of the present
Agreement.
1.3 PRICE OF THE SHARES
1.3.1 The Parties have agreed that the Price for the Shares shall be equal to
FF. 1 (one French franc). The Price is justified by the fact that,
amongst others, at the Closing Date, BIOSEPRA will grant to the Company
an exclusive license pertaining to patents and technology relating to
embolization microbeads and will transfer its technology in connection
with vascular applications which shall strengthen substantially the
activity of the Company, and the Company will benefit from synergies
with BIOSEPRA group.
1.3.2 On the Closing Date BIOSEPRA shall pay to MPLL the Price (by means of a
bank check or by wire transfer).
1.4 DOCUMENTS SUPPLIED ON THE CLOSING DATE
MPLL delivers the following, documents to BIOSEPRA on the Closing Date:
(i) "Ordre de mouvement" (stock transfers) relating to 51% of the
Shares and "Ordres de mouvement" with respect to minority
shareholders, i.e. Mr. Aime Poirier, Mrs. Claire Ardouvin,
Mrs. Maryvonne Fallavier, Mrs. Colette Bouillette, Mrs. Herve
and Mr. Angeloglou
(ii) the minutes of the general shareholders meetings of the
Company amending the Articles to create two classes A and B of
shares of the Company and appointing Messrs. Jean-Marie Vogel,
Egisto Boschetti and Aime Poirier as directors;
(iii) the resignation letters from Mr. Aime Poirier, Mrs.
Marie-Paule Leroy-Landercy, Mrs. Claire Ardouvin and Mrs.
Maryvonne Fallavier, containing their resignations from their
positions as directors of the Company and stating that the
Company does not owe them any amount for any reason
whatsoever;
(iv) the statutory auditors' letters of resignation from the
Company;
(v) the minutes of the meeting of the board of directors of the
Company at which the intended sale by MPLL to BIOSEPRA was
approved;
(vi) the minutes of the meeting of the board of directors of the
Company appointing Mr. Jean-Marie Vogel as chairman of the
board, and MPLL as "DIRECTEUR GENERAL NON ADMINISTRATEUR" and
as salaried Technology Manager (DIRECTEUR DES TECHNOLOGIES).
<PAGE>
The following, agreements are also signed on the Closing Date:
(i) an exclusive license agreement between the Company and
BIOSEPRA relating to all of BIOSEPRA's patents and technology
relating to embolization microbeads, substantially in
accordance with the terms of the draft attached hereto in
EXHIBIT 1.4 duly signed;
(ii) the labor contract between MPLL and the Company in accordance
with the terms of the draft attached hereto in EXHIBIT 1.4
duly signed.
ARTICLE 2: COVENANTS OF MPLL AND BIOSEPRA
2.1 MPLL undertakes to and covenants with BIOSEPRA that she will not at any
time after the date of this Agreement:
(i) disclose or divulge to any person other than to officers or
employees of any BIOSEPRA's group member whose function it is
to know the same or to any of their professional advisers any
Confidential Information which may be within or have come to
its knowledge and it shall use its best endeavors to prevent
the publication or disclosure of any Confidential Information;
(ii) do or say anything which is likely or intended to damage the
goodwill or reputation of the Company or use the event of the
Sale of the Company to encourage any person to cease to do
business with the Company on substantially equivalent terms to
those previously offered or lead any person not to engage in
business with the Company.
2.2 Unless demanded by law or relevant administrative authority or to
enforce its performance and/or sue for damages a defaulting party, it
is understood that no revelation or communication of any of the
provisions of this Agreement may be made by one of the Parties without
the written consent of the other.
2.3 MPLL hereby undertakes to and covenants with BIOSEPRA that she will not
as long as she remains a shareholder of the Company and for a period
starting the date she sells her last Remaining Share(s) in the Company
and lasting five years from that date, either on its own behalf or
jointly with or as manager, adviser, consultant or agent for any other
person directly or indirectly, in the field of embolization:
(i) approach, canvass, solicit or otherwise act with a view to
enticing away from or seeking in competition with any business
of the Company as carried on by the Company at any time the
custom of any person who has at any time been a customer of
the Company and during such period she shall not use her
knowledge of or influence over any such customer to or for her
own benefit or the benefit of any other person carrying on
business in competition with the Company or otherwise use its
knowledge of or influence over any such customer to the
detriment of the Company;
<PAGE>
(ii) be engaged, concerned or interested howsoever in carrying on
any business worldwide if such business is in competition with
the business carried on at any time by the Company.
2.4 MPLL hereby undertakes to and covenants with BIOSEPRA that she will not
as long as she remains a shareholder of the Company and for a period
starting the date she sells her last Remaining Share(s) in the Company
and lasting five years from that date either on her own behalf or
jointly with or as manager adviser consultant or agent for any other
person directly or indirectly approach, canvass, solicit, engage or
employ or otherwise endeavor to entice away any person who shall be or
shall have been an employee officer or manager of the Company at any
time from and after the date of this Agreement.
2.5 PROMISE TO SELL THE REMAINING SHARES
MPLL holds just after the Closing Date 49% of the share capital of the
Company i.e.: 4,900 shares, hereafter referred to as the "Remaining
Shares".
2.5.1 MPLL hereby irrevocably promises to sell to BIOSEPRA all the Remaining
Shares (hereafter the "Option") at a price per share equal to the Sales
of the Company over the last period of 12 months ending at the end of
the month preceding the one during which the Option will be exercised
by BIOSEPRA, divided by the total number of shares in the Company at
that time, pursuant to the following schedule:
a) BIOSEPRA may exercise the Option granted to it hereabove by
MPLL on 70% of the Remaining Shares from the Closing Date
until the fifth anniversary of the Closing Date, i.e.,:
December 31, 2003.
b) BIOSEPRA may exercise the Option on 30% of the Remaining
Shares still held by MPLL from December 31, 2003 until
December 31, 2004.
In any case, the minimum price to be paid by BIOSEPRA for the total
Remaining Shares should not be less than 49 % of FF. 12,000,000 (twelve
million French francs).
BIOSEPRA may substitute to itself in the benefit of the Option any
affiliated company.
2.5.2 If the Option is exercised by BIOSEPRA, or any substituted company, the
Remaining Shares will be transferred free of any liens, charges,
privileges, guarantees, options or other rights in favor of third
parties.
MPLL irrevocably undertakes neither to transfer the Remaining Shares to
any third party before December 31, 2004, nor, for the same duration,
to grant to any third party a right of any nature whatsoever on the
Remaining Shares, such as, but not limited to, option, lien,
guarantee...
If the Option is exercised, the transfer of the Remaining Shares will
take place at the latest the 15th day following such exercise.
<PAGE>
2.5.3 The Option stipulated in article 2.5 hereby and all its provisions will
also apply to:
(i) the shares, voting certificates and certificates of
investment;
(ii) the warrants, bonds, combined securities, options, rights and
other securities or titles which may give access, immediately
or in the future, directly or indirectly, whatever be the
importance or form of such access, to the capital, the profits
or to the votes at general meetings of the shareholders of the
Company.
All such items mentioned in (i) and (ii) being herein called the
"Related Securities", which at the date of exercise of the Option MPLL
may as a result of the Remaining Shares hold (or in which, at the date
of exercise, she may have rights to), in the Company or any other
company which might succeed to the Company by reason of any
restructuring, merger, modification of the capital, etc., without
modification to the price for the Remaining Shares mentioned in clause
2.5.1 above, except in the case where such Related Securities will have
been (or would be) granted to MPLL in consideration of contributions in
cash or in kind or by way of setting off of credit in which case, the
said price will be increased by the amounts actually contributed or
paid through setting off by MPLL.
2.6 If after December 31, 2003, MPLL still holds the totality or part of
the Remaining Shares and is still an employee of the Company or of any
of BIOSEPRA's affiliated companies, or has been dismissed for a cause
other than "FAUTE GRAVE" or "FAUTE LOURDE", or is deceased, she or her
successor as the case may be will benefit from BIOSEPRA of a promise
from the latter to purchase the Remaining Shares still held by her,
(hereafter the "Promise").
2.6.1 BIOSEPRA hereby irrevocably promises to buy from MPLL all the Remaining
Shares still held by MPLL.
MPLL may exercise the Promise granted to it hereabove by BIOSEPRA from
December 31, 2003 until December 31, 2004.
2.6.2 If MPLL exercises the Promise set forth in article 2.6 hereabove,
BIOSEPRA shall pay the Remaining Shares -or the prorata of the
remaining, shares still held thereof- at a price per share equal to the
Sales of the Company over the last period of 9 months ending at the end
of the month preceding the transfer of the Remaining Shares, divided by
the total number of shares in the Company at that time. In any case,
the minimum price paid by BIOSEPRA to MPLL for the Remaining Shares
still held by MPLL after December 31, 2003 shall not be less than 49%
of FF. 6,000,000 (or the prorata of such amount if BIOSEPRA has
exercised the Option on part of the Remaining Shares it being
understood that for the calculation of the prorata all the Remaining
Shares represents 49%).
BIOSEPRA may substitute to itself in the exercise of the Promise any
affiliated company. In case of substitution, BIOSEPRA will guarantee
the commitments resulting from the Promise of all substituted persons.
<PAGE>
2.6.3 If the Promise is exercised by MPLL, the Remaining Shares will be
transferred free of any liens, charges, privileges, guarantees, options
or other rights in favor of third parties, and the transfer of the
Remaining Shares will take place at the latest the 15th day following
such exercise.
The Promise can be exercised by MPLL only for all the Remaining Shares,
and not part of them.
2.6.4 The Promise stipulated in article 2.6 hereby and all its provisions
will also, mutatis mutandis, apply to the Related Securities mentioned
in clause 2.5.4 hereabove, under the same terms and conditions save for
the reference to the price which will be the one stipulated in clause
2.6.2.
2.6.5 BIOSEPRA undertakes to cause the shareholders meeting of the Company to
appoint MPLL as a director ("ADMINISTRATEUR") at the board of the
latter as soon as legally possible after the Closing Date.
2.6.6 BIOSEPRA and MPLL will vote, at a shareholders meeting to be held as of
the Closing Date, for the modification of the by-laws of the Company to
create in particular two classes A and B of shares in compliance with
the terms and conditions set forth in the Shareholders Agreement
attached in Exhibit 2.6.7.
2.6.7 BIOSEPRA and MPLL shall sign a shareholders agreement in compliance
with Exhibit 2.6.7 (hereafter the "Shareholders Agreement"). The
Shareholders Agreement shall provide for the right for MPLL and
BIOSEPRA to appoint directors in proportion to their respective
percentage in the total share capital of the Company.
The Shareholders Agreement shall also grant to the directors appointed
by MPLL a right of veto of the following decisions :
- any change to the exclusive license contract mentioned in
article 1.3.1 hereto. However such contract may be terminated in
the event that the amount or amounts for which MPLL may be liable
for under this Agreement exceed the sum of FF. 100,000.
- change of the head office of the Company.
- guarantees ("AVALS" and "CAUTIONS") for an amount exceeding 1
million French francs, granted by the Company to the benefit of
companies other than the Company's affiliates.
The Shareholders Agreement shall be automatically terminated if and
when the Company is listed at the French "NOUVEAU MARCHE". The
Shareholders Agreement shall also be automatically terminated if and
when BIOSEPRA exercises the Option on 70% of the Remaining Shares
provided for in article 2.5.1 a) hereto.
2.6.8 BIOSEPRA shall irrevocably assign, worldwide and free of charge, all
its rights to its technology and patent portfolio for vascular
applications, including its recent patent application for spherical PVA
beads.
<PAGE>
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF MPLL
3.1 SCOPE OF THE REPRESENTATIONS AND WARRANTIES
BIOSEPRA buys the Shares under the condition that MPLL makes the
representations and grants the warranties contained in the present
article 3.
The warranties and representations herein are stipulated for the
benefit of BIOSEPRA and they will remain valid for the duration
stipulated in this Agreement, even if BIOSEPRA resells some or all of
the Shares. MPLL hereby represents and warrants that they are true and
accurate on the date of this Agreement.
So far as MPLL is aware after careful consideration there are no facts
or considerations which are not disclosed in the Agreement and its
Exhibits which by their omission would or might:
(i) affect the import of the information contained therein; or
(ii) make any statement therein false or misleading; or
(iii) invalidate or qualify any assumption expressed to be made in
support of any statement therein; or
(iv) be material for disclosure either to BIOSEPRA or to a
potential buyer of the Shares being information which
discloses circumstances whereby the Company is or is likely to
be affected.
3.2 REPRESENTATIONS AND WARRANTIES
3.2.1 ACCURACY AND RELEVANCE OF THE INFORMATION GIVEN TO BIOSEPRA
All information represented in the Exhibits and all other information
contained in the present Agreement concerning the Company is true and
accurate.
No representation or warranty contained in this Agreement and its
Exhibits, which are an integral part thereof contains any untrue
statement or omits a fact necessary to make such representation or
warranty not misleading. MPLL has no knowledge of facts or
circumstances rendering any such information false, untrue or
misleading.
3.2.2 CAPACITY AND POWER OF MPLL
MPLL has all necessary power and authority to conclude and to execute
the Agreement. The Agreement represents a valid and binding obligation
of MPLL in accordance with its terms and does not violate or result in
a breach or default under any agreement or commitment to which MPLL or
the Company is a party or which is binding upon it.
<PAGE>
Neither the Company nor MPLL is a party to, subject to, or bound by any
mortgage, deed of trust, indenture or other instrument or agreement or
by any judgment, order, writ, injunction, or decree of any court or
governmental body, and there is no provision in the Company's
organizational documents or, to the knowledge of MPLL, in any statutes,
rule or regulation, that would prevent or materially impair (i) the
execution, delivery or performance of this Agreement, or the agreements
contemplated hereby, (ii) BIOSEPRA's ability to exercise rights as a
controlling or majority shareholder of the Company, or (iii) the
carrying on or the right to carry on the business of the Company as it
is now constituted.
3.2.3 INCORPORATION OF THE COMPANY
The Company has been duly incorporated and properly formed, and its
articles of incorporation, as well as the manner in which it is
operating, are in accordance with all applicable laws and regulations.
3.2.4 SHARES AND PARTICIPATIONS OF THE COMPANY
All the shares of the Company have been issued in accordance with
applicable laws and regulations and are entirely paid-up and free of
any liens, charges, privileges, guarantees, options or other rights in
favor of third parties.
There exists no contract or commitment of any nature, whether signed or
unsigned, with a view to allocating or issuing shares, or giving rise
to any right of any person to buy or preempt, in whole or in part, the
shares of the Company.
The Company does not own, directly or indirectly, any holding in any
legal entity, grouping or partnership of whatever kind, including any
"SOCIETE DE PERSONNES", "SOCIETE CIVILE IMMOBILIERE", "G.I.E.", SOCIETE
DE PARTICIPATION", or in which the liability of the members or partners
is not limited to their ownership interest.
The Company has issued no priority shares, preferred shares, bonds
convertible into shares, exchangeable against shares or giving rights
to subscribe to shares. More generally, the Company has issued no
securities giving rights, by conversion, exchange, warrant,
reimbursement or in any other manner, to the distribution, immediately
or in due course, of shares for which purpose are or will be issued in
representation of amount of shares in the capital of the Company. No
issuing of any securities of the type described hereabove is currently
in progress.
3.2.5 TRANSFER AND OWNERSHIP OF THE SHARES
The Shares are on the Closing Date owned by MPLL, at its free disposal
without any restriction and represent 51% of the authorized legal
capital of the Company.
BIOSEPRA acknowledges that the transfer of the Shares may, if requested
by Guerbet SA, entail the early repayment by the Company of the loan
amounting to 3 million French francs granted by Guerbet SA by contract
dated April 29, 1998, which repayment is to be made within 6 months
after the change of control under the provisions of article 8 of the
loan agreement.
<PAGE>
All the procedures relating to the transfer of the Shares at the
Closing Date which are necessary, in order that the transfer can take
place in compliance with all applicable laws and regulations at the
Closing Date, have been duly performed.
3.2.6 STATUTORY BOOKS
To the best of MPLL's knowledge:
- all accounting books, statutory books and files required by
applicable laws and regulations are maintained by and in the
possession of the Company, and contain information which is true
and correct and duly recorded in accordance with applicable
regulations and laws.
- all documents evidencing the ownership of the assets of the
Company and signed copies of all contracts entered into by it
which are currently in force, are essential to its activity, and
should be in their possession, are in the possession of the
Company.
3.2.7 OPTIONS, MORTGAGES AND OTHER GUARANTEES
There exists no option, mortgage, lien, pledge, or any other form of
guarantee or privilege in favor of third parties on all or any part of
the assets of the Company. No contract or commitment to grant any of
these rights or guarantees has been concluded. Neither the Company nor
its employees or representatives have received any claim from any
person claiming to benefit from any of the rights or guarantees
mentioned above.
3.2.8 COMPLIANCE WITH LAWS AND REGULATIONS
To the best of MPLL's knowledge:
- the Company has all material permits and authorizations necessary
for the ownership of its assets and for the conduct of its current
business. The Company has complied with all material laws,
regulations and customs applicable to such business, in particular
all regulations relating to labor regulations, environment
regulations, as well as all conditions in respect of the required
permits and authorizations.
- the Company is not bound to arrange measures which would require
new investments in order to comply with any of these laws or
regulations.
- there exists no event that might bring about the revocation or
suspension of any permits or authorizations held by the Company or
that might involve its liability or that of its directors or
employees, in particular by reason of the violation of regulations
relating to environmental law and labor law.
- the transfer of ownership of the Shares to BIOSEPRA will not bring
about the revocation or suspension of any permit or authorization
necessary for the conduct of the business of the Company.
<PAGE>
- all information transmitted to governmental authorities are true
and accurate.
3.2.9 AGREEMENTS
to the best of MPLL's knowledge:
- the Company is not party to any one or more agreements or
commitments which are manifestly of an unusual nature and/or
duration or otherwise outside the normal course of business and
more specifically the Company is not subject to any
non-competition commitment or restriction from doing business
which it is legally capable of carrying on.
- there exists no contract or agreement entered into by the Company,
which includes a provision enabling the other contracting party to
terminate it (or to demand modification of the contractual
provisions) as a result of a change in the ownership of the
Company.
3.2.10 LOANS AND OTHERS
Complete and accurate information (in particular the amount, duration,
security...) relating to all loans, credit contracts, overdraft
agreements or other banking facilities of the Company in existence are
contained in EXHIBIT 3.2.10.
3.2.11 GUARANTIES
No security guarantee, sponsorship or comfort letter of any nature
given or incurred by the Company is in effect on the Closing Date.
3.2.12 PROFIT-SHARING AGREEMENT
The Company is not a party or has not agreed to be a party to any
agreement giving any third party any right to share in whole or in part
in its profits.
3.2.13 INSOLVENCY
No receiver ("ADMINISTRATEUR JUDICIAIRE") has been appointed to manage
all or any part of the assets or the business of the Company.
No request or declaration has been made with a view to the judicial
reorganization or judicial liquidation of the Company or with a view to
the dissolution and early liquidation of the Company.
The Company has not ceased making payments to creditors, is not
insolvent or unable to pay its debts.
3.2.14 LITIGATION
To the best of MPLL's knowledge, the Company is not engaged directly,
or through employees or/and directors, actual or former, in any
judicial criminal, administrative or arbitral proceedings, as plaintiff
or defendant, including by way of counterclaim.
<PAGE>
There does not exist to MPLL's knowledge, after due inquiry in that
respect, any fact that would give rise to any proceeding against the
Company or against one of its directors, employees, or former directors
or employees for which the Company would be liable.
In particular, the Company is not a defendant to, and to MPLL's
knowledge is not threatened with, any lawsuit brought by customers or
third parties.
Furthermore, to MPLL's knowledge there has been no court or
administrative decision or order, and no time limit given by a
professional organization or supervisory authority, imposing on the
Company, an obligation which might in the future have unfavorable
consequences on the normal course of its business.
3.2.15 EMPLOYEES, REPRESENTATIVES OF THE COMPANY
The current employees of the Company, along with an indication of their
age and seniority, are listed in EXHIBIT 3.2.15. No binding promise to
hire any person has been granted by the Company and the Company has not
granted any loans to its employees.
3.2.16 REAL AND PERSONAL PROPERTY
The Company owns no real property. All personal property necessary to
its current business, except the property subject to the leasing
contracts which are listed in EXHIBIT 3.2.16, is fully owned by the
Company.
3.2.17 INTELLECTUAL PROPERTY
the Company owns or is entitled to use all patents and trademarks,
tradenames, processes, software, company name and more generally all
intellectual property rights, if any, that it uses the course of its
business, except what is mentioned in EXHIBIT 3.2.18.
None of these rights has been transferred in any way to any third party
or infringes the rights of any third party. The documentation
pertaining to such rights is contained in EXHIBIT 3.2.18.
3.2.19 INSURANCE
To the best of MPLL's knowledge:
- the Company is insured by policies in force, for which all
premiums have been paid when due and which cover under normal
conditions the risks regularly incurred by companies operating a
business similar to those of the Company. The Company has not
committed or omitted any act which might render null or
inoperative such insurance policies or which might bring about
their cancellation.
- there exists at present no lawsuit involving the application of
the Company's insurance policies, and no event has occurred which
might bring about such a lawsuit.
<PAGE>
A description of the insurance contracts concluded by the Company is
contained in EXHIBIT 3.2.19.
3.2.21 TAX AND OTHER RETURNS
To the best of MPLL's knowledge, the Company has regularly filed all
required tax, Social Security and all administrative returns and has
paid or provided for all taxes, duties, levies and Social Security
charges, including any interest, fines or penalties relating thereto.
There is no current dispute with any government authority concerning
taxes, customs or Social Security charges and, to MPLL's knowledge,
there is no reason to believe any such dispute might arise.
3.3 INDEMNIFICATION
a) MPLL undertakes to pay to BIOSEPRA or to the Company, at
BIOSEPRA's option, a sum, covering all harmful consequences
duly suffered for BIOSEPRA and/or the Company as a result of
any failure to comply with, any omission or inaccuracy of any
one of the representations and covenants contained in this
Agreement.
b) It is understood that the amount of any sum due from MPLL to
BIOSEPRA and/or the Company, as the case may be, under clause
3.3 a) of this Agreement will be reduced by (i) the amount of
any insurance payment actually received by BIOSEPRA or the
Company in relation to any event giving rise to a claim by
BIOSEPRA hereunder (ii) elements likely to increase
liabilities and assets.
c) Any amount or amounts that MPLL may be liable to pay pursuant
to this Agreement shall not exceed the sum of FF. 49% of
FF. 6,000,000 except as regards the representations and
guarantees given by MPLL in articles 3.2.2., 3.2.3, 3.2.4 and
3.2.5.
Furthermore, the amount or amounts for which MPLL may be
liable under this Agreement shall only be payable if such
amount or amounts have reached the aggregate amount of FF.
100,000. This aggregate amount may be only subtracted once
from the amounts due to BIOSEPRA
d) All grounds likely to result in a call on the guarantee set
forth by this Agreement shall be notified by BIOSEPRA within
30 days from the moment BIOSEPRA is aware thereof. MPLL shall
have 21 days, either to acknowledge its acceptance of
BIOSEPRA's claim, or to communicate its disagreement. The lack
of response in this period of time shall be considered as an
acceptance of BIOSEPRA's claim by MPLL.
<PAGE>
e) BIOSEPRA, acting on behalf of the Company, shall not enter
into a settlement agreement on any matters likely to entail
MPLLs' liability under this guarantee, without the approval of
MPLL, which approval shall not be unreasonably withheld.
Such approval shall be deemed to have been obtained if MPLL
fails to notify its opposition to the planned settlement
agreement within more than 21 days of receiving a registered
mail in which BIOSEPRA shall have given notice of its
intention so to proceed on the basis of explicit information.
3.4 DURATION OF THE GUARANTEE
All demands for payment (which can only be valued as a provisional
figure under this indemnification) under the Agreement in regard to
matters of a tax, administrative, Social Security nature or pertaining
to clauses 3.2.2 and 3.2.5 must be made by BIOSEPRA, even if only
provisionally, before the expiration of a period equal to the
applicable limitations provided by law plus three (3) months and, in
regard to any other matter, before January 1st, 2004.
3.5 PAYMENT
The payment of any sum due by MPLL in application of article 3 of the
Agreement shall be made, by means of an actual payment by MPLL to
BIOSEPRA, up to the amount of FF. 500,000 and exclusively by means of
set-off against any sum that BIOSEPRA owes to MPLL, in particular as
payment of the price of the Remaining Shares, with respect to any sum
due by MPLL exceeding the above mentioned FF. 500,000 threshold.
The payment of any sum due by MPLL to BIOSEPRA and/or the Company under
this Agreement (either pursuant to MPLL's acceptance of BIOSEPRA's
claim or arbitrator's award), subject to the provisions of the above
paragraph, shall be made within thirty (30) days of the payment by the
Company of any sum covered by this indemnification, supported by
appropriate justifying documents.
ARTICLE 4: MISCELLANEOUS PROVISIONS
4.1 WHOLE AGREEMENT
This Agreement constitutes the whole and unique agreement of the
parties on the matters it relates to. It replaces and cancels therefore
any prior contract or agreement, whether written or oral between the
parties on matters covered by this Agreement. This Agreement shall be
modified only in writing with the signature of both parties.
<PAGE>
4.2 COSTS AND FEES
Each of the Parties shall bear, without entitlement to a refund from
the other, the costs incurred by it in connection with the preparation
and conclusion of this Agreement, including all expenses, fees and
disbursements for legal advice, auditors and other advisers instructed
by either of the Parties.
ARTICLE 5: GOVERNING LAW AND DISPUTES
Clause 2.2 of the Agreement shall not apply for the performance of article 5.
5.1 GOVERNING LAW
The Agreement is governed by, and shall be construed in accordance
with, French law.
5.2 DISPUTES
The parties agree to submit any and all disputes arising with respect
to the validity, interpretation or performance of this agreement to the
exclusive jurisdiction of Paris Commercial Court ("Tribunal de Commerce
de Paris") due to the commercial nature of the Agreement.
ARTICLE 6: NOTICES
All notices under this Agreement shall be sent by registered mail, return
receipt requested, and shall be deemed sent on the date of receipt or on the
date of mailing if preceded by transmission of the text of such notice by telex
or fax. Such notices shall be sent, until changed by notice given as indicated
above, to the following addresses:
- If MPLL to: Marie Paule Leroy-Landercy at her address
mentioned on the first page of this Agreement
- If BIOSEPRA to: BIOSEPRA Inc. at its head office mentioned on
the first page of this Agreement
Attention: Jean-Marie Vogel
Done in Paris
On December 31st, 1998
In 2 originals
/S/ MARIE-PAUL LEROY LANDERCY /S/ JEAN-MARIE VOGEL
- ----------------------------- ----------------------------
for MPLL for BIOSEPRA
<PAGE>
Exhibit 10.5
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
JOINT OWNERSHIP CONTRACT
- --------------------------------------------------------------------------------
BETWEEN THE UNDERSIGNED
1) BIOSEPRA S.A., Corporation with headquarters at 35 Avenue Jean
Jaures 92395 VILLENEUVE LA GARENNE, represented for the purposes of this
document by its Chief Executive Officer Jean-Marie Vogel and its Executive
Director, Therese Bourdy, hereinafter referred to as "BIOSEPRA."
AND
2) L'ASSISTANCE PUBLIQUE-HOPITAUX DE PARIS, Public Institution with
headquarters at 3 Avenue Victoria 75004 Paris, RP, represented for the purposes
of this contract, by delegation of its Executive Director, by Dominique Laurent,
Director of Medical Policy, hereinafter referred to as "AP-HP."
IT HAS BEEN STATED AS FOLLOWS:
The Angioma Group of the Therapeutic Neuroradiology and Angiography Service of
the Hopital Lariboisiere ("The Angioma Group") has been studying the use of
particle embolization agents for several years.
In the context of its experience, the Angioma Group developed the idea of using
microspheres initially designed for cell cultures not only to totally block
blood flow due to their shape and size, but also to cause the vascular lumen to
be occluded by cells that can proliferate on the microspheres, promoting
adhesion and immobilization, and resulting in satisfactory vascular occlusion.
BIOSEPRA (formerly IBF, then SEPRACOR), has developed and sold microspheres
designed for cell cultures, which were composed of a spherical core coated with
a chemotactic agent. One example is MICARCEL G composed of a patented
reticulated synthetic polymer - Tricasryl -coated with denatured collagen. These
microspheres constitute the basic embolization products covered by this
contract.
BIOSEPRA possesses substantial know-how in the area of the design of various
types of chemical microspheres, and considerable experience in the modification
of these materials in order to imbue them with specific properties.
Due to their complementary experience, the two parties decided to collaborate
for the development of microspheres adapted to embolization, and signed an
agreement on 7 June 1991 (contract number 90625300). This contract was extended
on 7 April 1993 through February 1994.
During the course of their technical collaboration, the parties developed
products according to predetermined specifications. As these products are the
joint property of the parties, the parties met to define the principles of the
applicable joint ownership arrangement, in accordance with the aforementioned
collaboration contract of 7 June 1991, and to define the conditions covering the
commercial use of these products.
1
<PAGE>
NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:
PRELIMINARY ARTICLE: DEFINITIONS
1. -CONTRACT PATENTS are defined as:
- the application for French patent filed on 29 May 1991 in the names
of AP-HP and IBF under number 9106441, and the French patent "Microspheres
useful for therapeutic vascular occlusions and injectable solutions containing
the same" subsequently issued on 25 June 1995 under number 9106441.
- all international extensions (patent applications and patents issued)
resulting from the above French patent, specifically in the context of the PCT
extension procedure undertaken on 20 May 1992 under number PCT/US 92/14625
2. -CONTRACT PRODUCTS are defined as the MICROSPHERES FOR EMBOLIZATION
covered by the CONTRACT PATENTS.
3. -CONTRACT SPECIALTIES are defined as any compound using the CONTRACT
PRODUCTS, and specifically any compound covered by the CONTRACT PATENTS.
4. -IMPROVEMENT is defined as any improvement or innovation, whether
patentable or not, arising from the CONTRACT PATENTS.
5. -CONTRACT SCOPE is defined as the utilization of the CONTRACT PRODUCTS
and the CONTRACT SPECIALTIES.
6. -SALES EXCLUDING TAXES are defined as the Net SALES, after deduction of
all commissions, rebates, balances for returned goods, insurance and
transportation expenses, taxes and duties.
7. -The PARTIES are defined as AP-HP and/or BIOSEPRA, signatories of this
contract.
8. -COMPANIES IN THE BIOSEPRA GROUP are defined as BIOSEPRA, BIOSEPRA Inc.
(Parent Company of BIOSEPRA), and in general any subsidiary or affiliate of
BIOSEPRA.
Subsidiary or Affiliate of BIOSEPRA is defined as any company, corporation,
partnership, joint venture, and/or firm which, either by capital or by
leadership, controls BIOSEPRA or is controlled by BIOSEPRA. For the purposes of
this paragraph, the term control specifically signifies:
- in the case of entities formed as corporations, the direct or
indirect exercise of financial control of at least thirty-five percent (35%) of
the capital or shares entitling holder to vote in the election of the Board of
Directors.
- in the case of entities not formed as corporations, the direct or
indirect control of at least thirty-five percent (35%) of the interest in the
realizable equity, with the power to direct the management and policies of the
entity not formed as a corporation.
2
<PAGE>
ARTICLE 1: PURPOSE OF THE CONTRACT
The purpose of this contract is to define the principles of joint ownership
between BIOSEPRA and AP-HP for the CONTRACT PATENTS as well as the rights and
obligations of each of the PARTIES in the context of the commercial use of the
CONTRACT PRODUCTS AND SPECIALTIES.
ARTICLE 2: HISTORY OF THE JOINT OWNERSHIP
2.1. The application for French patent number 9106441 recorded under
the title "Microspheres useful for therapeutic vascular occlusions and
injectable solutions containing the same" was filed jointly on 29 May 1991 in
the names of AP-HP and 103F.
Following an error attributable to SEPRACOR Inc., of which IBF had become a
subsidiary in July 1991, the international extension procedure for the CONTRACT
PATENTS was initiated in the name of SEPRACOR Inc. only.
Subsequently, SEPRACOR Inc. agreed to remedy this error and to transfer to its
French subsidiary BIOSEPRA and to AP-HP all of the rights related to the
international extensions of the CONTRACT PATENTS. BIOSEPRA undertook to ensure
compliance with this agreement and guaranteed AP-HP against any litigation or
loss that arose from or that may arise from said error.
The PARTIES did then and do now mutually acknowledge their status as exclusive
joint owners of the CONTRACT PATENTS, each party owning 50% of same, and each
party paying 50% of the filing, extension, and maintenance fees in effect in
accordance with article 3.2 of this contract.
2.2. BIOSEPRA agrees to perform all formalities related to the
registration of the joint ownership mentioned in the paragraph above,
specifically recording the transfers on the various registers of the national
and supranational patent offices.
ARTICLE 3: MANAGING THE JOINT OWNERSHIP
3.1. Managing the CONTRACT PATENTS
The PARTIES agree to charge BIOSEPRA with carrying out all actions required by
the national and supranational patent offices related to the management of the
CONTRACT PATENTS: writing and filing patent applications, follow up on
procedures for obtaining patents, payment of the various taxes and fees for the
filing, issuance, and maintaining of patents.
These actions shall be carried out in consultation with AP-HP, and BIOSEPRA
agrees to keep AP-HP fully informed of the various management actions required
and to obtain the consent of AP-HP whenever necessary.
3.2. Expenses Associated with Rectifying the Joint Ownership of the
CONTRACT PATENTS
3
<PAGE>
In order to take into account the provisions of article 2 of this contract, it
is hereby agreed that BIOSEPRA will cover the payment of all costs, taxes, fees,
and other sums related to the rectification of the joint ownership by the
PARTIES.
3.3. Patent Filing and Maintenance Fees
All sums (specifically costs, taxes, fees, etc.) associated with the filing,
extension, and maintenance of the CONTRACT PATENTS shall be shared in equal
parts by the PARTIES, with the exception of sums relating to actions by internal
counsel or the employees of AP-HP, BIOSEPRA, and COMPANIES IN THE BIOSEPRA
GROUP.
It is however agreed that these costs shall be paid directly by BIOSEPRA, and
BIOSEPRA will deduct the amount from the royalties payable to AP-HP; in this
respect, it is understood that said deduction made annually by BIOSEPRA from the
amount of royalties payable to AP-HP for each year of use in question may not
exceed 50% (fifty percent) of the total amount of the royalties payables to
AP-HP for the year of use in question. (50% (fifty percent) of the total amount
of the royalties payables to AP-HP for the year of use in question is
hereinafter referred to as THE AMOUNT).
If, during a given year, the amounts to be deducted from the royalties payable
to AP-HP should exceed THE AMOUNT, the excess shall be charged to the royalties
payable to AP-HP for the following year, though the total amount to be deducted
may not exceed 50% of the amounts payable by BIOSEPRA for that following year.
Upon the expiration of this contract, all sums still owed by AP-HP under the
terms of article 3.3 shall be paid by AP-HP to BIOSEPRA.
BIOSEPRA shall in each case send AP-HP a copy of the invoices paid and
supporting documents for expenses incurred. If these documents do not contain
the necessary information, they will be accompanied by a detailed statement of
the various expense items.
3.4. IMPROVEMENTS
(a) The PARTIES agree to keep each other mutually informed as
promptly as possible of any IMPROVEMENTS developed by them or by licensee
companies. The same applies in the case of any IMPROVEMENTS developed by third
parties that come to the attention of the PARTIES.
(b) The PARTIES agree that the IMPROVEMENTS developed
separately or jointly by them shall be their joint property with each party
owning 50%.
(c) The PARTIES agree to refrain from disclosing such
IMPROVEMENTS as long as they have not decided on the most appropriate exclusive
protection method for the IMPROVEMENTS in question. Once the decision is made,
the PARTIES shall determine by mutual agreement the period during which said
IMPROVEMENTS shall be kept confidential.
Barring express waiver of BIOSEPRA or AP-HP, applications for industrial
property titles filed in relation to the IMPROVEMENTS and any titles
subsequently issued shall be jointly owned in
4
<PAGE>
equal shares by AP-HP and BIOSEPRA and shall be subject to the provisions of
this joint ownership contract.
The PARTIES agree to meet to negotiate in good faith and in the mutual interest
of the joint ownership covered in this contract any question or dispute
involving the IMPROVEMENTS. The same applies in the case of acquisition from a
third party of the rights necessary for the use of the IMPROVEMENTS developed by
said third party.
ARTICLE 4: PRIMARY USE OF CONTRACT PRODUCTS AND SPECIALTIES
4.1. BIOSEPRA manufactures the CONTRACT PRODUCTS but is not in a
position to manufacture and distribute the CONTRACT SPECIALTIES. Therefore the
PARTIES have mutually agreed to entrust the manufacture and distribution of the
CONTRACT SPECIALTIES to a third party company.
Thus the PARTIES granted to GUERBET BIOMEDICAL an exclusive, worldwide de facto
license for the manufacture and distribution of the CONTRACT SPECIALTIES, based
on a draft "manufacturing and sale licensing contract."
4.2. It is expressly agreed by the PARTIES that the application of
articles 5 and 6 below relative to the direct or indirect use of the CONTRACT
PRODUCTS and SPECIALTIES by BIOSEPRA shall be strictly subject to the signature
by AP-HP, BIOSEPRA, and GUERBET BIOMEDICAL of a memorandum of understanding
terminating the de facto license mentioned in the preceding paragraph.
ARTICLE 5: RIGHT OF USE
The PARTIES agree that BIOSEPRA shall have
- the rights associated with the CONTRACT PATENTS for the exclusive use
of the CONTRACT PRODUCTS AND SPECIALTIES,
- for the entire world and for a period of 10 years starting from the
date the rights become effective, in accordance with article 4.2 above,
renewable with the express agreement of the parties to this contract.
- and for a use within the SCOPE OF THE CONTRACT.
ARTICLE 6: LICENSES
6.1. BIOSEPRA may grant licenses not only to COMPANIES IN THE BIOSEPRA
GROUP but also to independent third parties, provided that in each case BIOSEPRA
obtains the prior written consent of AP-HP as to the licensee and the terms of
the licensing contract.
In this respect, AP-HP must inform BIOSEPRA of its acceptance or rejection of
the licensee as well as the terms of the license according to the following
schedule:
5
<PAGE>
- if the license is granted to a COMPANY IN THE BIOSEPRA GROUP, AP-HP
shall have a period of 21 days to respond;
- if the license is granted to a company other than a COMPANY IN THE
BIOSEPRA GROUP, AP-HP shall have a period of 45 days to respond.
In both cases, the period granted to AP-HP to respond shall start as of receipt
by AP-HP of the registered letter with acknowledgement of receipt sent by
BIOSEPRA notifying AP-HP of the licensing contract and the identity of the
proposed licensee.
If AP-HP rejects the proposed licensee or the term of the licensing contract,
its rejections must be well-founded and based on objective and valid reasons;
AP-HP may not wrongfully reject a licensee without a valid reason.
If AP-HP does not respond within the periods mentioned above, it shall be deemed
to have given its approval three business days after receipt of a final
notification sent by BIOSEPRA by registered letter with acknowledgement of
receipt, if no response is provided to said notification.
6.2. BIOSEPRA and AP-HP shall decide on any modifications in the terms
of the licenses granted under the same terms expressed in item 6.1 above.
6.3. BIOSEPRA shall provide AP-HP with a copy of each licensing
contract entered into or renewed within a period of two months following
signature of same by the parties.
6.4. The licensing contracts shall in all cases contain clauses
according to which:
- ASSISTANCE PUBLIQUE and BIOSEPRA may, jointly or separately, verify
the accounting books kept by the licensee as regards the use of the rights
granted to the licensee.
- The licensee shall be bound by the confidentiality obligations as
well as by the obligations to use appropriate methods and achieve appropriate
results, and specifically as regards these last two items, by the obligations of
BIOSEPRA in application of item 1 of article 7 of this contract.
- The licensee shall be required to notify BIOSEPRA of any improvements
developed relating to the CONTRACT PATENTS, which improvements shall
automatically benefit the licensee and BIOSEPRA.
- In the event that any of the CONTRACT PATENTS are declared invalid by
final legal decision, the licensee may not claim any compensation,
reimbursement, or reduction of sums owed at the time the final legal decision
declaring the patent invalid is handed down.
- The licensee shall notify BIOSEPRA annually of all information and
documents necessary for accurate knowledge of the number of sales made, any lump
sum payments made, and the sales figures.
6
<PAGE>
ARTICLE 7: USE
7.1. BIOSEPRA agrees to directly or indirectly use the rights granted
to it under the terms of this contract and to take all necessary steps for the
most advantageous use of the CONTRACT SPECIALTIES in all countries where
CONTRACT PATENTS exists, specifically by means of active business development
and effective advertising.
BIOSEPRA agrees not to manufacture and/or distribute products that are likely to
compete with the CONTRACT PRODUCTS and/or SPECIALTIES, for the entire duration
stipulated in artitle 13 of this contract.
BIOSEPRA agrees to do its best to fill all orders as promptly as possible.
7.2. BIOSEPRA directly or indirectly uses the rights granted to it
under its sole liability, and may not implead AP-HP in the case of litigation.
BIOSEPRA shall perform or cause to be performed by a third party of its choice,
at its own expenses or at the expense of the third party selected, all legal
registrations and other actions required in the context of the use of the
CONTRACT PRODUCTS and SPECIALTIES, specifically the registrations required by
various national and supranational patent offices, as well as any actions
required by the relevant national or supranational agencies in order to obtain
any necessary marketing authorizations.
7.3. BIOSEPRA agrees that the CONTRACT PRODUCTS shall be manufactured
in France, without prejudice to the possibility of manufacturing same in other
countries of its choice as well.
BIOSEPRA agrees to take all necessary steps, personally or through its
licensees, so that the CONTRACT SPECIALTIES are distributed in France in
sufficient quantity to satisfy national demand, under competitive pricing
conditions.
Nonperformance of this obligation shall result in withdrawal of the exclusive
nature of the right of use granted to BIOSEPRA under the terms of this contract,
without prejudice to the possible application of the provisions of article 15
below.
7
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
ARTICLE 8: FINANCIAL CLAUSES
8.1. Use Royalties
(a) Royalties on the sale of CONTRACT PRODUCTS made by
BIOSEPRA to independent third parties:
It is hereby agreed that royalty payments to AP-HP correspond to:
- [**] of SALES EXCLUDING TAXES realized on sales made in 1994,- [**]
of SALES EXCLUDING TAXES realized on sales made in 1995,-[**] of SALES EXCLUDING
TAXES realized on sales made in 1996,- [**] of SALES EXCLUDING TAXES realized on
sales made in 1997 and in subsequent years;
(b) Royalties on the amounts paid to BIOSEPRA by the
manufacturer/distributor holding the license mentioned in article 4 of this
contract:
It is hereby agreed that AP-HP and BIOSEPRA shall each receive 50% of the
royalties received from the manufacturer/distributor.
(c) Royalties on the sums paid to BIOSEPRA by independent
third parties who receive a license from BIOSEPRA for the manufacture, sale,
and/or distribution of the CONTRACT PRODUCTS OR SPECIALTIES:
BIOSEPRA shall pay AP-P one half of the royalties and sums of any nature
received from the licensee.
(d) Royalties due for the sale and/or distribution to
independent third parties of CONTRACT PRODUCTS and/or CONTRACT SPECIALTIES by
COMPANIES IN THE BIOSEPRA GROUP:
* CONTRACT PRODUCTS: subject to the provisions of item a) above concerning the
sale by BIOSEPRA of CONTRACT PRODUCTS to independent third parties, it is hereby
agreed that AP-HP will be paid a royalty of [**] of the cumulative non-group
SALES EXCLUDING TAXES realized by the COMPANIES IN THE BIOSEPRA GROUP on the
sale and/or distribution of CONTRACT PRODUCTS to independent third parties.
* CONTRACT SPECIALTIES: it is hereby agreed that AP-HP will be paid a royalty of
[**] of the cumulative non-group SALES EXCLUDING TAXES realized by the COMPANIES
IN THE BIOSEPRA GROUP on the sale and/or distribution of CONTRACT SPECIALTIES to
independent third parties.
8.2. Lump Sum Payments
Any lump sum payments received by BIOSEPRA and the COMPANIES IN THE BIOSEPRA
GROUP in the context of the performance of this contract shall be shared in
equal parts by
8
<PAGE>
BIOSEPRA and AP-HP, with the exception of payments specifically earmarked for
the research, development, and promotion of the CONTRACT PRODUCTS and
SPECIALTIES such as those earmarked for obtaining marketing authorizations.
ARTICLE 9: ACCOUNTING AND PAYMENTS
9.1. BIOSEPRA shall keep special accounting books containing all of the
information required for an accurate evaluation of the business transactions
performed and the sales realized by BIOSEPRA and its licensees, whether said
licensees are COMPANIES IN THE BIOSEPRA GROUP or independent third parties.
These special accounting books shall include a detailed journal of the sales of
CONTRACT PRODUCTS and CONTRACT SPECIALTIES, supported by the required and
generally used documentation. The books shall also record all lump sum payments
(import duties, guarantee payments, research and development amortization
expenses, etc.) received and/or paid by BIOSEPRA and the licensees, COMPANIES IN
THE BIOSEPRA GROUP, or independent third parties, for the assignment of any or
all of the rights of use granted to BIOSEPRA under the terms of this contract.
9.2. These special accounting books as well as the general accounting
and analytical accounting items relating thereto shall at all times be available
to AP-HP or a representative of same, until the one year after the expiration
date of this contract. These special accounting books shall be closed on 31
December of each year.
9.3. The sums due to AP-HP shall be paid by BIOSEPRA within ninety (90)
days of the closing of the accounts, by bank check make out to Monsieur le
Tresorier-payeur General de ASSISTANCE PUBLIQUE - HOPITAUX DE PARIS.
Failure to pay said sums within the period stipulated shall result in the
application of a penalty of 1% of the total amount of sums owed per month of
delay, at the discretion of AP-HP.
Sums owed to ASSISTANCE PUBLIQUE are understood to be excluding taxes, and
specifically excluding VAT.
ARTICLE 10: OBLIGATION TO PROVIDE INFORMATION
10.1. BIOSEPRA shall include with each payment to AP-HP the
documentation required for an accurate evaluation of the sales made and the
sales figures realized.
10.2. This documentation must include the information required to
verify the amount of the sums owed to AP-HP; in this respect, the documentation
shall include:
- the number of sales and the sales figures realized by BIOSEPRA on the
sale and/or distribution by BIOSEPRA of the CONTRACT PRODUCTS and/or
SPECIALTIES;
9
<PAGE>
- the royalties received by BIOSEPRA from licensees, whether they are
COMPANIES IN THE BIOSEPRA GROUP or independent third parties, with an indication
of the royalty rate and base applicable for each of the licenses in question;
- the number of sales and the sales figures realized by licensees,
COMPANIES IN THE BIOSEPRA GROUP, or independent third parties on the sale and/or
distribution by same of the CONTRACT PRODUCTS and/or SPECIALTIES;
- any lump sum payments, (import duties, guarantee payments, research
and development amortization expenses, etc.) received and/or paid by BIOSEPRA
and the licensees, COMPANIES IN THE BIOSEPRA GROUP, or independent third
parties, for the assignment of any or all of the rights granted to BIOSEPRA
under the terms of this contract.
10.3. BIOSEPRA agrees to comply with and respond promptly to any
request for additional information made by AP-HP.
ARTICLE 11: INVALIDITY
11.1. AP-HP and BIOSEPRA agree not to contest the validity of the
CONTRACT PATENTS.
11.2. If one of the CONTRACT PATENTS is declared invalid by final legal
decision in a given country or territory, and if said declaration of invalidity
results in the appearance of new competition on the market in question, AP-HP
and BIOSEPRA may meet to reexamine the conditions of commercial use of the
CONTRACT PRODUCTS and/or SPECIALTIES by BIOSEPRA and/or the licensees.
AP-HP and BIOSEPRA would meet in the same manner to examine the possible effects
of the new market situation on the joint ownership principles decided on in this
contract, and to make any necessary changes thereto.
ARTICLE 12: INFRINGEMENT
12.1. The PARTIES agree to inform one another promptly if they learn of
any case of infringement by a third party of the rights conferred by the
CONTRACT PATENTS.
The PARTIES will work together to define the best strategy in this case.
12.2. If legal action becomes necessary, it will be initiated either by
both PARTIES, jointly or by mutual representation, or by one of the PARTIES
alone. The costs associated with such action would be shared equally by the
PARTIES, or paid only by the PARTY acting alone. The same would apply for any
order to pay compensatory damages handed down against the defendant by the
court, which indemnification would be shared equally by the PARTIES or
attributed only to the PARTY who brought the action.
12.3. Because BIOSEPRA holds the exclusive right of use associated with
the CONTRACT PATENTS, in accordance with the terms of articles 4, 5, and 6 of
this contract, BIOSEPRA shall be liable for any action for infringement brought
against it by a third party
10
<PAGE>
within the SCOPE OF THE CONTRACT. If such action is brought, AP-HP shall provide
its assistance to BIOSEPRA.
12.4. The PARTIES agree to provide one another with all documents,
authorizations, and signatures that they may need for performing any of the
aforementioned actions.
ARTICLE 13: DURATION
This contract takes effect retroactively as of 29 May 1991.
Subject to the provisions of article 15 below, this contract shall run for the
entire duration of the CONTRACT PATENTS or as long as the CONTRACT PRODUCTS
and/or SPECIALTIES are being marketed and sold.
ARTICLE 14: TRANSFER OF OWNERSHIP / RELINQUISHMENT OR OWNERSHIP
14.1. Each PARTY may at any time sell its share of the CONTRACT PATENTS
to a third party with the consent of the other PARTY, which latter also has a
right of first refusal for a period of three months starting from notification
of the plan to sell by the selling PARTY.
If the right of first refusal is exercised, but AP-HP and BIOSEPRA cannot agree
on a selling price, the PARTIES shall, by mutual agreement, choose an expert
registered on the list of experts with the Appeals Court, who will propose a
price. If the PARTIES cannot agree on the choice of an expert, an expert will be
appointed by the President of the District Court of Paris at the request of
either PARTY.
If there is still a disagreement as to the selling price, the price will be set
by the District Court of Paris; if the other joint owner does not accept the
price set, or does not present to the selling joint owner a third party
purchaser who accepts said price, the selling joint owner may sell its share to
a third party under financial conditions that may not be less than those set by
the Court.
The new joint owner who purchases the share of ownership of the selling PARTY
shall be required to comply with all of the conditions of this joint ownership
contract.
14.2. If for any reason one of the PARTIES to this contract decides to
relinquish its share of joint ownership of any or all of the CONTRACT PATENTS,
it must inform the other PARTY within a reasonable period; said other PARTY will
automatically become full owner of the share of ownership for the patents in
question, without compensation or indemnity.
14.3. The joint owner that is selling or relinquishing its share of
joint ownership shall be released from all obligations with respect to the other
joint owner, once the sale or relinquishment is recorded on the national and
supranational patent registers.
11
<PAGE>
ARTICLE 15: TERMINATION
15.1. This contract shall be automatically terminated in the case of
the court-ordered liquidation of BIOSEPRA ordered by the Commercial Court in
application of the law of 25 January 1985, as well as in the case of cessation
of business, dissolution, or voluntary liquidation of BIOSEPRA.
This contract shall not terminate in the case of a transfer of BIOSEPRA's
business activities to another company planning to continue BIOSEPRA's business
activities, subject to the agreement of AP-HP as to the identity of the
transferee. The company taking over the rights of BIOSEPRA shall be required to
assume all of the rights and obligations of BIOSEPRA under the terms of this
contract.
15.2. This contract shall be terminated automatically by one of the
PARTIES in the case of nonperformance by the other PARTY of one or more of its
obligations under the terms of this contract.
This termination will not become effective until three months after receipt by
the defaulting PARTY of a registered letter with acknowledgement of receipt from
the PARTY making the claim, stating the reasons for the claim, unless during
this period, the defaulting PARTY performs its obligations or provides proof of
circumstances beyond its control preventing performance thereof.
The exercise of this termination option does not release the defaulting party
from its obligation to perform the obligations contracted until the effective
date of the termination, without prejudice to payment of compensation for losses
incurred by the complaining PARTY due to the early termination of the contract.
Starting as of the effective date of the termination, the joint ownership by the
PARTIES and specifically the ability of the PARTIES to use or grant licenses
shall be governed by the legal system imposed by article L.613-29 of the
Intellectual Property Code.
ARTICLE 16: NOTIFICATIONS
All letters, communications, or notifications whatsoever sent in application of
this contract or regarding same, must, under penalty of inadmissibility and
without prejudice to compliance with the conditions of legal, usual, or
conventional form agreed on by the PARTIES, be sent to the following people:
FOR AP-HP:
Madame la Delegue a la Recherche Clinique,
Or: Madame la Chargee de la Mission de la Valorisation Industrielle
Direction de la Politique Medicale
AP-HP, 3, avenue Victoria
751000 PARIS RP
12
<PAGE>
FOR BIOSEPRA:
Madame le Directeur General
BIOSEPRA S.A. 35, avenue Jean-Jaures
92395 VILLENEUVE LA GARENNE
ARTICLE 17: CONTRACT LAW - DISPUTES - LITIGATION
17.1. This contract is subject to French law both as regards the
formation and the interpretation and performance thereof.
This contract constitutes the entire agreement between the PARTIES and replaces
and renders void all written or verbal commitments made prior to the signature
of this contract by the PARTIES.
Any modification of or addition to the content of this contract must be drawn up
as a rider between the PARTIES in due form.
17.2. The PARTIES will make every effort to reach an amicable
resolution of any disputes arising from the interpretation or performance of the
clauses of this contract.
In the event of persistent disagreement, the Courts and Tribunals of Paris shall
have jurisdiction.
Drawn up in Paris,
on 5 January 1998
In four originals.
For BIOSEPRA For L'ASSISTANCE PUBLIQUE
HOPITAUX DE PARIS
[signature]
J.M. Vogel Dominique Laurent
Chief Executive Officer Director of Medical Policy
[signature]
T. Bourdy [signature]
Executive Director
Approved by the Financial Controller
For AP-HP 29 Dec [year illegible]
[signature]
Mr. Potier de Courcy
13
<PAGE>
- --------------------------------------------------------------------------------
RIDER TO THE JOINT OWNERSHIP CONTRACT OF 5 JANUARY 1998
- --------------------------------------------------------------------------------
BETWEEN
L'Assistance Publique-Hopitaux de Paris, Public Institution with headquarters at
3 Avenue Victoria 75004 Paris, RP, represented for the purposes of this rider,
by delegation of its Executive Director, by Dominique Laurent, Director of
Medical Policy, hereinafter referred to as "AP-HP."
AND
Biosepra S.A., Corporation with headquarters at 48 Avenue des Genottes 95800
Cergy-Saint-Christophe, represented for the purposes of this document by its
Executive Director, Therese Bourdy, hereinafter referred to as "BIOSEPRA."
AND
Biosphere Medical S.A., Corporation with headquarters in the Industrial Zone of
Louvres, voie 2, 95380 Louvres, represented for the purposes of this document by
its Executive Director, Marie-Paule Leroy-Landercy, hereinafter referred to as
"BIOSPHERE."
PREAMIBLE
Article 1 of the joint ownership contract signed on 5 January 1998 between AP-HP
and BIOSEPRA defined the principles of joint ownership of the patents covered in
the contract, as well as the rights and obligations of each of the parties, in
the context of the commercial use of these patents.
BIOSEPRA decided to transfer its share of ownership to BIOSPHERE. In accordance
with article 14-1 of the agreement of January 1999:
- BIOSEPRA informed AP-HP on 22 January 1999 of this decision to
transfer.
- AP-HP was given a period of three months to exercise its right of
first refusal
- AP-HP informed BIOSEPRA on 1 April 1999 that it waived its right of
first refusal for Biosepra's share of ownership and agrees to the transfer to
BIOSPHERE.
- Biosepra's share of ownership was transferred to BIOSPHERE on 13
April 1999 by means of a notarized document (appendix 1).
Copy certified true to the original.
10 February 2000
[signature]
Therese Bourdy, Executive Director
14
<PAGE>
IT WAS PREVIOUSLY STATED AS FOLLOWS:
Article 1
In the text of the aforementioned agreement, the name BIOSEPRA will be replaced
by the name BIOSPHERE in the body of the contract.
Article 2
BIOSPHERE agrees to undertake all of the conditions of the joint ownership
contract.
Article 3
BIOSPHERE agrees to pay all sums owed to AP-HP on sales made since 1 January
1999.
Article 5 [sic]
This rider is drawn up in 4 copies, each considered an original, one for each of
the parties and one to be recorded with the INPI.
Drawn up in [blank] on 6 December 1999
(four copies)
<TABLE>
<S> <C> <C>
L'Assistance Publique- Biosepra S.A. Biosphere Medical S.A.
Hopitaux de Paris,
Executive Director Executive Director Executive Director
And by delegation
Director of Medical Policy
[signature] [signature] [signature]
Dominique Laurent Therese Bourdy Marie-Paule Leroy Landercy
</TABLE>
Approval of the Financial Controller
[signature]
Francois Potier De Courcy
12 November 1999
15
<PAGE>
Exhibit 10.6
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
AGREEMENT
1. BioSphere Medical Inc. [and its subsidiary to be Biosphere Medical KK]
[BMKK] will initially focus on the approval and the marketing of
SAP-microsphere, until SAP-MS is approved, unless we have a common
agreement to work also on Embosphere.
2. BioSphere Medical, Inc. will pay for Japanese regulatory approval of SAP-MS
[including consultant, toxicity studies, etc.] up to [**].-
3. Shinichi Hori licenses exclusively its rights to SAP-MS, including patent
JP 6056676, to BioSphere Medical, per attached agreement.
4. Biosphere Medical will continue to work actively with Shinichi Hori, Rinku
Medical Center and Osaka University and leading groups in Europe and the
USA to coordinate development an evaluation of embolotherapy technology,
including gels.
5. Shinichi Hori joins BioSphere Medical Advisory Board as International
Representative, according to the attached agreement. Through that
agreement, BioSphere Medical will support animal work related to
microsphere technology at Osaka University with a designated Research
Grant, and will support mutually agreed travel expenses from Shinichi Hori
to promote microsphere technology.
/s/ Jean-Marie Vogel /s/ Shinichi Hori
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
LICENSE OF SAP-MS RIGHTS, INCLUDING JP 6056676
In addition to financial support and technical collaboration for Japanese
approval of SAP-MS for embolization, and in addition to any consulting fees and
expense reimbursement, BioSphere Medical Inc. will pay directly Shinichi Hori
following for exclusive license of SAP-MS rights:
1/ Royalties of [**] on [**] sales, [**] on [**] sales
2/ Upfront prepaid payment of royalties based on [**] of [**] for [**] [based on
[**] in [**], and a [**] representing [**] of [**]]
[**] of [**]:
est. 24,000
From which, [**]:
est. [**]
[**] [[**] per [**], [**] per [**]]:
[**]
[**]:
[**]
[**] Royalty:
[**] or [**].-
/s/ Jean-Marie Vogel /s/ Shinichi Hori
<PAGE>
Exhibit 10.7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
AMONG
FLEET NATIONAL BANK,
SEPRACOR INC.
AND
BIOSPHERE MEDICAL, INC.
------------------------------------------------
Dated as of December 22, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Dated as of December 22, 1999
THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as
of December 22, 1999, by and among SEPRACOR INC., a Delaware corporation having
its chief executive office at 111 Locke Drive, Marlborough, Massachusetts 01752
(the "BORROWER"), BIOSPHERE MEDICAL, INC., a Delaware corporation having its
chief executive office at 111 Locke Drive, Marlborough, Massachusetts 01752
("BIOSPHERE, collectively with the Borrower, the "CREDIT PARTIES") and FLEET
NATIONAL BANK (the "BANK"), having its office at One Federal Street, Boston,
Massachusetts 02110.
This Agreement amends, restates and supersedes the Amended and Restated
Revolving Credit Agreement dated as of December 31, 1996 as amended to date (the
"PRIOR CREDIT AGREEMENT") by and among the Borrower, Sepracor Securities
Corporation and Fleet National Bank, pursuant to which the Bank agreed to
establish a Revolving Line of Credit and make Revolving Credit Loans (the "PRIOR
LOANS") to the Borrower.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINITIONS.
All capitalized terms used in this Agreement or in the Notes or in any
certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below:
ACCOUNT AND ACCOUNT RECEIVABLE. Include all rights to payment for goods
sold or leased or for services rendered, all sums of money or other proceeds due
or becoming due thereon, all instruments pertaining thereto, all guaranties and
security therefor, and all goods giving rise thereto and the rights pertaining
to such goods, including the right of stoppage in transit, and all related
insurance.
AFFILIATE. As applied to any Person, a spouse or relative of such
Person, any member, director or officer of such Person, any corporation,
association, firm or other entity of which such Person is a member, director or
officer, and any other Person directly or indirectly controlling, controlled by
or under direct or indirect common control with such Person.
AGREEMENT. This Second Amended and Restated Revolving Credit Agreement,
as the same may be supplemented, amended or restated from time to time.
<PAGE>
ALTERNATIVE CURRENCY. The lawful currency of a foreign country which
may be established as an alternate currency by mutual agreement entered into
between the Bank and the Credit Parties hereafter as confirmed in writing, so
long as any such currency is freely transferable, convertible into Dollars and
traded on the inter-bank currency deposits market in which the Bank customarily
funds foreign currency loans.
ALTERNATIVE CURRENCY COMMITMENT. A commitment, to the extent mutually
agreed by the Bank and the Credit Parties, for (i) the exchange, for future
delivery, of an Alternative Currency into Dollars or Dollars into an Alternative
Currency or (ii) the purchase, for future delivery, of an Alternative Currency
with Dollars or Dollars with an Alternative Currency, in accordance with the
Bank's prevailing customs and practices.
ALTERNATIVE CURRENCY EQUIVALENT. The amount in Alternative Currency of
Dollars at the quoted spot rate at which the Bank's principal office in the
United States offers to exchange such Alternative Currency for Dollars at 11:00
a.m. (Boston time) two (2) Business Days prior to the date on which such
equivalent is determined.
AUTHORIZED OFFICER. The president, chief financial officer or senior
vice president finance and administration of the Borrower.
AVAILABLE AGGREGATE REVOLVING COMMITMENT. The excess, if any, of (1)
the Revolving Commitment Amount MINUS (2) the LC Exposure.
BANK. See Preamble.
BIOSPHERE. See Preamble.
BIOSPHERE LOAN SUBLIMIT A sublimit of the Revolving Commitment Amount
equal to $2,000,000, as such amount may be reduced from time to time pursuant to
Section 2.3.
BIOSPHERE LOANS. Revolving Loans made by the Bank to Biosphere.
BIOSPHERE NOTE. The Promissory Note dated the date hereof made by
Biosphere payable to the order of the Bank in the original principal amount of
$2,000,000.
BORROWER. See Preamble.
BUSINESS DAY. Any day other than a Saturday, Sunday or legal holiday on
which banks in Boston, Massachusetts are open for the conduct of a substantial
part of their commercial banking business.
CANADIAN INDEBTEDNESS. The indebtedness of the Borrower's wholly-owned
Canadian subsidiary, Sepracor Canada Limited, to certain Canadian investors in
the maximum principal amount of 4,891,000 Canadian Dollars which is guaranteed
by the Borrower.
CAPITAL EXPENDITURE. Any payment made directly or indirectly for the
purpose of acquiring or constructing fixed assets, real property or equipment
which in accordance with GAAP would be added as a debit to the fixed asset
account of the Person making such
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expenditure, including, without limitation, amounts paid or payable under any
conditional sale or other title retention agreement or under any lease or other
periodic payment arrangement which is of a nature that payment obligations of
the lessee or obligor thereunder would be required by GAAP to be capitalized and
shown as liabilities on the balance sheet of such lessee or obligor.
CAPITAL LEASE. Any lease of property (real, personal or mixed) which,
in accordance with GAAP, should be capitalized on the lessee's balance sheet or
for which the amount of the asset and liability thereunder as if so capitalized
should be disclosed in a note to such balance sheet.
CASH EQUIVALENT AMOUNT. The sum of the following, without duplication,
none of which may be subject to any Encumbrances except for Encumbrances in
favor of the Bank or any of its Affiliates: (1) cash held by the Borrower in the
United States and at the Bank, PLUS (2) Qualified Investments of the Borrower
held in the United States and Canada, PLUS (3) Net Outstanding Amount of
Accounts of the Borrower.
CLOSING DATE. December 22, 1999
CODE. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.
CONTROLLED GROUP. All trades or businesses (whether or not
incorporated) under common control that, together with the Credit Parties, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
CORPORATE AFFILIATE. As applied to any Person, any corporation,
association, firm or other entity directly or indirectly controlling, controlled
by or under direct or indirect common control with such Person.
CORPORATE SERVICES AGREEMENT. The Corporate Services Agreement between
the Borrower and each of its Subsidiaries, each as originally executed and
delivered to the Bank.
CREDIT PARTIES. See Preamble.
DEFAULT. Any event or condition that, with the giving of notice or
lapse of time, or both, would constitute an Event of Default.
DOLLARS or $. The lawful currency of the United States of America.
DOLLAR EQUIVALENT. The amount in Dollars of any Alternative Currency at
the quoted spot rate at which the Bank's principal office in the United States
offers to exchange Dollars for such Alternative Currency at 11:00 a.m. (Boston
time) two (2) Business Days prior to the date on which such equivalent is to be
determined.
EBITDA. For any period, operating income for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) for such period (calculated before taxes, Interest
Expense, depreciation, amortization, other non-cash income (other than
receivables arising in the ordinary course of business) or charges accrued for
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such period) and (except to the extent received or paid in cash by the Borrower)
income or loss attributable to equity in Affiliates for such period, excluding
(i) any extraordinary and unusual gains or losses during such period, and (ii)
the proceeds of insurance and asset sales received by the Borrower or any of its
Subsidiaries during such period.
ENCUMBRANCES. See Section 6.4.
ENVIRONMENTAL LAWS. Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies, bureaus or departments
which may now or hereafter have jurisdiction over the Borrower or any of its
Subsidiaries and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations,
relating to injury to, or the protection of, real or personal property or human
health or the environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Materials, chemical substances, pollutants or contaminants whether solid, liquid
or gaseous in nature, into the environment or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of such Hazardous Materials, chemical substances, pollutants or
contaminants.
ERISA. The Employee Retirement Income Security Act of 1974 and the
rules and regulations thereunder, collectively, as the same may from time to
time be supplemented or amended and remain in effect.
EVENT OF DEFAULT. Any event described in Section 8.1.
FDA. See Section 4.19.
FIXED CHARGE COVERAGE RATIO. As at any date, the ratio of (a) EBITDA
for the period of four fiscal quarters ending on or most recently ended prior to
such date to (b) the sum, for the Borrower and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP) of (i) all
regularly scheduled payments of principal of any Indebtedness (including the
principal component of any payments in respect of Capital Leases) for such
period plus, (ii) all Interest Expense for such period, plus (iii) the aggregate
amount of all Non-Financed Capital Expenditures made during such period
(excluding payment of Capital Leases to the extent included in principal
payments or Interest Expense for such period).
GAAP. Generally accepted accounting principles as defined by the United
States Financial Accounting Standards Board, as from time to time in effect.
GUARANTIES. As applied to the Credit Parties and their Subsidiaries,
all guarantees, endorsements or other contingent or surety obligations with
respect to obligations of others whether or not reflected on the consolidated
balance sheet of the Credit Parties and their Subsidiaries, including any
obligation to furnish funds, directly or indirectly (whether by virtue of
partnership arrangements, by agreement to keep-well or otherwise), through the
purchase of goods, supplies or services, or by way of stock purchase, capital
contribution, advance or loan, or
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to enter into a contract for any of the foregoing, for the purpose of payment of
obligations of any other Person or entity.
GUARANTY AGREEMENT. The Guaranty Agreement executed and delivered by
the Borrower on the date hereof in favor of the Bank guarantying the Biosphere
Loans.
HAZARDOUS MATERIAL. Any substance (i) the presence of which requires or
may hereafter require notification, investigation or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "controlled industrial waste"
or "pollutant" or "contaminant" under any present or future Environmental Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
ET SEQ.) and any applicable local statutes and the regulations promulgated
thereunder; (iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or had jurisdiction over the Borrower; or (iv) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls ("PCB's").
INDEBTEDNESS. As applied to the Credit Parties and their Subsidiaries,
(i) any and all obligations for borrowed money or other extensions of credit
whether or not secured or unsecured, absolute or contingent, including, without
limitation, Capital Leases, unmatured reimbursement obligations with respect to
letters of credit or guarantees issued for the account of or on behalf of the
Credit Parties and their Subsidiaries and all obligations representing the
deferred purchase price of property, other than accounts payable arising in the
ordinary course of business, (ii) all obligations evidenced by bonds, notes,
debentures or other similar instruments, (iii) all obligations secured by any
mortgage, pledge, security interest or other lien on property owned or acquired
by the Credit Parties or any Subsidiary of a Credit Party whether or not the
obligations secured thereby shall have been assumed, (iv) that portion of all
obligations arising under Capital Leases that is required to be capitalized on
the consolidated balance sheet of the Credit Parties and their Subsidiaries, (v)
all Guaranties, and (vi) all obligations that are immediately due and payable
out of the proceeds of or production from property now or hereafter owned or
acquired by the Credit Parties or any Subsidiary of a Credit Party.
INTEREST EXPENSE. For any period, the sum for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all interest paid or payable during
such period by the Borrower and its Subsidiaries in respect of Indebtedness for
borrowed money plus (b) all fees, including Letter of Credit fees and expenses,
incurred hereunder during such period.
INVESTMENT. As applied to the Borrower and its Subsidiaries, the
purchase or acquisition of any share of capital stock, partnership interest,
evidence of indebtedness or other equity security of any other Person or entity,
any loan, advance or extension of credit to, or contribution to the capital of,
any other Person or entity, any real estate held for sale or investment, any
commodities futures contracts held other than in connection with bona fide
hedging transactions,
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any other investment in any other Person or entity, and the making of any
commitment or acquisition of any option to make an Investment.
LC EXPOSURE. At any time, the sum of (a) the aggregate undrawn amount
of all outstanding Letters of Credit at such time PLUS (b) the aggregate amount
of all payments made by the Bank pursuant to Letters of Credit which have not
yet been reimbursed by or on behalf of the Credit Parties.
LETTERS OF CREDIT. Letters of credit previously and hereafter issued by
the Bank for the account of a Credit Party in accordance with the provisions of
Section 2.5 hereof, or drafts accepted under any agreement for banker's
acceptances entered into by a Credit Party with the Bank.
LOAN ACCOUNT. The account on the books of the Bank in which will be
recorded Revolving Loans made by the Bank to the Credit Parties pursuant to this
Agreement, payments made on such Revolving Loans and other appropriate debits
and credits as provided by this Agreement.
LOAN DOCUMENTS. See Section 7.2.
MATERIAL LICENSES. See Section 4.11.
MONEY MARKETS. See Section 8.10.
NET OUTSTANDING AMOUNT OF ACCOUNTS. As of any date, the net amount of
Accounts Receivable of the Borrower outstanding on such date after (a)
eliminating from the aggregate amount of outstanding Accounts (i) such Accounts
past due under the original terms of sale more than sixty (60) days, (ii) any
Account owed by any account debtor whose principal place of business or chief
executive office is not within the United States or the District of Columbia
("FOREIGN ACCOUNT DEBTORS"), (iii) such Accounts due from Affiliates or
Subsidiaries of the Borrower, (iv) such Accounts for services not yet rendered
or goods not yet delivered, and (v) such Accounts representing obligations in
respect of any joint venture interest owned by the Borrower and in respect of
royalties and license fees payable to the Borrower by any such joint venture or
any joint venture therein, and (b) deducting from the aggregate face amount of
the remaining Accounts Receivable of the Borrower (i) net offsets from accounts
owing from account debtors, other than foreign account debtors, which maintain
both receivable and payable balances with the Borrower, (ii) the aggregate
amount of outstanding claims asserted by account debtors, other than foreign
account debtors, against the Borrower and (iii) all payments, adjustments, and
credits applicable thereto and all amounts due thereon considered by the Bank to
be difficult to collect or uncollectible by reason of return, rejection,
repossession, loss or damage of or to the merchandise giving rise thereto, a
merchandise or other dispute, insolvency of the account debtor or any other
reason, all as determined by the Bank in its sole and reasonable discretion,
which determination shall be final and binding upon the Borrower.
NON-FINANCED CAPITAL EXPENDITURES. For any period, all Capital
Expenditures made by the Borrower and its Subsidiaries during such period that
have not been funded, directly or indirectly, with the proceeds of purchase
money financing (including, without limitations, Capital Leases) other than the
proceeds of Revolving Loans.
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NOTES. Collectively, the Sepracor Note and the Biosphere Note.
NOTICE OF BORROWING. See Section 2.1(b).
OBLIGATIONS. Any and all obligations of the Credit Parties to the Bank
of every kind and description (i) hereunder and under the Notes and (ii) under
Alternative Currency Commitments and under any and all documents pertaining
thereto whether direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising, regardless
of how they arise or by what agreement or instrument, if any, and including
obligations to perform acts and refrain from taking action as well as
obligations to pay money.
ORIGINAL CURRENCY. See Section 8.10.
PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
PERMITTED ENCUMBRANCES. See Section 6.4.
PERSON. A corporation, an association, a partnership, a limited
liability company or partnership, a joint venture, an organization, a business,
an individual, a government or political subdivision thereof or a governmental
agency.
PLAN. At any time, an employee pension or other benefit plan that is
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by the Credit Parties or
any member of the Controlled Group for employees of the Credit Parties or any
member of the Controlled Group or (ii) if such Plan is established, maintained
pursuant to a collective bargaining agreement or any other arrangement under
which more than one employer makes contributions and to which the Credit Parties
or any member of the Controlled Group is then making or accruing an obligation
to make contributions or has within the preceding five Plan years made
contributions.
PRIME RATE. The rate of interest announced from time to time by the
Bank at its office in Boston, Massachusetts as its prime rate.
PRIOR CREDIT AGREEMENT. See Preamble.
PRIOR LOANS. See Preamble.
QUALIFIED INVESTMENTS. As applied to the Borrower, Investments in (i)
notes, bonds or other obligations of the United States of America or any agency
thereof that as to principal and interest constitute direct obligations of or
are guaranteed by the United States of America; (ii) certificates of deposit or
other deposit instruments or accounts of banks or trust companies organized
under the laws of the United States or any state thereof that have capital and
surplus of at least $100,000,000, (iii) commercial paper issued by companies
organized under the laws of the United States or any state thereof and that is
rated not less than prime-two or A-2 or their equivalents by Moody's Investors
Service, Inc. or Standard & Poor's Corporation, respectively, or their
successors, (iv) mutual or closed end funds that invest solely in Investments
described in
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clauses (i) through (iii) of this definition and (v) any repurchase agreement
secured by any one or more of the foregoing.
RESTRICTED PAYMENTS. (a) Any dividend or other distribution, direct or
indirect, on or on account of any shares of any class of stock of any Credit
Party now or hereafter outstanding and (b) any redemption, purchase or other
acquisition, direct or indirect, of any shares of any class of stock of Credit
Party now or hereafter outstanding or of any warrants or rights to purchase any
such stock (including without limitation the repurchase of any such stock or
warrant or any refund of the purchase price thereof in connection with the
exercise by the holder thereof of any right of rescission or similar remedies
with respect thereto) and (c) any payment of principal of, premium, if any, or
interest on, or otherwise in respect of any Subordinated Indebtedness.
REVOLVING COMMITMENT AMOUNT. Twenty-five Million Dollars ($25,000,000)
or any lesser amount, including zero, resulting from a termination or reduction
of such amount in accordance with Section 2.3 or Section 7.2.
REVOLVING CREDIT PERIOD. The period beginning on the date hereof and
extending through and including the Revolving Credit Termination Date.
REVOLVING CREDIT TERMINATION DATE. December 31, 2001 or such earlier
date on which the commitment to make Revolving Loans is terminated or the
Revolving Commitment Amount is reduced to zero in accordance with the terms of
this Agreement.
REVOLVING LOANS. Loans made pursuant to Section 2.1(a) that utilize the
Revolving Commitment Amount including, without limitation, all Biosphere Loans.
SECOND CURRENCY. See Section 8.10.
SEPRACOR NOTE. The Promissory Note dated the date hereof made by the
Borrower payable to the order of the Bank in the original principal amount of
$25,000,000.
SUBORDINATED INDEBTEDNESS. (a) the existing Indebtedness of the Credit
Parties which is designated as "Subordinated Indebtedness" in SCHEDULE 6.1
attached hereto, and (b) any other Indebtedness of the Credit Parties consented
to in writing by the Bank which matures in its entirety later than the Notes and
by its terms (or by the terms of the instrument under which it is outstanding
and to which appropriate reference is made in the instrument evidencing such
Subordinated Indebtedness) is made subordinate and junior in right of payment to
the Notes and to the Credit Parties' other obligations to the Bank hereunder by
provisions reasonably satisfactory in form and substance to the Bank and its
counsel.
SUBORDINATED NOTES. The Borrower's (i) $165,000,000 6 1/4% Convertible
Subordinated Debentures due 2005 issued by the Borrower pursuant to an Indenture
dated February 5, 1998 from the Borrower to Chase Manhattan Bank, and (ii)
$300,000,000 7.00% Convertible Subordinated Debentures due 2005 issued pursuant
to an Indenture dated December 15, 1998 by the Borrower to Chase Manhattan Bank.
SUBSIDIARY. Any corporation, association, limited liability company,
joint stock company, business trust or other similar organization of which 50%
or more of the ordinary
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voting power for the election of a majority of the members of the board of
directors or other governing body of such entity is held or controlled by any
Credit Party or their Subsidiaries; or any other such organization the
management of which is directly or indirectly controlled by any Credit Party or
a Subsidiary of any Credit Party through the exercise of voting power or
otherwise; or any joint venture, whether incorporated or not, in which any
Credit Party has, at least, a 50% ownership interest.
TANGIBLE CAPITAL BASE. At any date as of which the amount thereof shall
be determined, the stockholders' equity of the Borrower and its Subsidiaries
determined on a consolidated basis in accordance with GAAP PLUS the outstanding
principal amount of any Subordinated Indebtedness MINUS the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights and
research and development expenses except prepaid expenses, (c) all reserves not
already deducted from assets, (d) any write-up in the book value of assets
resulting from any revaluation thereof subsequent to the date of the financial
statements referred to in Section 4.6 and (e) any and all items included as
assets on the consolidated balance sheet of the Borrower and its Subsidiaries if
and to the extent such items consist of the equity in Subsidiaries or other
joint ventures holdings or similar Investments.
TECHNOLOGY TRANSFER AGREEMENTS. The Technology Transfer and License
Agreements dated as of January 1, 1994 between the Borrower and each of its
Subsidiaries each as originally executed and delivered to the Bank.
TOTAL LIABILITIES. Any and all liabilities of the Credit Parties and
their Subsidiaries on a consolidated basis determined in accordance with GAAP.
U.S. SUBSIDIARY. With respect to any Person, each of such Person's
Subsidiaries organized, and having a principal place of business located in the
United States.
VERSICOR. Versicor Inc., a Delaware corporation, a Subsidiary of the
Borrower and an Affiliate of Biosphere.
1.2 ACCOUNTING TERMS. All terms of an accounting character shall have
the meanings assigned thereto by GAAP applied on a basis consistent with the
financial statements referred to in Section 4.6 of this Agreement, modified to
the extent, but only to the extent, that such meanings are specifically modified
herein.
1.3 MULTIPLE BORROWERS. All Obligations are several (and not joint)
between the Borrower and Biosphere except that the Borrower is guarantying the
Biosphere Loans. All representations and covenants shall apply and be applied to
the Borrower (and not Biosphere). The Credit Parties hereby designate the
Borrower to act on behalf of the Credit Parties for all purposes under this
Agreement, including, without limitation, reduction of the Revolving Commitment
Amount and the Biosphere Sublimit. Notice when given to the Borrower shall be
sufficient notice to the Credit Parties. Any document delivered to the Borrower
shall be considered delivered to each of the Borrower and Biosphere. Any Event
of Default by the Borrower shall be an Event of Default by the Credit Parties.
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SECTION 2
DESCRIPTION OF CREDIT
2.1 THE REVOLVING LOANS.
(a) Upon the terms and subject to the conditions of this
Agreement, and in reliance upon the representations, warranties and covenants of
the Credit Parties made herein, the Bank agrees to make Revolving Loans to the
Borrower and Biosphere Loans to Biosphere, in each case in Dollars, pursuant to
Notices of Borrowing as delivered by the Credit Parties to the Bank from time to
time, from and after the Closing Date and during the Revolving Credit Period;
PROVIDED, that (1) the aggregate principal amount of Revolving Loans outstanding
at any time shall not exceed the Available Aggregate Revolving Commitment at
such time, (2) the sum of the aggregate principal amount of Biosphere Loans
outstanding at such time PLUS Biosphere LC Exposure shall not exceed the
Biosphere Sublimit at such time and (3) at the time a Credit Party requests a
Revolving Loan or a Letter of Credit and after giving effect to the making
thereof there has not occurred and is not continuing any Default or Event of
Default. The Credit Parties agree that it shall be an Event of Default if at any
time the debit balance of the Loan Account shall exceed the Available Aggregate
Revolving Commitment or the aggregate principal amount of Biosphere Loans plus
Biosphere LC Exposure exceeds the Biosphere Sublimit unless, in each case, the
Credit Parties shall, upon demand by the Bank, pay, within two (2) Business
Days, cash to the Bank to be credited to the Loan Account in such amount as
shall be necessary to eliminate any such the excess.
(b) Prior to 12:00 noon (Boston time) on the Revolving Loan
request date, (1) with respect to all Revolving Loans (except for Biosphere
Loans), an Authorized Officer and (2) with respect to Biosphere Loans, the Chief
Financial Officer of Biosphere and the Senior Vice President, Finance and
Administration of the Borrower, shall, subject to the notice requirements for
LIBOR Loans as set forth in Section 2.3(a), notify the Bank in writing or by
telephone confirmed by (i) telex, (ii) telecopy or (iii) other facsimile
transmission, on the same day as the telephonic request (the "NOTICE OF
BORROWING"), of the proposed date of borrowing and the principal amount
requested. No Notice of Borrowing shall be revocable by any Credit Party. No
Notice of Borrowing for a Biosphere Loan shall be effective unless the Bank
shall have received, on or prior to the date of such Notice of Borrowing, a
certificate of the secretary of Biosphere with respect to resolutions of the
Board of Directors authorizing such Biosphere Loan or granting authority to
certain officers of Biosphere to request Biosphere Loans pursuant to the terms
hereof.
(c) The Bank shall enter the Revolving Loans as debits in the
Loan Account. The Bank shall also record in the Loan Account all payments made
by the Credit Parties on account of the Revolving Loans, and may also record
therein, in accordance with customary accounting practices, other debits and
credits, and all interest, fees, charges and expenses chargeable to the Credit
Parties under this Agreement. The debit balance of the Loan Account shall
reflect the amount of the Credit Parties' Obligations to the Bank from time to
time by reason of the Revolving Loans (including Biosphere Loans) and other
appropriate charges hereunder. Periodically, the Bank shall render a statement
of account showing as of its date the debit balance of the Loan Account which,
unless within thirty (30) days of such date notice to the
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contrary is received by the Bank from the Credit Parties, absent manifest error,
shall be considered correct and accepted by each of the Credit Parties and
conclusively binding upon both Credit Parties.
(d) Subject to the terms and conditions of this Agreement, the
Bank shall make each Revolving Loan on the effective date specified therefor by
crediting the amount of such Revolving Loan to the applicable Credit Party's
demand deposit account with the Bank.
2.2 FEES. The Borrower shall pay to the Bank during the Revolving
Credit Period a commitment fee computed at the rate of one quarter of one
percent (0.25%) per annum on the average daily amount of the unborrowed portion
of the Revolving Commitment Amount during each quarter or portion thereof;
provided, that LC Exposure shall be deemed borrowed. Commitment fees shall be
payable quarterly in arrears, on the first day of January, April, July and
October of each year beginning on April 1, 2000, and on the last day of the
Revolving Credit Period.
2.3 REDUCTION OF REVOLVING COMMITMENT AMOUNT/BIOSPHERE SUBLIMIT. The
Borrower may from time to time by written notice delivered to the Bank by the
Borrower at least five Business Days prior to the date of the requested
reduction or termination, reduce by integral multiples of Five Hundred Thousand
Dollars ($500,000) any unborrowed portion of the Revolving Commitment Amount by
integral multiples of One Hundred Thousand Dollars ($100,000) any unborrowed
portion of the Biosphere Sublimit or, subject to the prior payment in full of
any Biosphere Loans, together with all interest and fees accrued thereon,
terminate the Biosphere Sublimit; provided that if the Borrower shall cease to
own directly at least 51% of the outstanding capital stock of Biosphere, then
the Biosphere Sublimit shall be terminated automatically, and all Biosphere
Loans, together with all interest and fees accrued thereon, shall be immediately
due and payable in full. No reduction of the Revolving Commitment Amount or the
Biosphere Sublimit shall be subject to reinstatement.
2.4 THE NOTES.
(a) The Revolving Loans (except the Biosphere Loans) shall be
evidenced by the Sepracor Note substantially in the form of EXHIBIT A-1 hereto
and the Biosphere Loans shall be evidenced by the Biosphere Note, substantially
in the form of EXHIBIT A-2 hereto, each of which is payable to the order of the
Bank and with a final maturity on the Revolving Credit Termination Date. The
Notes shall be dated on or before the date of the first Revolving Loan and shall
have the blanks therein appropriately completed.
(b) The Bank shall, and is hereby irrevocably authorized (but
not required) by the Credit Parties to, enter on the schedule forming a part of
each Note or otherwise in its records appropriate notations evidencing the date
and the amount of each Revolving Loan, the interest rate applicable thereto and
the date and amount of each payment of principal made by the applicable Credit
Party with respect thereto; and in the absence of manifest error, such notations
shall constitute conclusive evidence thereof. The Bank is hereby irrevocably
authorized by the Credit Parties to attach to and make a part of each Note a
continuation of any such schedule as and when required. No failure on the part
of the Bank to make any notation as provided in this
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subsection (b) shall in any way affect any Revolving Loan or Biosphere Loan or
the rights or obligations of the Bank or any Credit Party with respect thereto.
2.5 LETTERS OF CREDIT. Upon the request of a Credit Party (and if
Biosphere, subject to the requirements of Section 2.1(b)(2)), the Bank shall
issue such Letters of Credit as such Credit Party may request, PROVIDED that
such Letters of Credit shall not be issued unless and until such Credit Party
has completed and executed such application as the Bank may require from time to
time and such other agreements evidencing Letters of Credit as the Bank shall
request from time to time (consistent with the Bank's usual practice), and
PROVIDED FURTHER that, each Letter of Credit shall be subject to customary fees
relating to issuance, negotiation, settlement, amendment and other similar fees
and charges as agreed by the Bank and such Credit Party. All Letters of Credit
shall expire no later than five (5) Business Days prior to the Revolving Credit
Termination Date. Letters of Credit issued hereunder shall constitute
utilization of the Revolving Commitment Amount and the Biosphere Sublimit, as
applicable.
2.6 CAPITAL REQUIREMENTS. If after the date hereof, the Bank shall have
determined that the adoption or implementation of any applicable law, rule or
regulation regarding capital requirements for banks or bank holding companies,
or any change therein (including, without limitation, any change according to a
prescribed schedule of increasing requirements, whether or not known on the date
hereof), or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive of such entity regarding capital adequacy (whether or not
having the force of law) has the effect of reducing the return on the Bank's
capital to a level below that which the Bank could have achieved (taking into
consideration the Bank's policies with respect to capital adequacy immediately
before such adoption, implementation, change or compliance and assuming that the
Bank's capital was fully utilized prior to such adoption, implementation, change
or compliance) but for such adoption, implementation, change or compliance as a
consequence of its Commitment to make Revolving Loans hereunder by any amount
deemed by the Bank to be material, the Credit Parties shall pay to the Bank as
an additional fee from time to time on demand such amount as the Bank shall have
determined to be necessary to compensate it for such reduction. The
determination by the Bank of such amount, if done on the basis of any reasonable
averaging and attribution methods, shall in the absence of manifest error be
conclusive, and at the Borrower's request, the Bank shall demonstrate the basis
of such determination.
2.7 PAYMENTS AND PREPAYMENTS OF THE REVOLVING LOANS. On at least two
(2) Banking Days prior written notice to the Bank with respect to Revolving
Loans subject to an exercised LIBOR Option and on at least one (1) Banking Day
prior written notice to the Bank with respect to all other Revolving Loans, the
Credit Parties may, at their option, prepay the Notes in whole at any time or in
part from time to time without penalty or premium; PROVIDED, that any prepayment
of any LIBOR Portion shall be made together with the applicable LIBOR Premium.
Any interest accrued on the amounts so prepaid to the date of such payment must
be paid at the time of any such payment. No prepayment of the Revolving Loans
shall affect the Revolving Commitment Amount or the Biosphere Sublimit or impair
any Credit Party's right to borrow as set forth in Section 2.1. On the Revolving
Credit Termination Date, the Borrower shall repay all outstanding Revolving
Loans and the Sepracor Note, and Biosphere shall repay all outstanding
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Biosphere Loans and the Biosphere Note together with all unpaid interest thereon
and all fees and other amounts due hereunder with respect to the Revolving
Loans.
2.8 METHOD OF PAYMENT. All payments and prepayments of principal and
all payments of interest shall be made by the Credit Parties to the Bank at One
Federal Street, Boston, Massachusetts 02110 in immediately available funds, on
or before 11:00 a.m. on the due date thereof, free and clear of, and without any
deduction or withholding for, any taxes or other payments. The Bank may, and
each Credit Party hereby authorizes the Bank to, debit the amount of any payment
not made by such time to the demand deposit account of such Credit Party with
the Bank.
2.9 OVERDUE PAYMENTS.
(a) Upon the occurrence and during the continuance of an Event
of Default, interest on the outstanding principal amount of the Notes and (to
the extent permitted by law) on accrued but unpaid interest shall thereafter be
payable on demand at a rate per annum equal to two percent (2%) above the
interest rate otherwise in effect with respect to such Revolving Loans. Upon the
cure of an Event of Default and the payment of interest at the default rate
through the date of such cure, the interest rate shall revert to that provided
for in Section 2.10.
(b) If a payment of principal or interest hereunder is not
made in full within 10 days of date when due, the applicable Credit Party will
pay to the Bank a late fee equal to three percent (3%) of the amount of such
payment. Nothing in the preceding sentence shall affect the Bank's right to
exercise any of its rights or remedies, including those provided in Section 7.2,
if an Event of Default has occurred.
2.10 HOLIDAYS. If any payment required by this Agreement becomes due on
a day that is not a Business Day such payment may be made on the next succeeding
Business Day, and such extension shall be included in computing interest in
connection with such payment.
2.11 INTEREST. Each Note shall bear interest on the unpaid principal
amount thereof until paid in full at the rate or rates per annum determined (on
the basis of the actual number of days elapsed over a 360-day year) and payable
as follows:
(a) The rate of interest for any portion of the outstanding
principal amount of the Revolving Loans which is not then subject to an
exercised LIBOR Option under Section 2.12 of this Agreement shall be computed at
the Prime Rate.
(b) The rate for any LIBOR Portion of the Revolving Loans
shall be computed at a rate equal to three-quarters percent (0.75%) above the
applicable LIBOR Rate.
(c) Interest on each Note shall be payable monthly in arrears
on the first Business Day of each month, commencing on January 1, 2000 and, in
addition, interest on any LIBOR Portion of the Revolving Loans in respect of any
LIBOR Period shall also be payable on the last day of such LIBOR Period and on
the last day of the third month for each LIBOR Portion with a 180-day LIBOR
Period and at maturity (whether by acceleration or otherwise). The rate of
interest payable on any portion of the outstanding principal balance of any
Revolving
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Loan which is not then subject to a LIBOR Option shall take effect
simultaneously with the corresponding change in the Prime Rate.
2.12 CERTAIN LIBOR PROVISIONS.
(a) LIBOR OPTION. Subject to the provisions of this Section 2,
each Credit Party shall have the right to have the interest on all or any
portion of the principal amount of any Revolving Loan based on a LIBOR Rate.
(b) CERTAIN DEFINITIONS. As used herein, the following terms
have the following respective meanings:
BANKING DAY. (i) When used with respect to the LIBOR Option, a day on
which transactions may be effected in deposits of U.S. dollars in the London
interbank foreign currency deposits market and on which banks may conduct
business in London, England and Boston, Massachusetts and (ii) when used with
respect to the other provisions of this Agreement, any day excluding Saturday
and Sunday and excluding any other day which shall be in Boston, Massachusetts,
a legal holiday or a day on which banking institutions are authorized by law to
close.
BOARD. The Board of Governors of the Federal Reserve System of the
United States.
LEGAL REQUIREMENT. Any requirement imposed upon the Bank by any law of
the United States of America or the United Kingdom or by any regulation, order,
interpretation, ruling or official directive (whether or not having the force of
law) of the Board, the Bank of England or any other board, central bank or
governmental or administrative agency, institution or authority of the United
States of America, the United Kingdom or any political subdivision of either
thereof.
LIBOR OPTION. The option granted pursuant to this Section 2 to have the
interest on all or a portion of the principal amount of the Revolving Loans
based on a LIBOR Rate.
LIBOR PERIOD. Any period, as provided below in this Section 2.12, of
30, 60, 90 or 180 days, commencing on any Banking Day; PROVIDED, however, that
no LIBOR Period with respect to any LIBOR Portion of any Revolving Loan shall
extend beyond the maturity date of the Notes. If any LIBOR Period so selected
would otherwise end on a date which is not a Banking Day, such LIBOR Period
shall instead end on the next preceding or succeeding Banking Day as determined
by the Bank in accordance with the then current banking practice in London. Each
determination by the Bank of any LIBOR Period shall, in the absence of manifest
error, be conclusive, and at any Credit Party's request the Bank shall
demonstrate the basis for such determination.
LIBOR PORTION. That portion of the Revolving Loans specified in a LIBOR
Request, (i) which is not less than Five Hundred Thousand Dollars ($500,000),
(ii) which is an integral multiple of Ten Thousand Dollars ($10,000), (iii)
which does not exceed the outstanding balance of the Revolving Loan not already
subject to an exercised LIBOR Option, (iv) which, as of the date of the LIBOR
Request specifying such LIBOR Portion, has met the conditions for basing
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interest on the LIBOR Rate in Section 2.13 of this Agreement and (v) the LIBOR
Period of which has commenced and not terminated.
LIBOR PREMIUM. With respect to the prepayment of any LIBOR Portion of
any Revolving Loan, whether voluntary or as a result of acceleration, an amount
equal to the product of (i) the excess, if any, of the rate of interest on the
principal amount so prepaid over the rate of interest on debt securities issued
by the Treasury of the United States of America on a date approximating the date
of payment of such principal amount and having a maturity date approximating the
last Banking Day of the applicable LIBOR Period, multiplied by (ii) the
principal amount so prepaid, multiplied by (iii) a fraction, the numerator of
which is the number of days remaining in the related LIBOR Period and the
denominator of which is 360.
LIBOR RATE. With respect to any LIBOR Portion for the related LIBOR
Period, an interest rate per annum (rounded upwards, if necessary, to the next
higher 1/8 of 1%) equal to the product of (a) the Base LIBOR Rate (as
hereinafter defined) and (b) Statutory Reserves. For purposes of this
definition, the term "BASE LIBOR RATE" shall mean the rate (rounded to the
nearest 1/8 of 1% or, if there is no nearest 1/8 of 1%, the next higher 1/8 of
1%) at which deposits of U.S. dollars approximately equal in principal amount to
the LIBOR Portion and for a maturity equal to the applicable LIBOR Period are
offered to the Bank in the London interbank foreign currency deposits market at
approximately 11:00 a.m., London time, two (2) Banking Days prior to the
commencement of such LIBOR Period, for delivery on the first day of such LIBOR
Period. Each determination by the Bank of any LIBOR Rate shall, in the absence
of manifest error, be conclusive, and at any Credit Party's request, the Bank
shall demonstrate the basis for such determination.
LIBOR REQUEST. Notice in writing (or by telephonic communications
confirmed by telex, telecopy or other facsimile transmission on the same day as
the telephone request) from Biosphere with respect to Biosphere Loans or from
the Borrower with respect to all other Revolving Loans, to the Bank requesting
that interest on a LIBOR Portion be based on the LIBOR Rate, specifying: (i) the
first day of the LIBOR Period, (ii) the length of the LIBOR Period consistent
with the definition of that term and (iii) a dollar amount of the LIBOR Portion
consistent with the definition of that term.
STATUTORY RESERVES. A fraction, the numerator of which is the number
one and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including, without limitation, any marginal,
special, emergency or supplemental reserves), expressed as a decimal,
established by the Board and any other banking authority to which the Bank is
subject for Eurocurrency Liabilities (as defined in Regulation D of the Board).
Such reserve percentages shall include, without limitation, those imposed under
such Regulation D. LIBOR Portions of the Revolving Loans shall be deemed to
constitute Eurocurrency Liabilities and as such shall be deemed to be subject to
such reserve requirements without benefit of or credit for proration, exceptions
or offsets which may be available from time to time to the Bank under such
Regulation D. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
TAX. In relation to any LIBOR Portion and the applicable LIBOR Rate,
any tax, levy, impost, duty, deduction, withholding or other charges of whatever
nature required by any Legal
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Requirement (i) to be paid by the Bank and/or (ii) to be withheld or deducted
from any payment otherwise required hereby to be made by any Credit Party to the
Bank, PROVIDED that the term "Tax" shall not include any taxes imposed upon the
net income of the Bank by the United States of America or any political
subdivision thereof (including state and local governmental authorities).
2.13 CONDITIONS FOR BASING INTEREST ON THE LIBOR RATE. Upon the
condition that:
(a) The Bank shall have received a LIBOR Request from the
Borrower or Biosphere, as applicable, prior to noon at least two (2) Banking
Days prior to the first day of the LIBOR Period requested;
(b) There shall have occurred no change in applicable law
which would make it unlawful for the Bank to obtain deposits of U.S. dollars in
the London interbank foreign currency deposits market;
(c) As of the date of the LIBOR Request and the first day of
the LIBOR Period, there shall exist no Event of Default, nor any Default, which
has not been waived by the Bank;
(d) The Bank shall not have determined in good faith that it
is unable to determine the LIBOR Rate in respect of the requested LIBOR Period
or that it is unable to obtain deposits of U.S. dollars in the London interbank
foreign currency deposits market in the applicable amounts and for the requested
LIBOR Period; and
(e) As of the first date of the LIBOR Period specified in such
LIBOR Request, and after having given effect thereto, there shall be no more
than an aggregate of four (4) LIBOR Portions outstanding;
then interest on the LIBOR Portion requested during the LIBOR Period requested
will be at the applicable LIBOR Rate.
2.14 INDEMNIFICATION FOR FUNDING AND OTHER LOSSES. Each LIBOR Request
shall be irrevocable and binding on the applicable Credit Party. Without
limiting the generality of Section 2.15, the Credit Parties shall indemnify the
Bank against any loss or expense incurred by the Bank as a result of any failure
on the part of any Credit Party to fulfill, on or before the date specified in
any LIBOR Request, the applicable conditions set forth in this Agreement,
including, without limitation, any loss (including loss of anticipated profits)
or expense incurred by reason of the liquidation or redeployment of deposits or
other funds acquired by the Bank to fund or maintain the requested LIBOR Portion
when interest on such LIBOR Portion, as a result of such failure on the part of
the Credit Parties, is not based on the applicable LIBOR for the requested LIBOR
Period. The Bank shall determine the amount of such loss or expense incurred by
it, and absent manifest error such determination shall be conclusive, and at any
Credit Party's request the Bank shall demonstrate the basis for such
determination.
2.15 CHANGE IN APPLICABLE LAWS, REGULATIONS, ETC. If any Legal
Requirement shall make it unlawful for the Bank to fund through the purchase of
U.S. dollar deposits any LIBOR Portion, or otherwise to give effect to its
obligations as contemplated hereby, or shall impose on
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the Bank any costs based on or measured by the excess above a specified level of
the amount of a category of deposits or other liabilities of the Bank, which
includes deposits by reference to which the LIBOR Rate is determined as provided
herein or a category of extensions of credit or other assets of the Bank which
includes any LIBOR Portion, or shall impose on the Bank any restrictions on the
amount of such a category of liabilities or assets which the Bank may hold, (a)
the Bank may by notice thereof to the Credit Parties terminate the LIBOR Option,
(b) any LIBOR Portion subject thereto shall immediately bear interest thereafter
at the rate provided for in Section 2.10.(a), and (c) the Credit Parties shall
indemnify the Bank against any loss, penalty or expense incurred by the Bank by
reason of the liquidation or redeployment of deposits or other funds acquired by
the Bank to fund or maintain such LIBOR Portion, as provided in Section 2.14.
2.16 TAXES. It is the understanding of the Credit Parties and the Bank
that the Bank shall receive payments of amounts of principal of and interest on
the Revolving Loans with respect to the LIBOR Portions from time to time subject
to a LIBOR Option free and clear of, and without deduction for, any Taxes. If
(a) the Bank shall be subject to any such Tax in respect of any such LIBOR
Portion or part thereof or (b) the Credit Parties shall be required to withhold
or deduct any such Tax from any such amount, and (c) such Tax shall not have
existed as of the date of the applicable LIBOR Request, the LIBOR applicable to
such LIBOR Portion shall be adjusted by the Bank to reflect all additional costs
incurred by the Bank in connection with the payment by the Bank or the
withholding by the Credit Parties of such Tax and the Credit Parties shall
provide the Bank with a statement detailing the amount of any such Tax actually
paid by the Credit Parties. Determination by the Bank of the amount of such
costs shall, in the absence of manifest error, be conclusive, and at any Credit
Party's request, the Bank shall demonstrate the basis of such determination. If
after any such adjustment, any part of any Tax paid by any Bank is subsequently
recovered by the Bank, the Bank shall reimburse the Credit Parties to the extent
of the amount so recovered. A certificate of an officer of the Bank setting
forth the amount of such recovery and the basis therefor shall, in the absence
of manifest error, be conclusive.
SECTION 3
CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL REVOLVING LOAN. The obligation of
the Bank to make its initial Revolving Loans, to issue Letters of Credit is
subject to the condition precedent that the Bank shall have received, in form
and substance satisfactory to the Bank and its counsel, the following:
(a) this Agreement, duly executed by the Credit Parties;
(b) the Sepracor Note, duly executed by the Borrower;
(c) the Biosphere Note, duly executed by Biosphere;
(d) the Guaranty Agreement duly executed by the Borrower;
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(e) a certificate of the Secretary or an Assistant Secretary
of the Borrower with respect to resolutions of its Board of Directors
authorizing the execution and delivery of this Agreement, the Notes, and
identifying the officer(s) authorized to execute, deliver and take all other
actions required under this Agreement, and providing specimen signatures of such
officers;
(f) a certificate signed by an Authorized Officer, certifying
that the conditions of Section 3.2.(b) have been fulfilled;
(g) the certificate of incorporation of the Borrower and all
amendments and supplements thereto, filed in the office of the Secretary of
State of the State of Delaware, each certified by said Secretary of State as
being a true and correct copy thereof;
(h) the bylaws of the Borrower and all amendments and
supplements thereto, certified by the Secretary or an Assistant Secretary as
being a true and correct copy thereof;
(i) a certificate of the Secretary of State of the State of
Delaware, as to legal existence and good corporate standing of the Borrower in
such state and listing all documents on file in the office of said Secretary of
State;
(j) a certificate of the Secretary or an Assistant Secretary
of Biosphere with respect to resolutions of the Board of Directors authorizing
the execution and delivery of this Agreement, the Biosphere Note, and
identifying the officer(s) authorized to execute, deliver and take all other
actions required under this Agreement, and providing specimen signatures of such
officers;
(k) a certificate signed by a principal officer of Biosphere,
certifying that the conditions of Section 3.2.(b) have been fulfilled;
(l) the certificate of incorporation of Biosphere and all
amendments and supplements thereto, filed in the office of the Secretary of
State of the State of Delaware, each certified by said Secretary of State as
being a true and correct copy thereof;
(m) the bylaws of Biosphere and all amendments and supplements
thereto, certified by the Secretary or an Assistant Secretary as being a true
and correct copy thereof;
(n) a certificate of the Secretary of State of the State of
Delaware, as to legal existence and good corporate standing of Biosphere in such
state and listing all documents on file in the office of said Secretary of
State;
(o) Lien searches against each Credit Party in all appropriate
state filing offices and in the United States Patent and Trademark Office and
the United States Copyright Office;
(p) if necessary, UCC-3 Termination Statements and other
appropriate lien discharge documentation terminating all liens except those
consisting of Permitted Encumbrances.
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(q) a certificate signed by an Authorized Officer, certifying
that there has been no material adverse change in the condition (financial or
otherwise), operations, properties, assets, liabilities or earnings of the
Credit Parties since the date of its most recent financial statement;
(r) an opinion addressed to it from Hale and Dorr LLP, counsel
to the Credit Parties, in form and substance satisfactory to the Bank and its
counsel; and
(s) such other documents, and completion of such other
matters, as counsel for the Bank may deem reasonably necessary or appropriate.
Notwithstanding the foregoing, the obligations of the Bank to make
Revolving Loans or Biosphere Loans or issue Letters of Credit hereunder shall
not become effective unless each of the foregoing conditions is satisfied (or
waived) at or prior to 12:00 p.m. on January 7, 2000 (and in the event such
conditions are not so satisfied or waived, the Revolving Commitment Amount (and
the Biosphere Sublimit) shall terminate).
3.2 CONDITIONS PRECEDENT TO ALL REVOLVING LOANS. The obligation of the
Bank to make each Revolving Loan, including the initial Revolving Loan, or
continue or convert the Revolving Loans to loans of another type, is further
subject to the following conditions:
(a) timely receipt by the Bank of a Notice of Borrowing as
provided in Section 2.1;
(b) the representations and warranties contained in Section 4
shall be true and accurate in all material respects on and as of the date of
such Notice of Borrowing and on the effective date of the making, continuation
or conversion of each Revolving Loan as though made at and as of each such date
(except to the extent that such representations and warranties expressly relate
to an earlier date), and no Default or Event of Default shall have occurred and
be continuing, or would result from such Revolving Loan;
(c) the resolutions referred to in Sections 3.1.(d) and 3.1(i)
shall remain in full force and effect; and
(d) no change shall have occurred in any law or regulation or
interpretation thereof that, in the opinion of counsel for the Bank, would make
it illegal or against the policy of any governmental agency or authority for the
Bank to make Revolving Loans hereunder.
The making of each Revolving Loan shall be deemed to be a
representation and warranty by the Credit Parties on the date of the making,
continuation or conversion of such Revolving Loan as to the accuracy of the
facts referred to in subsection (b) of this Section 3.2.
SECTION 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and to make
the Revolving Loans hereunder, issue Letters of Credit, the Borrower represents
and warrants to the Bank that:
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4.1 ORGANIZATION AND QUALIFICATION. Each of the Credit Parties and
their Subsidiaries (a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated and (c) is duly qualified and in good
standing as a foreign corporation and is duly authorized to do business in each
jurisdiction where the nature of its properties or business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the financial condition, operations, properties or
business.
4.2 CORPORATE AUTHORITY. The execution, delivery and performance of
this Agreement, the Notes, and the transactions contemplated hereby are within
the corporate power and authority of the Credit Parties, as applicable, and the
execution, delivery and performance of the Notes are within the corporate power
and authority of the Credit Parties, as applicable, and have been authorized by
all necessary corporate proceedings, and do not and will not (a) require any
consent or approval of the stockholders of the Credit Parties, (b) contravene
any provision of the charter documents or by-laws of the Credit Parties or any
law, rule or regulation applicable to any Credit Party, (c) contravene any
provision of, or constitute an event of default or event that, but for the
requirement that time elapse or notice be given, or both, would constitute an
event of default under, any other agreement, instrument, order or undertaking
binding on any Credit Party, or (d) result in or require the imposition of any
Encumbrance on any of the properties, assets or rights of any Credit Party.
4.3 VALID OBLIGATIONS. This Agreement, the Notes, and all of their
respective terms and provisions are the legal, valid and binding obligations of
the Credit Parties, as applicable, each enforceable in accordance with their
respective terms except as limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally, and except as the remedy of specific performance or of injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
4.4 CONSENTS OR APPROVALS. The execution, delivery and performance of
this Agreement, the Notes, and the transactions contemplated herein do not
require any approval or consent of, or filing or registration with, any
governmental or other agency or authority, or any other party.
4.5 TITLE TO PROPERTIES; ABSENCE OF ENCUMBRANCES. Each of the Credit
Parties and their Subsidiaries has good and marketable title to all of the
properties, assets and rights of every name and nature now purported to be owned
by it, including, without limitation, such properties, assets and rights as are
reflected in the financial statements referred to in Section 4.6 (except such
properties, assets or rights as have been disposed of in the ordinary course of
business since the date thereof), free from all Encumbrances except Permitted
Encumbrances hereto, and, except as so disclosed, free from all defects of title
that might materially adversely affect such properties, assets or rights, taken
as a whole.
4.6 FINANCIAL STATEMENTS. The Borrower has furnished the Bank the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as of December 31, 1998, and the related consolidated and
consolidating statements of income, changes in stockholders' equity and cash
flow for the fiscal year then ended, and related footnotes, audited and
certified by
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PriceWaterhouseCoopers. The Borrower has also furnished the foregoing unaudited
financial statements to the Bank for the nine-month period ending September 30,
1999 and financial projections for the 1999 fiscal year prepared by the
Borrower. All such financial statements, except for such projections, were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods specified and present fairly the financial position of the Borrower and
its Subsidiaries as of such date and the results of the operations of the
Borrower and its Subsidiaries for such period. The projections were prepared in
good faith and based on assumptions which were reasonable when made. There are
no liabilities, contingent or otherwise, not disclosed in such financial
statements that involve a material amount.
4.7 CHANGES. Since the date of the financial statements for the
three-month period ending September 30, 1999 referred to in Section 4.6, there
have been no changes in the assets, liabilities, financial condition, business
or prospects of the Borrower or any of its Subsidiaries other than changes in
the ordinary course of business, the effect of which has not, in the aggregate,
been materially adverse.
4.8 DEFAULTS. As of the date hereof, no Default or Event of Default
exists.
4.9 TAXES. The Borrower and each Subsidiary has filed all federal,
state and other tax returns required to be filed, and all taxes, assessments and
other governmental charges due from the Borrower and each Subsidiary have been
fully paid. The Borrower and each Subsidiary have established on their books
reserves adequate for the payment of all federal, state and other tax
liabilities.
4.10 MATERIAL AGREEMENTS. As of the Closing Date, SCHEDULE 4.10 hereto
accurately and completely lists all material leases, management, stockholder,
partnership, joint venture, stock redemption or retirement, employment
(including severance), non-competition and related agreements, if any, which are
presently in effect in connection with the conduct of business of the Borrower
and its Subsidiaries.
4.11 MATERIAL LICENSES. As of the Closing Date, SCHEDULE 4.11 hereto
accurately and completely lists all material licenses and related agreements, if
any, which are presently in effect in connection with the conduct of business of
the Borrower and its Subsidiaries (the "MATERIAL LICENSES"), and all such
Material Licenses are in full force and effect.
4.12 LITIGATION. Except as set forth in SCHEDULE 4.12 hereto, there is
no litigation, arbitration, proceeding or investigation pending, or, to the
knowledge of any Credit Party's or any Credit Party's Subsidiary's officers,
threatened, against any Credit Party or any such Subsidiary that, if adversely
determined, could result in a material judgment not fully covered by insurance,
could result in a forfeiture of all or any substantial part of the property of
the Credit Parties or their Subsidiaries, or could otherwise have a material
adverse effect on the assets, business or prospects of the Credit Parties or any
Subsidiary.
4.13 USE OF PROCEEDS.
(a) The Credit Parties will not, directly or indirectly, use
any part of the proceeds of any of the Revolving Loans (i) for the purpose of
making any Restricted Payment which is prohibited by Section 6.8 hereof, (ii)
for the purpose of purchasing or carrying any
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margin stock within the meaning of Regulations U and X (12 C.F.R. Part 221 and
224) of the Board, or (iii) for any other purpose which would violate any
provision of any other applicable statute, regulation, order or restriction.
(b) The proceeds of the Revolving Loans shall be used
exclusively for the working capital purposes of the Credit Parties and for
acquisitions permitted hereunder.
4.14 EXISTING INDEBTEDNESS. SCHEDULE 6.1 hereto accurately and
completely lists all existing Indebtedness of the Credit Parties and their
Subsidiaries as of the date hereof.
4.15 EXISTING INVESTMENTS. SCHEDULE 4.15 hereto accurately and
completely lists the record owner, location and any relevant account numbers of
all depository and operating accounts and marketable securities owned by the
Credit Parties and their Subsidiaries as of the date hereof.
4.16 SUBSIDIARIES. As of the date hereof, all the Subsidiaries of the
Credit Parties are listed in SCHEDULE 4.16 hereto. The Borrower or a Subsidiary
of the Borrower is the owner, free and clear of all liens and encumbrances,
except as expressly provided in such schedule, of all of the issued and
outstanding stock of each Subsidiary. All shares of such stock have been validly
issued and are fully paid and nonassessable, and no rights to subscribe to any
additional shares have been granted, and no options, warrants or similar rights
are outstanding.
4.17 INVESTMENT COMPANY ACT. Neither Credit Party nor any of its
Subsidiaries is subject to regulation under the Investment Company Act of 1940,
as amended.
4.18 COMPLIANCE WITH ERISA. The Credit Parties and each member of the
Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the applicable provisions of ERISA and the Code,
and have not incurred any liability to the PBGC or a Plan under Title IV of
ERISA; and no "prohibited transaction" or "reportable event" (as such terms are
defined in ERISA) has occurred with respect to any Plan.
4.19 FDA COMPLIANCE, ETC. Without limiting the scope of Section 4.2,
the Credit Parties and their Subsidiaries are in compliance in all material
respects with all applicable foreign and federal and state laws and regulations,
including all material rules, regulations and administrative orders of the
United States Food and Drug Administration (the "FDA") and of foreign
authorities with jurisdiction over the Credit Parties and their Subsidiaries.
The Credit Parties and their Subsidiaries are in compliance in all material
respects with all of the applicable provisions of the Food, Drug and Cosmetic
Act, as amended.
4.20 ENVIRONMENTAL MATTERS.
(a) The Credit Parties and their Subsidiaries have obtained
all permits, licenses and other authorizations which are required under all
Environmental Laws, except to the extent failure to have any such permit,
license or authorization would not have a material adverse effect on the
business, financial condition or operations of the Credit Parties and their
Subsidiaries. The Credit Parties and their Subsidiaries are in compliance with
the terms and conditions of all such permits, licenses and authorizations, and
are also in compliance with all
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other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply would not have a material
adverse effect on the business, financial condition or operations of the Credit
Parties and their Subsidiaries.
(b) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by the Credit Parties or any of its Subsidiaries, which could materially
adversely affect the properties, business, prospects, operating results or
condition (financial or otherwise) of the Credit Parties, to have any permit,
license or authorization required in connection with the conduct of its business
or with respect to any Environmental Laws, including, without limitation,
Environmental Laws relating to the generation, treatment, storage, recycling,
transportation, disposal or release of any Hazardous Materials.
(c) To the best of each Credit Party's knowledge no oral or
written notification of a release of a Hazardous Material, which could
materially adversely affect the properties, business, prospects, operating
results or condition (financial or otherwise) of any Credit Party, has been
filed by or on behalf of any Credit Party or any Subsidiary of a Credit Party
and no property now or previously owned, leased or used by any Credit Party or
any Subsidiary of a Credit Party is listed or proposed for listing on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or on any similar state list
of sites requiring investigation or clean-up.
(d) There are no liens or encumbrances arising under or
pursuant to any Environmental Laws on any of the real property or properties
owned, leased or used by any Credit Party or any Subsidiary of a Credit Party
and no governmental actions have been taken or are in process which could
subject any of such properties to such liens or encumbrances or, as a result of
which any Credit Party or any Subsidiary of a Credit Party would be required to
place any notice or restriction relating to the presence of Hazardous Materials
at any property owned by it in any deed to such property.
(e) Neither any Credit Party nor any Subsidiary of a Credit
Party nor, to the best knowledge of any Credit Party, any previous owner,
tenant, occupant or user of any property owned, leased or used by any Credit
Party or any Subsidiary of a Credit Party (i) engaged in or permitted any
operations or activities upon or any use or occupancy of such property, or any
portion thereof, for the purpose of or in any way involving the handling,
manufacture, treatment, storage, use, generation, release, discharge, refining,
dumping or disposal (whether legal or illegal, accidental or intentional) of any
Hazardous Materials on, under, in or about such property, except to the extent
commonly used in day-to-day operations of such property and in such case only in
compliance with all Environmental Laws, or (ii) transported any Hazardous
Materials to, from or across such property except to the extent commonly used in
day-to-day operations of such property and, in such case, in compliance with,
all Environmental Laws, except, in the case of both clause (i) and clause (ii)
above, where so doing would not have a material adverse affect on the business,
prospects, operating results or condition (financial or
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otherwise) of any Credit Party; nor to the best knowledge of any Credit Party
have any Hazardous Materials migrated from other properties upon, about or
beneath such property, nor, to the best knowledge of any Credit Party, are any
Hazardous Materials presently constructed, deposited, stored or otherwise
located on, under, in or about such property except to the extent commonly used
in day-to-day operations of such property and, in such case, in compliance with,
all Environmental Laws.
SECTION 5
AFFIRMATIVE COVENANTS
So long as the Bank has any commitment to lend hereunder, issue Letters
of Credit or any Revolving Loan or other Obligation hereunder remains
outstanding, the Borrower covenants as follows:
5.1 FINANCIAL STATEMENTS AND OTHER REPORTING REQUIREMENTS. The Credit
Parties shall furnish to the Bank:
(a) as soon as available to each Credit Party and its
Subsidiaries, but in any event within 90 days after the end of each of fiscal
year, the consolidated and consolidating balance sheet of each Credit Party and
its Subsidiaries as of the end of, and the related consolidated and
consolidating statement of income, changes in stockholders' equity and cash flow
for, such year, audited and certified by PriceWaterhouseCoopers (or other
independent nationally recognized certified public accountants reasonably
acceptable to the Bank) in the case of such consolidated statements, and
certified by an Authorized Officer in the case of such consolidating statements;
and, concurrently with such financial statements, a copy of said certified
public accountants' management report and a written statement by such
accountants that, in the making of the audit necessary for their report and
opinion upon such financial statements they have obtained no knowledge of any
Default or Event of Default or, if in the opinion of such accountants any such
Default or Event of Default exists, they shall disclose in such written
statement the nature and status thereof;
(b) as soon as available to the Borrower, but in any event
within 45 days after the end of each fiscal quarter, the consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries as of the end
of, and the related consolidated and consolidating statements of income for, the
period then ended, certified by an Authorized Officer but subject, however, to
normal, recurring year-end adjustments;
(c) as soon as available to the Borrower, but in any event
concurrently with the delivery of each financial statement of the Borrower
pursuant to subsection 5.1.(a), a copy of each so-called management letter
submitted to the Borrower or any of its Subsidiaries by independent certified
public accountants in connection with each annual audit of the books of the
Borrower and its Subsidiaries by such accountants or in connection with any
interim audit thereof pertaining to any phase of the business of the Borrower or
any such Subsidiary;
(d) concurrently with the delivery of each financial statement
of the Borrower pursuant to subsections 5.1.(a) and 5.1.(b) and at any time
reasonably requested by the Bank, a
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completed compliance certificate substantially in the form of EXHIBIT C hereto
signed on behalf of the Borrower by an Authorized Officer;
(e) as soon as available to the Borrower and its Subsidiaries,
but in any event within 90 days after the end of each fiscal year, projections
for the Borrower and its consolidated Subsidiaries on a consolidating and
consolidated basis for the current fiscal year, including projected balance
sheets, income statements, cash flow statements and such other statements as the
Bank may reasonably request and in form and substance satisfactory to the Bank,
all prepared in good faith and based on assumptions which were reasonable when
made;
(f) if and when the Borrower gives or is required to give
notice to the PBGC of any "Reportable Event" (as defined in Section 4043 of
ERISA) with respect to any Plan that might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that any member of the Controlled
Group or the plan administrator of any Plan has given or is required to give
notice of any such Reportable Event, a copy of the notice of such Reportable
Event given or required to be given to the PBGC;
(g) immediately upon becoming aware of the existence of any
condition or event that constitutes a Default or Event of Default, written
notice thereof specifying the nature and duration thereof and the action being
or proposed to be taken with respect thereto;
(h) promptly upon becoming aware of any litigation or of any
investigative proceedings by a governmental agency or authority commenced or
threatened against the Borrower or any of its Subsidiaries of which it has
notice, the outcome of which would or might have a materially adverse effect on
the assets, business or prospects of the Borrower or the Borrower and its
Subsidiaries on a consolidated basis, written notice thereof and the action
being or proposed to be taken with respect thereto;
(i) promptly upon becoming aware of any investigative
proceedings by a governmental agency or authority commenced or threatened
against the Borrower or any of its Subsidiaries regarding any potential
violation of Environmental Laws or any spill, release, discharge or disposal of
any Hazardous Material, written notice thereof and the action being or proposed
to be taken with respect thereto; and
(j) promptly after the same become available, (i) copies of
all proxy statements and annual, quarterly and interim reports (excluding
reports in respect of the beneficial ownership of officers, directors and
certain other shareholders on Forms 3, 4 and 5 promulgated under the Securities
Exchange Act of 1934, as amended) as the Borrower shall send to shareholders or
as the Borrower may file with the Securities and Exchange Commission or any
governmental authority at any time having jurisdiction over the Borrower and
(ii) with respect to Biosphere, copies of all annual reports as Biosphere shall
send to shareholders; and
(k) from time to time, such other financial data and
information about the Borrower or its Subsidiaries including, without
limitation, a current aging of Accounts, as the Bank may reasonably request.
5.2 CONDUCT OF BUSINESS. Each of the Borrower and its Subsidiaries
shall:
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(a) duly observe and comply in all material respects with all
applicable laws and valid requirements of any governmental authorities relative
to its corporate existence, rights and franchises, to the conduct of its
business and to its property and assets (including, without limitation, the
Food, Drug and Cosmetic Act, and all regulations promulgated by the FDA, all
Environmental Laws and ERISA), and shall maintain and keep in full force and
effect all licenses and permits necessary in any material respect to the proper
conduct of its business;
(b) maintain its corporate existence; and
(c) with respect to the Borrower, maintain its business in
developing and commercializing improved chemical entities and related products
and services and transacting related business; and with respect to Biosphere,
maintain its business in developing and commercializing its business related to
intracorporeal and "on-line" extracorporeal therapies.
5.3 MAINTENANCE AND INSURANCE. Each of the Credit Parties and their
Subsidiaries shall maintain and keep its properties in good repair, working
order and condition, and from time to time make all needful improvements thereto
so that its business may be properly and advantageously conducted at all times.
The Credit Parties will maintain or cause to be maintained on all insurable
properties now or hereafter owned by the Credit Parties insurance against loss
or damage by fire or other casualty to the extent customary with respect to like
properties of companies conducting similar businesses and will maintain or cause
to be maintained, products liability, public liability and workmen's
compensation insurance insuring the Credit Parties to the extent customary with
respect to companies conducting similar businesses and, upon request, will
furnish to the Bank satisfactory evidence of the same.
5.4 TAXES. The Credit Parties shall pay or cause to be paid all taxes,
assessments or governmental charges on or against it or any Subsidiary of a
Credit Party or their properties on or prior to the time when they become due;
PROVIDED that this covenant shall not apply to any tax, assessment or charge
that is being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been established and are being
maintained in accordance with GAAP.
5.5 INSPECTION BY THE BANK. Each Credit Party shall permit the Bank or
its designees, at any reasonable time, and upon reasonable notice (or if a
Default or Event of Default shall have occurred and is continuing, at any time
and without prior notice), to (i) visit and inspect the properties of each
Credit Party and its Subsidiaries, (ii) examine and make copies of and take
abstracts from the books and records of each Credit Party and its Subsidiaries
and (iii) discuss the affairs, finances and accounts of each Credit Party and
its Subsidiaries with their appropriate officers, employees and accountants. In
handling such information the Bank shall exercise the same degree of care that
it exercises with respect to its own proprietary information of the same types
to maintain the confidentiality of any non-public information thereby received
or received pursuant to Section 5 except that disclosure of such information may
be made (i) to the subsidiaries or affiliates of the Bank in connection with
their present or prospective business relations with any Credit Party and its
Subsidiaries if such subsidiaries agree in advance to be bound by the same
confidentiality provisions of the Bank as set forth in this Section 5.5, (ii)
to prospective transferees or purchasers of an interest in the Revolving
Loans if they agree in advance to be bound by the same confidentiality
obligations of the Bank as set forth in this
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Section 5.5, (iii) as required by law, regulation, rule or order, subpoena,
judicial order or similar order and (iv) as may be required in connection
with the examination, audit or similar investigation of the Bank.
5.6 MAINTENANCE OF BOOKS AND RECORDS. Each Credit Party and its
Subsidiaries shall keep adequate books and records of account, in which true and
complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with GAAP consistently
applied and applicable law.
5.7 MAINTENANCE OF ACCOUNTS. The Credit Parties and each of their U.S.
Subsidiaries will maintain its principal depository and operating accounts with
the Bank at all times (except for Versicor which may maintain its principal
depository and operating accounts in California so long as its principal place
of business is located in California) and shall maintain in such accounts
sufficient funds to make all principal and interest payments when due.
5.8 [RESERVED].
5.9 MINIMUM LIQUIDITY RATIO. At the end of each fiscal quarter, the
Cash Equivalent Amount of the Borrower shall be equal to or greater than 150% of
its Total Liabilities.
5.10 MINIMUM TANGIBLE CAPITAL BASE. The Borrower shall maintain at all
times a Tangible Capital Base of not less than $50,000,000.
5.11 MINIMUM CASH OR EQUIVALENTS/FIXED CHARGE COVERAGE RATIO. The
Borrower shall maintain at all times (a) a Cash Equivalent Amount of not less
than $50,000,000 or (b) a Fixed Charge Coverage Ratio of not less than 1.50 to
1.00.
5.12 FURTHER ASSURANCES. At any time and from time to time the Credit
Parties shall, and shall cause each of their Subsidiaries to, execute and
deliver such further instruments and take such further action as may reasonably
be requested by the Bank to effect the purposes of this Agreement and the Note.
SECTION 6
NEGATIVE COVENANTS
So long as the Bank has any commitment to lend hereunder, issue Letters
of Credit or any Revolving Loan or other Obligation hereunder remains
outstanding, the Borrower covenants as follows:
6.1 INDEBTEDNESS. Neither the Borrower nor any of its Subsidiaries
shall create, incur, assume, guarantee or be or remain liable with respect to
any Indebtedness other than the following:
(a) Indebtedness of the Borrower or any of its Subsidiaries
(including Biosphere) to the Bank or any of its Affiliates;
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(b) Indebtedness existing as of the date hereof and disclosed
in SCHEDULE 6.1 hereto and Guaranties disclosed on SCHEDULE 6.2 hereto and any
refinancing of such Indebtedness in amounts not exceeding the principal amount
thereof and on terms (including without limitation any subordination terms
applicable thereto) which are substantially the same as the terms of the
refinanced Indebtedness;
(c) Indebtedness of the Borrower to or from its Subsidiaries
in the aggregate principal amount outstanding at any time not in excess of
$20,000,000; PROVIDED that no Default shall exist and be continuing or caused
thereby at the time of incurrence of such Indebtedness;
(d) Indebtedness secured by Permitted Encumbrances under
Section 6.2(c);
(e) Indebtedness not in excess of 4,891,000 Canadian Dollars
in respect of Sepracor Canada Limited's obligation with respect to the Canadian
Indebtedness and the Borrower's guaranty of the Canadian Indebtedness and any
refinancing of such Indebtedness in amounts not exceeding the principal amount
thereof and on terms which are substantially the same terms as the terms of the
refinanced indebtedness;
(f) Indebtedness in respect of Capital Leases and purchase
money financing for tangible property used in the Borrower's business in the
aggregate principal amount outstanding at any time not in excess of $15,000,000
LESS, with respect to Biosphere, any indebtedness in respect of Capital Leases
and purchase money financing for tangible property used in their businesses; and
6.2 CONTINGENT LIABILITIES. Neither the Borrower nor any of its
Subsidiaries shall create, incur, assume or remain liable with respect to any
Guaranties other than the following:
(a) Guaranties in favor of the Bank or any of its Affiliates;
and
(b) Guaranties disclosed in SCHEDULE 6.2 hereto or in the
financial statements referred to in Section 4.6.
6.3 SALE AND LEASEBACK. Neither the Borrower nor any of its
Subsidiaries shall enter into any arrangement, directly or indirectly, whereby
it shall sell or transfer any property owned by it in order to lease such
property or lease other property that the Borrower or any such Subsidiary
intends to use for substantially the same purpose as the property being sold or
transferred.
6.4 ENCUMBRANCES. Neither the Borrower nor any of its Subsidiaries
shall create, incur, assume or suffer to exist any mortgage, pledge, security
interest, lien or other charge or encumbrance, including the lien or retained
security title of a conditional vendor upon or with respect to any of its
property or assets ("ENCUMBRANCES"), or assign or otherwise convey any right to
receive income, including the sale or discount of accounts receivable with or
without recourse, except the following ("PERMITTED ENCUMBRANCES"):
(a) Encumbrances in favor of the Bank or any of its
Affiliates;
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(b) Encumbrances existing as of the date hereof and disclosed
in SCHEDULE 6.4 hereto and securing any refinancing of Indebtedness PROVIDED
that such refinancing is permitted pursuant to Section 6.1(b);
(c) Encumbrances for purchase money obligations or Capital
Leases permitted pursuant to Section 6.1(d); PROVIDED that such Encumbrances
shall not attach to property and assets of the Borrower or any Subsidiary not
purchased with the proceeds of such purchase money obligations;
(d) liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same may be postponed or is not
required in accordance with the provisions of Section 5.4; and
(e) landlords' and lessors' liens in respect of rent not in
default or liens in respect of pledges or deposits under workmen's compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA) or in connection with appeal and similar bonds incidental to litigation;
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent; liens securing the performance of
bids, tenders, contracts (other than for the payment of money); and statutory
obligations incidental to the conduct of its business and that do not in the
aggregate materially detract from the value of its property or materially impair
the use thereof in the operation of its business.
6.5 LINES OF BUSINESS. Neither the Borrower nor any Subsidiary will
engage in any line of business if as a result thereof the business of the
Borrower and its Subsidiaries taken as a whole would be materially different
from what it was on the date hereof.
6.6 MERGER; CONSOLIDATION; SALE OR LEASE OF ASSETS. Neither the
Borrower nor any of its Subsidiaries shall, without the prior written consent of
the Bank, sell, lease or otherwise dispose of assets or properties, other than
sales or leases of inventory in the ordinary course of business; or liquidate,
merge or consolidate into or with any other Person or entity, PROVIDED that any
Subsidiary of a Credit Party may merge or consolidate into or with (i) the
Borrower if no Default or Event of Default has occurred and is continuing or
would result from such merger and if the Borrower is the surviving company or
(ii) any other wholly-owned Subsidiary of the Borrower.
Notwithstanding the foregoing provisions of this section, the Borrower
or any Subsidiary may acquire (whether by way of purchase of assets or stock, by
merger or consolidation or otherwise) all or substantially all of the assets
located in or capital stock of any Person engaged primarily in the same line of
business as the Borrower or any Subsidiaries; PROVIDED that (a) no Default shall
exist at the time of such acquisition or shall be caused thereby in the
foreseeable future and (b) after giving effect to such acquisition the Borrower
shall be in compliance with all the provisions of Sections 5.9 through 5.11 and
the Borrower shall have delivered to the Bank a Compliance Certificate
demonstrating such compliance on a pro forma basis.
Notwithstanding any provision of this Agreement to the contrary, the
Credit Parties may license and exploit any rights to their intellectual
property, including, without limitation, all
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patents, patent applications, trademarks, service marks, and tradenames, in
arms-length transactions for fair market value, without the consent of the Bank.
6.7 ADDITIONAL STOCK ISSUANCE. The Borrower shall not permit any of its
Subsidiaries to issue any additional shares of such Subsidiary's capital stock
or other equity securities, any options therefor or any securities convertible
thereto other than to the Borrower; PROVIDED, that such Subsidiaries may issue
additional shares of its capital stock if after any such issuance the Borrower
or such Subsidiary has 50% or more of the ordinary voting power for the election
of a majority of the members of the board of directors or other governing body
of such entity or the Borrower or such Subsidiary has, at least, a 50% ownership
interest.
6.8 RESTRICTED PAYMENTS. Neither the Borrower nor its Subsidiaries will
directly or indirectly declare, order, pay or make any Restricted Payment or set
aside any sum or property therefore if at the time of such proposed action or
immediately after giving effect thereto, any condition or event shall exist
which constitutes a Default or an Event of Default and unless such Restricted
Payment is expressly permitted by this Section 6.8; provided that nothing herein
shall be deemed to prohibit the making of any dividend or distribution by any
Subsidiary to a Credit Party.
Subject to the foregoing, the Borrower may (a) make any scheduled
payment of principal or interest on Subordinated Notes issued and outstanding on
the date of this Agreement in accordance with the subordination provisions for
such subordinated notes, (b) make payments under any Corporate Services
Agreement, (c) make distributions of shares of its capital stock as stock splits
or stock dividends, and (d) make any other Restricted Payment in addition to
those referred to in the previous clause; PROVIDED, that in the last event the
Borrower shall have received the prior written consent of the Bank to such
proposed Restricted Payment.
The amount involved in any Restricted Payment declared, ordered, paid,
made or set apart in property shall be deemed to be the greater of the fair
market value thereof at the time of such distribution or payment (or the date of
such transaction, as the case may be), as determined in good faith by the
Borrower, or the net book value thereof on the books of the Borrower as at such
time.
6.9 TRANSACTIONS WITH AFFILIATES. Except for the Borrower's
Subsidiaries on the date hereof so long as they remain Subsidiaries of the
Borrower, the Credit Parties will not, and will not permit any Corporate
Affiliate to, directly or indirectly, enter into any lease or other transaction
with any shareholder or with any Affiliate of the Borrower or such shareholder,
on terms that are less favorable to the Borrower or such Subsidiary than those
which might be obtained at the time from Persons who are not a shareholder or an
Affiliate. Notwithstanding the preceding sentence, the Borrower may (1) sublease
its facilities to Biosphere, Versicor and Hemasure; (2) enter into and perform
the Corporate Services Agreements, the Technology Transfer Agreements and the
Cross License Agreement, (3) enter into an amended and restated cross license
agreement replacing the Cross License Agreement if such amended and restated
agreement is in form and substance acceptable to the Bank and its counsel and
(4) engage in transactions expressly permitted by Sections 6.1, 6.6 and 6.7.
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6.10 INVESTMENTS. Neither the Credit Parties nor any of their
Subsidiaries shall make or maintain any Investments other than (i) existing and
additional Investments in Subsidiaries on the date hereof so long as they remain
Subsidiaries of Sepracor, (ii) Qualified Investments and (iii) acquisitions
permitted under Section 6.6 and (iv) Investments consisting of foreign deposit
accounts used for ordinary course working capital purposes of the Credit Parties
or their Subsidiaries; PROVIDED, that the aggregate balance of foreign deposit
accounts of the Borrower and its Subsidiaries shall not at any time exceed
$10,000,000.
6.11 ERISA. Neither the Credit Parties nor any member of the Controlled
Group shall permit any Plan maintained by it to (i) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code, (ii) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived, or (iii) terminate any Plan in a manner that could result in the
imposition of a lien or encumbrance on the assets of the Credit Parties or any
of their Subsidiaries pursuant to Section 4068 of ERISA.
6.12 OBSERVANCE OF SUBORDINATION PROVISIONS, ETC. The Credit Parties
will not make, or cause or permit to be made, any payments in respect of any
Subordinated Indebtedness in contravention of the subordination and other
payment provisions contained in the evidence of such Subordinated Indebtedness
or in contravention of any written agreement pertaining thereto, nor will the
Credit Parties (a) amend, modify or change in any manner any of such
subordination or other payment provisions without the prior written consent of
the Bank or (b) amend, modify or change in any manner adverse to the interests
of the Bank any of the other provisions set forth in the agreements under which
such Subordinated Indebtedness is outstanding or contained in the evidence of
such Subordinated or other Indebtedness.
6.13 RESTRICTIVE AGREEMENTS. No Credit Party will directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon the ability
of any Credit Party to create, incur or permit to exist any Lien upon any of its
property or assets; PROVIDED that (i) the foregoing shall not apply to
restrictions and conditions imposed by law or by this Agreement, (ii) the
foregoing shall not apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness and (iii) the foregoing shall not apply to customary provisions in
leases and other contracts restricting the assignment thereof.
SECTION 7
DEFAULTS
7.1 EVENTS OF DEFAULT. There shall be an Event of Default hereunder if
any of the following events occurs:
(a) the Credit Parties shall fail to pay when due (i) any
amount of principal of any Revolving Loans, or (ii) any amount of interest
thereon; or
(b) the Credit Parties shall fail to pay within three (3) days
after receipt of notice from the Bank any fees or expenses payable hereunder or
under any Note; or
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(c) the Credit Parties shall fail to perform any term,
covenant or agreement contained in Sections 5 (except Section 5.3) or 6; or
(d) the Credit Parties shall fail to perform any term,
covenant or agreement (other than those referred to above in this Section 7.1)
contained in this Agreement and such default shall continue for twenty (20)
days; or
(e) any representation or warranty of any Credit Party made in
this Agreement or in the Notes, or any Credit Parties in any other documents or
agreements executed in connection with the transactions contemplated by this
Agreement or in any certificate delivered hereunder shall prove to have been
false in any material respect upon the date when made or deemed to have been
made; or
(f) the failure to pay at maturity, or within any applicable
period of grace, any obligations of the Borrower in excess of One Million
Dollars ($1,000,000) in the aggregate for borrowed monies or advances, or for
the use of real or personal property, or fail to observe or perform any term,
covenant or agreement evidencing or securing such obligations, the result of
which failure is to permit the holder or holders of such indebtedness to cause
such indebtedness to become due prior to its stated maturity upon delivery of
required notice, if any; or
(g) the Borrower shall default in any payment due on any
Indebtedness in respect of borrowed money, any Capital Lease or the deferred
purchase price of property with an outstanding principal amount in excess of One
Million Dollars ($1,000,000) and such default shall continue for more than the
period of grace, if any, specified therein and shall not have been waived
pursuant thereto; or
(h) the Borrower or any Subsidiary of the Borrower shall (i)
apply for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar official of itself or of all
or a substantial part of its property, (ii) be generally not paying its debts as
such debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as
now or hereafter in effect), (v) take any action or commence any case or
proceeding, as debtor, under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts, or any other
law providing for the relief of debtors, (vi) fail to contest in a timely or
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Federal Bankruptcy Code or other law, (vii) take
any action under the laws of its jurisdiction of incorporation or organization
similar to any of the foregoing, or (viii) take any corporate action for the
purpose of effecting any of the foregoing; or
(i) a proceeding or case shall be commenced, without the
application or consent of the Borrower or any Subsidiary of the Borrower in any
court of competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets, or (iii) similar relief in respect
of it, under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts or any other law providing for
the relief of debtors, and such proceeding or case shall continue undismissed,
or unstayed and in effect, for a period of 60 days; or an order
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for relief shall be entered in an involuntary case under the Federal Bankruptcy
Code, against the Borrower or any Subsidiary of the Borrower; or action under
the laws of the jurisdiction of incorporation or organization of the Borrower or
any Subsidiary of the Borrower similar to any of the foregoing shall be taken
with respect to the Borrower or any Subsidiary of the Borrower and shall
continue unstayed and in effect for any period of 60 days; or
(j) a judgment or order for the payment of money shall be
entered against the Borrower by any court, or a warrant of attachment or
execution or similar process shall be issued or levied against property of the
Borrower, that in the aggregate exceeds One Million Dollars ($1,000,000) in
value and such judgment, order, warrant or process shall continue undischarged
or unstayed for 45 days; or
(k) the Borrower or any member of the Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess of One Hundred
Thousand Dollars ($100,000) that it shall have become liable to pay to the PBGC
or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or
Plans shall be filed under Title IV of ERISA by the Borrower, any member of the
Controlled Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any such Plan or Plans or a
proceeding shall be instituted by a fiduciary of any such Plan or Plans against
the Borrower and such proceedings shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or
(l) any Person or "group" (within the meaning of Section 13(d)
and 14(d)(2) of the Securities and Exchange Act of 1934, as amended) shall
beneficially own or control in excess of 50% of the issued and outstanding
shares of the capital stock of the Borrower having ordinary voting power to
elect a majority of the board of directors of the Borrower; or
(m) the termination, expiration or non-renewal of any license
or other Material Agreement which termination, expiration or non-renewal has a
material adverse effect on the existing business or prospects of the Borrower.
7.2 REMEDIES. Upon the occurrence of an Event of Default described in
Sections 7.1.(h) and 7.1.(i), immediately and automatically, and upon the
occurrence of any other Event of Default, at any time thereafter while such
Event of Default is continuing, at the Bank's option and upon the Bank's
declaration:
(a) the Bank's commitment to make any further Revolving Loans
hereunder or to issue Letters of Credit, generally, shall terminate;
(b) the unpaid principal amount of the Revolving Loans
together with accrued interest and all other Obligations hereunder shall become
immediately due and payable, including the unpaid principal amount of any
Revolving Loan subject to an exercised LIBOR Option together with accrued
interest thereon and the related LIBOR Premium in the same manner as though the
Credit Parties had exercised their right to prepayment pursuant to Section
33
<PAGE>
2.7 of this Agreement, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived; and
(c) the Bank may exercise any and all rights it has under this
Agreement, the Notes or any other documents or agreements executed in connection
herewith, or at law or in equity, and proceed to protect and enforce the Bank's
rights by any action at law, in equity or other appropriate proceeding.
(d) Upon the occurrence of any Event of Default and at any
time thereafter (unless such Event of Default shall theretofore have been
remedied), at the Bank's option: (i) the Bank shall thereupon be relieved of all
of its obligations to make any Revolving Loans hereunder; (ii) the unpaid
principal amount of the Notes together with accrued interest thereon and all
other Obligations shall become immediately due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived;
and (iii) the Bank may exercise any and all rights it has under this Agreement,
the Notes, or any other documents or agreements executed in connection with the
transactions contemplated by this Agreement (the "LOAN DOCUMENTS"), or by law or
equity, and proceed to protect and enforce the Bank's rights by any action at
law, suit in equity or other appropriate proceeding, whether for specific
performance or for an injunction against a violation of any covenant contained
herein or in any Loan Document or in aid of the exercise of any power granted
hereby or thereby or by law.
SECTION 8
MISCELLANEOUS
8.1 NOTICES. Unless otherwise specified herein, all notices hereunder
to any party hereto shall be in writing and shall be deemed to have been given
when delivered by hand, or three (3) days after being properly deposited in the
mails certified, return receipt requested, or when sent by electronic facsimile
transmission, or when delivered to the telegraph company or overnight courier,
the next business day following addressed to such party at its address indicated
below:
If to the Credit Parties, at
Sepracor Inc.
111 Locke Drive
Marlborough, Massachusetts 01752
Attention: Robert F. Scumaci
Senior Vice President Finance and Administration
Tel. No.: 508-481-6700
Fax No.: 508-357-7494
If to the Bank, at
Fleet National Bank
100 Federal Street
Boston, Massachusetts 02110
34
<PAGE>
Attention: Kimberly A. Martone
Senior Vice President
Tel. No.: 617-434-5316
Fax No.: 617-434-2473
or at any other address specified by such party in writing.
8.2 EXPENSES. The Credit Parties will pay on demand all expenses of the
Bank in connection with the preparation, waiver or amendment of this Agreement,
the Notes, or other documents executed in connection therewith, or the
administration, default or collection of the Revolving Loans or other
Obligations or in connection with the Bank's exercise, preservation or
enforcement of any of its rights, remedies or options thereunder, including,
without limitation, reasonable fees and disbursements of outside legal counsel
or accounting, consulting, brokerage or other similar professional fees or
expenses, and any fees or expenses associated with any travel or other costs
relating to any appraisals or examinations conducted in connection with the
Obligations and the amount of all such expenses shall, until paid, bear interest
at the rate applicable to principal hereunder for Revolving Loans not subject to
a LIBOR Option (including any default rate).
8.3 SET-OFF. Regardless of other means of obtaining repayment of the
Obligations, any deposits, balances or other sums credited by or due from the
head office of the Bank or any of its branch offices to the Credit Parties may,
at any time and from time to time after the occurrence of an Event of Default
hereunder, without notice to the Credit Parties or compliance with any other
condition precedent now or hereafter imposed by statute, rule of law, or
otherwise (all of which are hereby expressly waived) be set off, appropriated,
and applied by the Bank against any and all Obligations of the Credit Parties to
the Bank or any of its affiliates in such manner as the head office of the Bank
or any of its branch offices in their sole discretion may determine, and the
Credit Parties each hereby grant the Bank a continuing security interest in such
deposits, balances or other sums for the payment and performance of all such
obligations.
8.4 TERM OF AGREEMENT. This Agreement shall continue in force and
effect so long as the Bank has any commitment to make Revolving Loans hereunder
or any Revolving Loan or any Obligation hereunder shall be outstanding.
8.5 NO WAIVERS. No failure or delay by the Bank in exercising any
right, power or privilege hereunder or under the Note or under any other
documents or agreements executed in connection herewith shall operate as a
waiver thereof; nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein and in the Notes provided are
cumulative and not exclusive of any rights or remedies otherwise provided by
agreement or law.
8.6 GOVERNING LAW; JURISDICTION. This Agreement and the Notes shall be
deemed to be contracts made under seal and shall be construed in accordance with
and governed by the laws of Massachusetts (without giving effect to any
conflicts of laws provisions contained therein). The Credit Parties, to the
extent that they may lawfully do so, hereby consent to the jurisdiction of the
courts of the Commonwealth of Massachusetts and the United States District Court
for the District of Massachusetts, as well as to the jurisdiction of all courts
to which an appeal may be
35
<PAGE>
taken from such courts, for the purpose of any suit, action or other proceeding
arising out of any of its obligations hereunder or with respect to the
transactions contemplated hereby, and expressly waives any and all objections it
may have as to venue in any such courts. The Credit Parties further agree that a
summons and complaint commencing an action or proceeding in any of such courts
shall be properly served and shall confer personal jurisdiction if served
personally or by certified mail to it at its address provided in Section 8.1 of
this Agreement or as otherwise provided under the laws of the Commonwealth of
Massachusetts.
8.7 AMENDMENTS. Neither this Agreement nor the Notes nor any provision
of this Agreement or thereof may be amended, waived, discharged or terminated
except by a written instrument signed by the Bank and, in the case of
amendments, by the Credit Parties.
8.8 BINDING EFFECT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.
(a) This Agreement shall be binding upon and inure to the
benefit of the Credit Parties and the Bank and their respective successors and
assigns; PROVIDED that the Credit Parties may not assign or transfer their
rights or obligations hereunder.
(b) ASSIGNMENTS BY THE BANK. From and after the date hereof,
the Bank may at any time assign all, or a proportionate part of all, of its
rights, interests and duties with respect to the Revolving Commitment Amount and
the Notes (1) to any one or more of its Affiliates without the consent or
approval of the Credit Parties or (2) to one or more banks or other financial
institutions with the consent of the Credit Parties which consent shall not be
unreasonably withheld (each assignee under clauses (1) and (2), an "Assignee"),
in each case on such terms, as between the Bank and each of its Assignees, as
the Bank may think fit, and such Assignee shall assume such rights, interests
and duties pursuant to an instrument executed by such Assignee and the Bank, and
for this purpose the Bank may make available to each of its potential Assignees
such information relating to the Credit Parties, this Agreement and the
transactions contemplated hereby as the Bank may think necessary or desirable,
which information shall be held by each potential Assignee strictly in
confidence. Upon execution and delivery of such an instrument and payment by
such Assignee to the Bank of an amount equal to the purchase price agreed
between the Bank and such Assignee, such Assignee shall be a Bank party to this
Agreement and shall have all the rights, interests and duties of a Bank with a
Revolving Commitment Amount and Revolving Loan as set forth in such instrument
of assumption, and the Bank shall be released from its obligations hereunder to
a corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this paragraph
(b), the Bank and the Credit Parties shall make appropriate arrangements so
that, if required, a new Note or Notes are issued to the Assignee.
(c) PARTICIPATIONS BY THE BANK. From and after the date
hereof, the Bank shall be at liberty to offer the participations in the
Revolving Commitment Amount and the Notes to one or more banks or other
financial institutions on such terms as the Bank may think fit, and for this
purpose the Bank may make available to each of its potential participants such
information relating to the Credit Parties, this Agreement and the transactions
contemplated hereby as the Bank may think necessary or desirable, which
information shall be held by each potential participant strictly in confidence;
PROVIDED, that the Bank shall not offer any participations to foreign banks or
financial institutions without the prior written consent of the Credit Parties;
36
<PAGE>
PROVIDED FURTHER, that the Bank shall retain the sole right to consent to
amendments to, or waivers of, the provisions of this Agreement and the Notes and
the sole right and responsibility to enforce the obligations of the Credit
Parties hereunder and under the Notes; PROVIDED FURTHER, that the Bank may agree
with each of its participants that the Bank will not agree, without the consent
of the participant, to any amendment or waiver of any provision of this
Agreement which would increase or otherwise change such Revolving Commitment
Amount or reduce the principal of or rate of interest on the Revolving Loans
subject to such participation, or postpone the date fixed for any payment of
principal or of interest on any Revolving Loans.
8.9 CURRENCY CONVERSION. If, for the purpose of obtaining or enforcing
judgment in any court or for any other purpose hereunder it is necessary to
convert an amount due hereunder in the currency in which it is due (the
"ORIGINAL CURRENCY") into another currency (the "SECOND CURRENCY") the rate of
exchange applied shall be that at which, in accordance with normal banking
procedures, the Bank could purchase, in the United States money market or the
United States foreign exchange market (the "MONEY MARKETS"), as the case may be,
the Original Currency with the Second Currency on the Business Day on which
judgment is given or the amount is due. The Borrower agrees that its obligations
in respect of any amounts due from it to the Bank, in the Original Currency
hereunder shall, notwithstanding any judgment expressed or payment made in the
Second Currency, be discharged only to the extent that on the Business Day
following receipt of any sums so paid or adjudged to be due hereunder in the
Second Currency, the Bank may, in accordance with normal banking procedure
purchase, in the appropriate Money Market, the Original Currency with the amount
of the Second Currency so paid or so adjudged to be due; and if the amount of
the Original Currency so purchased is less than the amount originally due in the
Original Currency, the Borrower agrees as a separate obligation, and
notwithstanding any such payment or judgment to indemnify the Bank.
8.10 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.
8.11 PARTIAL INVALIDITY. The invalidity or unenforceability of any one
or more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.
8.12 CAPTIONS. The captions and headings of the various sections and
subsections of this Agreement are provided for convenience only and shall not be
construed to modify the meaning of such sections or subsections.
8.13 WAIVER OF JURY TRIAL. THE BANK AND THE CREDIT PARTIES AGREE THAT
NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT
OF, THIS AGREEMENT, ANY RELATED INSTRUMENTS, OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANK AND THE
CREDIT PARTIES, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER
THE BANK NOR THE CREDIT
37
<PAGE>
PARTIES HAVE AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS
PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
8.14 ENTIRE AGREEMENT. This Agreement, the Notes and the documents and
agreements executed in connection herewith constitute the final agreement of the
parties hereto and supersede any prior agreement or understanding, written or
oral, with respect to the matters contained herein and therein.
38
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
SEPRACOR INC.
By: /s/ Robert F. Scumaci
-----------------------------------
Name: Robert F. Scumaci
Title: Senior Vice President
Finance and Administration
BIOSPHERE MEDICAL, INC.
By: /s/ Robert M. Palladino
-----------------------------------
Name: Robert M. Palladino
Title: Vice President and Chief
Financial Officer
FLEET NATIONAL BANK
By: /s/ Kimberly A. Martone
-----------------------------------
Name: Kimberly A. Martone
Title: Senior Vice President
39
<PAGE>
EXHIBIT A-1
FORM OF
SEPRACOR INC.
PROMISSORY NOTE
December 22, 1999
$25,000,000 Boston, Massachusetts
For value received, the undersigned hereby promises to pay to FLEET
NATIONAL BANK (the "BANK"), or order, at the head office of the Bank at One
Federal Street, Boston, Massachusetts 02110, the principal amount of TWENTY-FIVE
MILLION DOLLARS ($25,000,000) or such lesser amount as shall equal the principal
amount outstanding hereunder on December 31, 2001 or such earlier date as
provided in the Agreement (as defined below) in lawful money of the United
States of America and in immediately available funds, and to pay interest on the
unpaid principal balance hereof from time to time outstanding, at said office
and in like money and funds, for the period commencing on the date hereof until
paid in full, at the rates per annum and on the dates provided in the Agreement.
Upon the occurrence and during the continuance of an Event of Default,
interest on the unpaid principal amount hereof and (to the extent permitted by
law) on unpaid interest shall thereafter be payable on demand at a rate per
annum equal to two percent (2%) above the interest rate otherwise in effect with
respect to such Revolving Loans. Upon the cure of an Event of Default and the
payment of interest at the default rate through the date of such cure, the
interest rate shall revert to that provided for in the Agreement.
If the entire amount of any required principal and/or interest is not
paid in full within ten (10) days after the same is due, the undersigned shall
pay to the Bank a late fee equal to three percent (3%) of the required payment.
Nothing in the preceding sentence shall affect the Bank's rights to exercise any
of its rights and remedies provided in the Agreement (as defined below) if an
Event of Default (as defined in the Agreement) has occurred.
This Note is issued pursuant to, and entitled to the benefits of, and
is subject to, the provisions of a certain Second Amended and Restated Revolving
Credit Agreement dated as of December 22, 1999, by and among the undersigned,
Biosphere Medical, Inc. and the Bank (herein, as the same may from time to time
be amended or extended, referred to as the "AGREEMENT"), but neither this
reference to the Agreement nor any provision thereof shall affect or impair the
absolute and unconditional obligation of the undersigned makers of this Note to
pay the principal of and interest on this Note as herein provided.
In case an Event of Default (as defined in the Agreement) shall occur,
the aggregate unpaid principal of and accrued interest on this Note shall become
or may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
<PAGE>
The undersigned may at its option prepay all or any part of the
principal of this Note before maturity upon the terms provided in the Agreement,
and this Note is subject to mandatory prepayment in certain circumstances, which
repayment shall in certain cases require the payment of a premium and in certain
cases not require the payment of a premium.
The undersigned makers hereby waive presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
This instrument shall have the effect of an instrument executed under
seal and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).
SEPRACOR INC.
By:_________________________________
Name: Robert F. Scumaci
Title: Senior Vice President
Finance and Administration
2
<PAGE>
SCHEDULE I TO PROMISSORY NOTE
<TABLE>
<CAPTION>
AMOUNT OF
REVOLVING INTEREST AMOUNT NOTATION
DATE LOAN RATE PAID MADE BY
<S> <C>
</TABLE>
3
<PAGE>
EXHIBIT A-2
FORM OF
BIOSPHERE MEDICAL, INC.
PROMISSORY NOTE
December 22, 1999
$2,000,000 Boston, Massachusetts
For value received, the undersigned hereby promises to pay to FLEET
NATIONAL BANK (the "BANK"), or order, at the head office of the Bank at One
Federal Street, Boston, Massachusetts 02110, the principal amount of TWO MILLION
DOLLARS ($2,000,000) or such lesser amount as shall equal the principal amount
outstanding hereunder on December 31, 2001 or such earlier date as provided in
the Agreement (as defined below) in lawful money of the United States of America
and in immediately available funds, and to pay interest on the unpaid principal
balance hereof from time to time outstanding, at said office and in like money
and funds, for the period commencing on the date hereof until paid in full, at
the rates per annum and on the dates provided in the Agreement.
Upon the occurrence and during the continuance of an Event of Default,
interest on the unpaid principal amount hereof and (to the extent permitted by
law) on unpaid interest shall thereafter be payable on demand at a rate per
annum equal to two percent (2%) above the interest rate otherwise in effect with
respect to such Revolving Loans. Upon the cure of an Event of Default and the
payment of interest at the default rate through the date of such cure, the
interest rate shall revert to that provided for in the Agreement.
If the entire amount of any required principal and/or interest is not
paid in full within ten (10) days after the same is due, the undersigned shall
pay to the Bank a late fee equal to three percent (3%) of the required payment.
Nothing in the preceding sentence shall affect the Bank's rights to exercise any
of its rights and remedies provided in the Agreement (as defined below) if an
Event of Default (as defined in the Agreement) has occurred.
This Note is issued pursuant to, and entitled to the benefits of, and
is subject to, the provisions of a certain Second Amended and Restated Revolving
Credit Agreement dated as of December 22, 1999, by and among Sepracor, the
undersigned and the Bank (herein, as the same may from time to time be amended
or extended, referred to as the "AGREEMENT"), but neither this reference to the
Agreement nor any provision thereof shall affect or impair the absolute and
unconditional obligation of the undersigned makers of this Note to pay the
principal of and interest on this Note as herein provided.
In case an Event of Default (as defined in the Agreement) shall occur,
the aggregate unpaid principal of and accrued interest on this Note shall become
or may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
<PAGE>
The undersigned may at its option prepay all or any part of the
principal of this Note before maturity upon the terms provided in the Agreement,
and this Note is subject to mandatory prepayment in certain circumstances, which
repayment shall in certain cases require the payment of a premium and in certain
cases not require the payment of a premium.
The undersigned makers hereby waive presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
This instrument shall have the effect of an instrument executed under
seal and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).
BIOSPHERE MEDICAL, INC.
By:___________________________________
Name: Robert M. Palladino
Title: Vice President and Chief
Financial Officer
2
<PAGE>
SCHEDULE I TO PROMISSORY NOTE
<TABLE>
<CAPTION>
AMOUNT OF
REVOLVING INTEREST AMOUNT NOTATION
DATE LOAN RATE PAID MADE BY
<S> <C>
</TABLE>
3
<PAGE>
EXHIBIT B
COMPLIANCE CERTIFICATE
Fleet National Bank
100 Federal Street
Boston, Massachusetts 02110
Attention: Kimberly A. Martone
Senior Vice President
Re: Sepracor Inc. Obligations under Second Amended and Restated Revolving
Credit Agreement dated as of December 22, 1999
Ladies and Gentlemen:
As required by Section 5.1(c) of the Second Amended and Restated
Revolving Credit Agreement dated as of December 22, 1999 (the "CREDIT
AGREEMENT") by and among Sepracor Inc. and Biosphere Medical, Inc.
(collectively, the "CREDIT PARTIES") and Fleet National Bank (the "BANK"), a
review of the activities of the Borrower for the fiscal year and/or fiscal
quarter ending ___________, _____ (the "FISCAL PERIOD") has been made under my
supervision to determine whether the Credit Parties have performed and/or
maintained all of their respective obligations under the Credit Agreement. Based
upon such review, I hereby certify to you, as an Authorized Officer of the
Borrower, that the Credit Parties have performed and maintained all such
obligations under the Credit Agreement, the Notes and the Loan Documents for the
Fiscal Period and, to the best of my knowledge, no event has occurred that
constitutes a Default or an Even of Default as defined in the Credit Agreement.
Other capitalized terms used herein without definition have the same meanings as
in the Credit Agreement.
As required by Section [5.1(a)][5.1(b)] of the Credit Agreement
financial statements of the Credit Parties (the "FINANCIAL STATEMENTS") for the
Fiscal Period and other information required by such sections accompany this
certificate. The Financial Statements present fairly the financial position of
the Credit Parties as of the date thereof and the statements of operation of the
Credit Parties for the Fiscal Period covered thereby.
I further certify to you, as an Authorized Officer of the Borrower,
that the figures set forth below accurately represent amounts required to be
calculated under the various provisions or covenants of the Credit Agreement
indicated, each as of the last day of the Fiscal Period unless otherwise
indicated.
Dated:___________________ ______________________________________________
Title:
<PAGE>
<TABLE>
<S> <C> <C>
I. SECTION 5.9 - MINIMUM LIQUIDITY RATIO
- ---------------------------------------------------------------------------- ----------------------------------------
A. TOTAL LIABILITIES
- ---------------------------------------------------------------------------- ----------------------------------------
(1) Total Liabilities $
- ---------------------------------------------------------------------------- ----------------------------------------
B. MINIMUM CASH OR EQUIVALENTS
- ---------------------------------------------------------------------------- ----------------------------------------
QUALIFIED INVESTMENTS HELD IN THE U.S.
- ---------------------------------------------------------------------------- ----------------------------------------
(2) Obligations of the United States of America held in $
the U.S.
- ---------------------------------------------------------------------------- ----------------------------------------
(3) Certificates of deposit, other deposit instruments, $
bank accounts held in the U.S.
- ---------------------------------------------------------------------------- ----------------------------------------
(4) Commercial Paper held in the U.S. (see definition of $
Qualified Investments)
- ---------------------------------------------------------------------------- ----------------------------------------
(5) Mutual/closed end funds that invest only in $
investments set forth in clauses (2) through (4)
- ---------------------------------------------------------------------------- ----------------------------------------
(6) Repurchase agreements secured by any one or more of $
the foregoing held in the U.S.
- ---------------------------------------------------------------------------- ----------------------------------------
(7) Qualified Investments: (sum of 2 through 6) $
- ---------------------------------------------------------------------------- ----------------------------------------
NET OUTSTANDING AMOUNT OF BASE ACCOUNTS
- ---------------------------------------------------------------------------- ----------------------------------------
(8) Base Accounts $
- ---------------------------------------------------------------------------- ----------------------------------------
(9) Ineligible as of ________________1
- ---------------------------------------------------------------------------- ----------------------------------------
(i) over 60 days from invoice date $
- ---------------------------------------------------------------------------- ----------------------------------------
(ii) Accounts outside of US $
- ---------------------------------------------------------------------------- ----------------------------------------
</TABLE>
- --------------------
(1) Ineligible calculated monthly
2
<PAGE>
<TABLE>
<S> <C> <C>
(iii) Accounts due from Affiliates $
- ---------------------------------------------------------------------------- ----------------------------------------
(iv) Prepayments $
- ---------------------------------------------------------------------------- ----------------------------------------
(v) Uninvoiced Accounts $
- ---------------------------------------------------------------------------- ----------------------------------------
(vi) Joint venture accounts $
- ---------------------------------------------------------------------------- ----------------------------------------
(10) Ineligible Accounts (sum of 16(i) through (v)) $
- ---------------------------------------------------------------------------- ----------------------------------------
(11) Contra Account offsets $
- ---------------------------------------------------------------------------- ----------------------------------------
(12) Net Outstanding Amount of Base Accounts $
(8 - 10 - 11)
- ---------------------------------------------------------------------------- ----------------------------------------
(13) CASH EQUIVALENT AMOUNT
- ---------------------------------------------------------------------------- ----------------------------------------
(14) Unencumbered Cash held in the United States $
- ---------------------------------------------------------------------------- ----------------------------------------
(15) Qualified Investments (from (14)) $
- ---------------------------------------------------------------------------- ----------------------------------------
(16) Net Outstanding Amount of Base Accounts (from (19)) $
- ---------------------------------------------------------------------------- ----------------------------------------
(17) Actual Cash Equivalent Amount (13 + 14 + 15) $
-
- ---------------------------------------------------------------------------- ----------------------------------------
C. LIQUIDITY RATIO
- ---------------------------------------------------------------------------- ----------------------------------------
(14) Actual Liability Ratio (13/1) %
- ---------------------------------------------------------------------------- ----------------------------------------
Required Minimum Liquidity Ratio: 150%
- ---------------------------------------------------------------------------- ----------------------------------------
II. SECTION 5.10 - MINIMUM TANGIBLE CAPITAL BASE
- ---------------------------------------------------------------------------- ----------------------------------------
(1) Stockholders' equity $
- ---------------------------------------------------------------------------- ----------------------------------------
(2) Subordinated Indebtedness $
- ---------------------------------------------------------------------------- ----------------------------------------
(3) Goodwill $
- ---------------------------------------------------------------------------- ----------------------------------------
(4) Intangible items $
- ---------------------------------------------------------------------------- ----------------------------------------
(5) Reserves not already deducted from assets $
- ---------------------------------------------------------------------------- ----------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
(6) Write-ups from revaluations $
- ---------------------------------------------------------------------------- ----------------------------------------
(7) Equity in Subsidiaries or joint ventures $
- ---------------------------------------------------------------------------- ----------------------------------------
(8) Actual Tangible Capital Base $
(1 + 2) - (sum of 3 through 7)
- ---------------------------------------------------------------------------- ----------------------------------------
Required Minimum Tangible Capital Base: $ 50,000,000
- ---------------------------------------------------------------------------- ----------------------------------------
III. A. MINIMUM CASH OR EQUIVALENT (from I.B) $
- ---------------------------------------------------------------------------- ----------------------------------------
Required Minimum Cash Equivalent $ 50,000,000
- ---------------------------------------------------------------------------- ----------------------------------------
B. FIXED CHANGE COVERAGE RATIO
- ---------------------------------------------------------------------------- ----------------------------------------
EBITDA
- ---------------------------------------------------------------------------- ----------------------------------------
(1) Operating Income $
- ---------------------------------------------------------------------------- ----------------------------------------
(2) Add Backs
- ---------------------------------------------------------------------------- ----------------------------------------
(i) Taxes $
- ---------------------------------------------------------------------------- ----------------------------------------
(ii) Interest Expense $
- ---------------------------------------------------------------------------- ----------------------------------------
(iii) Depreciation/Amortization $
- ---------------------------------------------------------------------------- ----------------------------------------
(iv) Non-Cash Income $
- ---------------------------------------------------------------------------- ----------------------------------------
(v) Losses from Equity in $
Affiliates
- ---------------------------------------------------------------------------- ----------------------------------------
(vi) Extraordinary and Unusual $
Losses
- ---------------------------------------------------------------------------- ----------------------------------------
(vii) Total $
- ---------------------------------------------------------------------------- ----------------------------------------
(3) Exclusions $
- ---------------------------------------------------------------------------- ----------------------------------------
(i) Income from Equity in $
Affiliates
- ---------------------------------------------------------------------------- ----------------------------------------
(ii) Extraordinary and Unusual $
Gains
- ---------------------------------------------------------------------------- ----------------------------------------
(iii) Proceeds of Insurance and $
- ---------------------------------------------------------------------------- ----------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
asset sales
- ---------------------------------------------------------------------------- ----------------------------------------
(iv) Total
- ---------------------------------------------------------------------------- ----------------------------------------
(4) EBITDA ((1) + (2) - (3)) $
- ---------------------------------------------------------------------------- ----------------------------------------
FIXED CHARGES
- ---------------------------------------------------------------------------- ----------------------------------------
(i) Interest Expense $
- ---------------------------------------------------------------------------- ----------------------------------------
(ii) Non-Financed Capital $
Expenditures
- ---------------------------------------------------------------------------- ----------------------------------------
(5) Total Fixed Charges ((i) + (ii)) $
- ---------------------------------------------------------------------------- ----------------------------------------
(6) Actual Fixed Charge Coverage ____:1
Ratio (4 /5)
- ---------------------------------------------------------------------------- ----------------------------------------
Required Fixed Charge Coverage Ratio 1.5 to 1
- ---------------------------------------------------------------------------- ----------------------------------------
</TABLE>
Dated:___________________, _____ _______________________________________
Title:
5
<PAGE>
EXHIBIT C
GUARANTY AGREEMENT
THIS AGREEMENT, dated as of December __, 1999, by SEPRACOR, INC., a
Delaware corporation (the "Guarantor"), to FLEET NATIONAL BANK (the "Secured
Party").
W I T N E S S E T H
WHEREAS, Biosphere Medical, Inc., a Delaware corporation (the
"Company"), the Guarantor and the Secured Party have entered into a Second
Amended and Restated Revolving Credit Agreement dated as of the date hereof (as
amended from time to time, the "Credit Agreement") pursuant to which the Secured
Party has agreed, subject to the terms and conditions set forth therein, to make
certain revolving loans to the Company (collectively, the "Biosphere Loans"),
such Biosphere Loans to be evidenced by the Company's Promissory note in the
original principal amount of $2,000,000 payable to the order of the Secured
Party (as amended or supplemented from time to time, the "Note"); and
WHERES, the Guarantor owns a majority of the outstanding capital stock
of the Company and the making of the Biosphere Loans will therefore be
beneficial to the Guarantor; and
WHEREAS, the obligation of the Secured Party to make the Biosphere
Loans is subject to the condition, among others, that the Guarantor shall
execute and deliver this Guaranty Agreement;
NOW, THEREFORE, in consideration of the willingness of the Secured
Party to make the Biosphere Loans to the Company, and for other good and
valuable consideration, receipt of which is hereby acknowledged by the
Guarantor, the Guarantor hereby agrees as follows:
<PAGE>
1. GUARANTEED OBLIGATIONS. The Guarantor does hereby irrevocably and
unconditionally guarantee the due and punctual payment and performance by the
Company of the following obligations to the Secured Party (individually, a
"Guaranteed Obligation" and collectively the "Guaranteed Obligations"):
(a) Principal of and premium, if any, and interest on the
Note; and
(b) Any and all other obligations of the Company to the
Secured Party under the Credit Agreement or under any agreement or instrument
relating thereto, all as amended from time to time.
2. DEMAND BY SECURED PARTY. Upon failure by the Company punctually to
pay or perform any Guaranteed Obligation when due, after the expiration of any
applicable grace period, the Secured Period may make demand upon the Guarantor
for the payment or performance of such Guaranteed Obligation and the Guarantor
binds and obliges itself to make such payment or performance forthwith upon such
demand.
3. WAIVER OF DEMANDS, NOTICES, DILIGENCE, ETC. The Guarantor hereby
assents to all of the terms and conditions of the Guaranteed Obligations and
waives: (a) demand for the payment of the principal of any Guaranteed Obligation
or of any claim for interest or any part of any thereof (other than the demand
provided for in Section 2 hereof); (b) notice of the occurrence of a default or
an event of default under any Guaranteed Obligation; (c) protest of the
nonpayment of the principal of any Guaranteed Obligation or of any claim for
interest or any part thereof: (d) notice of presentment, demand and protest; (e)
notice of acceptance of any guaranty herein provided for or of the terms and
provisions thereof or hereof by the Secured Party; (f) notice of any indulgences
or extensions granted to the Company or any successor to the Company or any
person or party which shall have assumed the obligations of the Company; (g) any
requirement of diligence or promptness on the part of the Secured Party in the
enforcement of any of its rights under the provisions of any Guaranteed
Obligation or this Guaranty Agreement; (h) any enforcement of any Guaranteed
Obligation; (i) any right which the Guarantor might have to require the Secured
Party to proceed against any other guarantor of the Guaranteed Obligations or to
realize on any collateral security therefor; and (j) any and all notices of
every kind and description which may be required to be given by an statute or
rule of law in any jurisdiction. The waivers set forth in this Section 3 shall
be effective notwithstanding the fact that the Company ceases to exist by reason
of its liquidation, merger, consolidation or otherwise.
4. OBLIGATIONS OF GUARANTOR UNCONDITIONAL. The obligations of the
Guarantor under this Guaranty Agreement shall be unconditional, irrespective of
the validity, regularity or enforceability of any Guaranteed Obligation, and
shall not be affected by any action taken under any Guaranteed Obligation in the
exercise of any right or remedy therein conferred, or by any failure or omission
on the part of the Secured Party to enforce any right given thereunder or
hereunder or any remedy conferred thereby or hereby, or by any waiver of any
term, covenant, agreement or condition of any Guaranteed Obligation or this
Guaranty Agreement, or by any release of any security or any other guaranty at
any time existing for the benefit of any Guaranteed Obligation, or by the merger
or consolidation of the Company, or by sale, lease or
2
<PAGE>
transfer by the Company to any person of any or all of its properties, or by any
action of the Secured Party granting indulgence or extension to, or waiving or
acquiescing in any default, the Company or any successor to the Company or any
person or party which shall have assumed its obligations, or by reason of any
disability or other defense of the Company or any successor to the Company, or
by any modification, alteration, or by any circumstance whatsoever (with or
without notice to or knowledge of the Guarantor) which may or might in any
manner or to any extent vary the risk of the Guarantor hereunder, it being the
purpose and intent of the Guarantor that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all circumstances
and shall not be discharged except by payment or performance as herein provided,
and then only to the extent of such payment or performance.
5. SUBORDINATION OF CLAIMS OF GUARANTOR. Any claims against the Company
to which the Guarantor may be or become entitled (including, without limitation,
claims by subrogation or otherwise by reason of any payment or performance by
the Guarantor in satisfaction and discharge, in whole or in part, of its
obligations under this Guaranty Agreement) shall be and hereby are made subject
and subordinate to the prior payment or performance in full of the Guaranteed
Obligations.
6. REINSTATEMENT. This Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time any amount received by the
Secured Party in respect of the Guaranteed Obligations is rescinded or must
otherwise be restored by the Secured Party upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company or the Guarantor or
upon the appointment of an intervenor or conservator of, or trustee or similar
official for, the Company or the Guarantor or any substantial part of any of
their respective properties, or otherwise, all as though said payments had not
been made.
7. NOTICES. Except as otherwise provided herein, all notices to the
Guarantor or the Secured Party shall be in writing and shall be deemed to have
been sufficiently given or served for all purposes hereof if personally
delivered or mailed by certified mail, return receipt requested, as follows:
(a) if to the Guarantor:
Sepracor Inc.
111 Locke Drive
Marlborough, Massachusetts 01752
Attention: Robert F. Scumaci
Senior Vice President
with a copy to:
John D. Sigel, Esquire
Hale & Dorr
60 State Street
Boston, Massachusetts 02109
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<PAGE>
(b) if to the Secured Party:
Fleet National Bank
100 Federal Street
Mail Stop: MA BOS 01-08-06
Boston, Massachusetts 02110
Attention: Kimberly A. Martone
Senior Vice President
with a copy to:
George Ticknor, Esquire
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
or at such other address as the party to whom such notice or demand is directed
may have designated in writing to the other party hereto. A notice shall be
deemed to have been given upon the earlier to occur of (i) three (3) days after
the date on which it is deposited in the U.S. mails or (ii) receipt by the party
to whom such notice is directed.
8. MISCELLANEOUS. This Guaranty Agreement shall inure to the benefit of
and be binding upon the Secured Party and the Guarantor and their respective
successors and assigns, and the term "Secured Party" shall be deemed to include
any other holder or holders of any of the Guaranteed Obligations. In case any
provision in this Guaranty Agreement shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby. This Guaranty Agreement may be
executed in any number of counterparts and by the different parties hereto on
separate counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. The Guarantor agrees, as principal
obligor and not as guarantor, to pay to the Secured Party, all reasonable costs
and expenses (including court costs and reasonable attorneys' fees and
disbursements) incurred or expended by the Secured Party in connection with the
enforcement of this Guaranty Agreement.
9. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. This Guaranty
Agreement, including the validity hereof and the rights and obligations of the
parties hereunder, shall be construed in accordance with and governed by the
laws of the Commonwealth of Massachusetts. The Guarantor, to the extent that it
may lawfully do so, hereby consents to the jurisdiction of the courts of the
Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts, as well as to the jurisdiction of all courts to which
an appeal may be taken from such courts, for the purpose of any suit, action or
other proceeding arising out of any of its obligations hereunder or with respect
to the transactions contemplated hereby, and expressly waives any and all
objections it may have as to venue in any such courts. The Guarantor further
agrees that a summons and complaint commencing an action or proceeding in any of
such courts shall be properly served and shall confer personal jurisdiction if
served
4
<PAGE>
personally or by certified mail to it at its address provided in Section 7 of
this Guaranty Agreement or as otherwise provided under the law of the
Commonwealth of Massachusetts. The Guarantor irrevocably waives all right to a
trial by jury in any suit, action or other proceeding instituted by or against
it in respect of its obligations hereunder or the transactions contemplated
hereby.
IN WITNESS WHEREOF, the parties have executed this Guaranty Agreement
as a sealed instrument as of the date first above written.
SEPRACOR INC.
By ___________________________________
Name: Robert F. Scumaci
Title: Senior Vice President
The foregoing Guaranty
Agreement is hereby
accepted:
FLEET NATIONAL BANK
By ___________________________________
Name: Kimberly A. Martone
Title: Senior Vice President
5
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TABLE OF CONTENTS
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<S> <C> <C> <C>
SECTION 1 DEFINITIONS................................................................................1
1.1 Definitions....................................................................................1
1.2 Accounting Terms..............................................................................10
1.3 Multiple Borrowers............................................................................10
SECTION 2 DESCRIPTION OF CREDIT.....................................................................10
2.1 The Revolving Loans...........................................................................10
2.2 Fees..........................................................................................11
2.3 Reduction of Revolving Commitment Amount/Biosphere Sublimit...................................12
2.4 The Notes.....................................................................................12
2.5 Letters of Credit.............................................................................12
2.6 Capital Requirements..........................................................................12
2.7 Payments and Prepayments of the Revolving Loans...............................................13
2.8 Method of Payment.............................................................................13
2.9 Overdue Payments..............................................................................13
2.10 Holidays......................................................................................14
2.11 Interest......................................................................................14
2.12 Certain LIBOR Provisions......................................................................14
2.13 Conditions for Basing Interest on the LIBOR Rate..............................................16
2.14 Indemnification for Funding and Other Losses..................................................17
2.15 Change in Applicable Laws, Regulations, etc...................................................17
2.16 Taxes.........................................................................................17
SECTION 3 CONDITIONS OF LOANS.......................................................................18
3.1 Conditions Precedent to Initial Revolving Loan................................................18
3.2 Conditions Precedent to all Revolving Loans...................................................20
SECTION 4 REPRESENTATIONS AND WARRANTIES............................................................20
4.1 Organization and Qualification................................................................20
4.2 Corporate Authority...........................................................................20
4.3 Valid Obligations.............................................................................21
4.4 Consents or Approvals.........................................................................21
4.5 Title to Properties; Absence of Encumbrances..................................................21
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4.6 Financial Statements..........................................................................21
4.7 Changes.......................................................................................21
4.8 Defaults......................................................................................22
4.9 Taxes.........................................................................................22
4.10 Material Agreements...........................................................................22
4.11 Material Licenses.............................................................................22
4.12 Litigation....................................................................................22
4.13 Use of Proceeds...............................................................................22
4.14 Existing Indebtedness.........................................................................22
4.15 Existing Investments..........................................................................22
4.16 Subsidiaries..................................................................................23
4.17 Investment Company Act........................................................................23
4.18 Compliance with ERISA.........................................................................23
4.19 FDA Compliance, Etc...........................................................................23
4.20 Environmental Matters.........................................................................23
SECTION 5 AFFIRMATIVE COVENANTS.....................................................................24
5.1 Financial Statements and other Reporting Requirements.........................................25
5.2 Conduct of Business...........................................................................26
5.3 Maintenance and Insurance.....................................................................27
5.4 Taxes.........................................................................................27
5.5 Inspection by the Bank........................................................................27
5.6 Maintenance of Books and Records..............................................................27
5.7 Maintenance of Accounts.......................................................................27
5.9 Minimum Liquidity Ratio.......................................................................28
5.10 Minimum Tangible Capital Base.................................................................28
5.11 Minimum Cash or Equivalents/Fixed Charge Coverage Ratio.......................................28
5.12 Further Assurances............................................................................28
SECTION 6 NEGATIVE COVENANTS........................................................................28
6.1 Indebtedness..................................................................................28
6.2 Contingent Liabilities........................................................................29
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6.3 Sale and Leaseback............................................................................29
6.4 Encumbrances..................................................................................29
6.5 Lines of Business.............................................................................30
6.6 Merger; Consolidation; Sale or Lease of Assets................................................30
6.7 Additional Stock Issuance.....................................................................30
6.8 Restricted Payments...........................................................................30
6.9 Transactions with Affiliates..................................................................31
6.10 Investments...................................................................................31
6.11 ERISA.........................................................................................31
6.12 Observance of Subordination Provisions, etc...................................................31
6.13 Restrictive Agreements........................................................................32
SECTION 7 DEFAULTS..................................................................................32
7.1 Events of Default.............................................................................32
7.2 Remedies......................................................................................34
SECTION 8 MISCELLANEOUS..............................................................................35
8.1 Notices.......................................................................................35
8.2 Expenses......................................................................................36
8.3 Set-Off.......................................................................................36
8.4 Term of Agreement.............................................................................36
8.5 No Waivers....................................................................................36
8.6 Governing Law; Jurisdiction...................................................................36
8.7 Amendments....................................................................................37
8.8 Binding Effect of Agreement; Assignments; Participations......................................37
8.9 Currency Conversion...........................................................................38
8.10 Counterparts..................................................................................38
8.11 Partial Invalidity............................................................................38
8.12 Captions......................................................................................38
8.13 WAIVER OF JURY TRIAL..........................................................................38
8.14 Entire Agreement..............................................................................38
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EXHIBITS AND SCHEDULES
Exhibit A-1 Sepracor Promissory Note
Exhibit A-2 Biosphere Promissory Note
Exhibit B Compliance Certificate
Exhibit C Guaranty Agreement
Schedule 4.10 Material Agreements
Schedule 4.11 Material Licenses
Schedule 4.12 Litigation
Schedule 4.15 Investments
Schedule 4.16 Subsidiaries
Schedule 6.1 Indebtedness
Schedule 6.2 Guaranties
Schedule 6.4 Encumbrances
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<PAGE>
Exhibit 10.8
February 14, 2000
Sepracor Inc. (the "Company")
111 Locke Drive
Marlborough, Massachusetts 01752
Re: $400,000,000 5.00% Convertible Subordinated Debentures due
2007 (including up to an additional $60,000,000 of 5.00%
Convertible Subordinated Debentures due 2007 which may be
issued at the option of the initial purchaser thereof, the
"Debentures") issued pursuant to a certain Indenture dated as
of February 11, 2000 (the "Indenture") by and between the
Company and The Chase Manhattan bank, as trustee (the
"Trustee")
AMENDMENT NO. 1 AND CONSENT
Ladies and Gentlemen:
Reference is made to that certain Second Amended and Restated Revolving
Credit and Security Agreement dated as of December 22, 1999 (the "Credit
Agreement") among Fleet National Bank (the "Bank"), Sepracor Inc. (the
"Company") and BioSphere Medical, Inc. ("BioSphere").
The Company plans to issue the Debentures on or after February 14,
2000, which Debentures shall be subordinated in right of payment to the amounts
payable pursuant to the Credit Agreement and the promissory note issued
thereunder and any other Obligations and to the obligations of the Company to
the Bank under (a) the Guaranty Agreement dated as of September 15, 1998 with
respect to certain loans to Hemasure Inc., (b) the Guaranty Agreement dated as
of December 22, 1999 with respect to certain loans to BioSphere (collectively
with the Guaranty Agreement described in clause (a), the "Guaranty Agreements"),
and (c) the Put Agreement dated as of December 30, 1997 (the "Put Agreement") by
and between the Company and the Bank. Without the Bank's waiver pursuant to this
Consent and Amendment, Section 6.1 of the Credit Agreement would prohibit the
issuance by the Company of the Debentures and Section 6.8 would prohibit the
payment of principal or interest on the Debentures.
The Company hereby covenants to the Bank that true and correct copies
of (i) the Confidential Offering Memorandum describing the issuance of the
Debentures and delivered to the purchasers thereof and (ii) the Indenture will
be promptly delivered to the Bank in the final and effective form.
In reliance upon such representations and warranties and the
subordination provisions contained in the Indenture, and contingent thereon and
upon receipt by the Bank of a copy of this letter executed by the Company:
<PAGE>
(i) the Bank, notwithstanding the provisions of Section 6.1 of the
Credit Agreement, the other Loan Documents, the Guaranty Agreements and the Put
Agreement, hereby consents to the issuance of the Debentures by the Company; and
(ii) the Bank and the Company agree that the Credit Agreement is
amended as follows:
(a) the definition of "Subordinated Notes" set forth in
Section 1.1 the Credit Agreement is hereby deleted and replaced by the
following:
SUBORDINATED NOTES. The Borrower's (i) $93,048,000 6
1/4% Convertible Subordinated Debentures due 2005 issued by
the Borrower pursuant to an Indenture dated February 5, 1998
from the Borrower to The Chase Manhattan Bank, (ii)
$300,000,000 7.00% Convertible Subordinated Debentures due
2005 issued pursuant to an Indenture dated December 15, 1998
by the Borrower to The Chase Manhattan Bank and (iii)
$400,000,000 5.00% Convertible Subordinated Debentures due
2007 issued pursuant to an Indenture dated February 11, 2000
by the Borrower to The Chase Manhattan Bank (plus up to an
additional $60,000,000 of such 5.00% Convertible Subordinated
Debentures which may be issued at the option of the initial
purchaser thereof).
(b) The second paragraph of Section 6.8 of the Credit
Agreement is amended by deleting the following phrase on the second
line, "issued and outstanding on the date of this Agreement".
The Company hereby confirms that: (a) the representations and
warranties of the Company contained in Section 4 of the Credit Agreement are
true on and as of the date hereof as if made on such date (except to the extent
that such representations and warranties expressly relate to an earlier date);
(b) the Company is in compliance in all material respects with all of the terms
and provisions set forth in the Credit Agreement on its part to be observed or
performed thereunder; and (c) after giving effect to this Consent and Amendment,
no Event of Default specified in Section 8 of the Credit Agreement, nor any
event which with the giving of notice or expiration of any applicable grace
period or both would constitute such an Event of Default, shall have occurred
and be continuing.
Except as expressly stated herein, this letter (i) does not amend or
modify either of the Credit Agreement, any Loan Documents, the Guaranty
Agreements or the Put Agreement and (ii) does not constitute a consent to any
other actions or the issuance of any Indebtedness except for the Debentures. All
provisions of the Credit Agreement (as amended hereby), the Loan Documents, the
Guaranty Agreements and the Put Agreement shall remain in full force and effect
and, except as expressly stated herein, nothing herein shall constitute a waiver
of any such provision.
2
<PAGE>
Capitalized terms used herein which are defined in the Credit Agreement
have the same meanings herein as therein.
Sincerely,
FLEET NATIONAL BANK
By: /s/ THOMAS W. DAVIES
-----------------------------
Name: Thomas W. Davies
Title: Senior Vice President
The foregoing is hereby
agreed to an accepted
SEPRACOR, INC.
By: ROBERT F. SCUMACI
-----------------
Name:
Title:
3
<PAGE>
Exhibit 10.9
REIMBURSEMENT
AND
SECURITY AGREEMENT
THIS AGREEMENT, dated as of December 22, 1999, by BIOSPHERE MEDICAL,
INC., a Delaware corporation (the "Company"), to SEPRACOR, INC. (the "Secured
Party").
W I T N E S S E T H
WHEREAS, BIOSPHERE MEDICAL, INC, a Delaware corporation (the
"Company"), and the Secured Party have entered into a Second Amended and
Restated Revolving Credit Agreement with Fleet National Bank dated as of the
date hereof (as amended from time to time, the "Credit Agreement") pursuant to
which the Secured Party has agreed, subject to the terms and conditions set
forth therein, to guaranty certain revolving loans to the Company (collectively,
the "BioSphere Loans") in accordance with the Guaranty Agreement by Sepracor
Inc. to Fleet National Bank, of even date (the "Guaranty Agreement"), such
BioSphere Loans to be evidenced by the Company's Promissory Note in the original
principal amount of $2,000,000 payable to the order of the Fleet National Bank
(as amended or supplemented from time to time, the "Note"); and
WHEREAS, the Guaranty Agreement will be beneficial to Biosphere; and
WHEREAS, the obligation of the Secured Party to guaranty the BioSphere
Loans is subject to the condition, among others, that the Company shall execute
and deliver this Reimbursement and Security Agreement;
NOW, THEREFORE, in consideration of the willingness of the Secured
Party to guaranty the BioSphere Loans to Fleet National Bank, and for other good
and valuable consideration, receipt of which is hereby acknowledged by the
Company, the Company hereby agrees as follows:
1. GRANT OF SECURITY INTEREST. As security for the prompt and
complete payment and performance when due of all the Secured
Obligations (as defined below), Company hereby pledges,
assigns, transfers and grants to Secured Party, a continuing
first priority security interest in and to all the following
property (collectively, the "Pledged Collateral"): all of the
right, title and interest of the Company in, to and under all
machinery, equipment, inventory, all accounts, accounts
receivable, contract rights, chattel paper, documents, all
investment property, securities, security accounts and
investment in joint ventures (excluding, in each case, the
Company's equity interest in BioSphere Medical France, S.A.
(the "French Stock")), all general intangibles, including all
royalties and license fees payable to the Company, and
including without limitation, all patents, patent
applications, copyrights, copyright applications, trademarks,
trademark applications, and all goodwill associated therewith,
each as it now exists or is
<PAGE>
hereafter acquired from time to time, and all amounts from
time to time payable under or in connection with any of the
Pledged Collateral, and all products and proceeds of the
foregoing. This grant covers only the property of the Company
and not that of any other entity.
2. OBLIGATION TO REIMBURSE; SECURED OBLIGATIONS. The Company
hereby agrees that, subject to the provisions of the Guaranty
Agreement, it shall immediately reimburse the Secured Party
for any and all amounts paid to Fleet National Bank by Secured
Party under the Guaranty Agreement (such reimbursement
obligation being referred to herein as the "Secured
Obligations").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS. Company represents,
warrants and covenants as follows:
(a) NO LIENS. Company is, as of the date hereof, and, as to
Pledged Collateral acquired by it from time to time after the
date hereof Company will be, the owner of all Pledged
Collateral and all French Stock free from any lien or other
right, title or interest of any person, and Company shall
defend the Pledged Collateral and the French Stock against all
claims and demands of all persons at any time claiming any
interest therein adverse to Secured Party. Company shall not
execute or authorize to be filed in any public office any
financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) relating to
the Pledged Collateral or the French Stock, except financing
statements filed or to be filed in respect of and covering the
security interest granted hereby by Company.
(b) AUTHORIZATION, ENFORCEABILITY. Company has full corporate
power, authority and legal right to pledge and grant a
security interest in all the Pledged Collateral pursuant to
this Agreement, and this Agreement constitutes the legal,
valid and binding obligation of Company, enforceable against
Company in accordance with its terms.
4. PROVISIONS CONCERNING ALL PLEDGED COLLATERAL AND OTHER ASSETS.
(a) Company shall, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to Secured Party from time to
time such lists and descriptions of the Pledged Collateral,
financing statements, powers of attorney and other assurances
or instruments and take such further steps relating to the
Pledged Collateral and other property or rights covered by
this Agreement or the security interest hereby granted
(including, without limitation, rights in connection with the
French Stock), which Secured Party reasonably deems
appropriate or advisable to exercise and enforce its rights
and remedies hereunder with respect to any Pledged Collateral
(and any subsequent security interest in the French Stock) and
to perfect, preserve or protect the security interests in the
Pledged Collateral (and any subsequent security interest in
the French Stock) created by this Agreement or otherwise.
2
<PAGE>
(b) Company agrees that it will not, except as otherwise expressly
permitted by the Credit Agreement (i) sell, convey, assign or
otherwise dispose of, or grant any option with respect to, any
of the Pledged Collateral or the French Stock, other than
sales of inventory in the ordinary course of business or (ii)
create or permit to exist any lien upon or with respect to any
of the Pledged Collateral or the French Stock, other than the
lien and security interest granted to Secured Party under this
Agreement or as may be required by the Credit Agreement.
5. REMEDIES.
(a) OBTAINING THE PLEDGED COLLATERAL UPON EVENT OF DEFAULT. If any
event of default shall have occurred and be continuing after
any applicable cure period, including without limitation a
breach by the Company of any of its obligations hereunder
("Event of Default") then and in every such case, the Secured
Party may, at any time or from time to time during the
continuance of such Event of Default exercise all rights and
remedies of a secured party under the Uniform Commercial Code
and may, personally, or by agents or attorneys, immediately
take possession of the Pledged Collateral or any part thereof,
from Company or any other person who then has possession of
any part thereof with or without notice or process of law.
(b) WAIVER OF CLAIMS. Company hereby waives, to the fullest extent
permitted by applicable law, notice or judicial hearing in
connection Secured Party's taking possession of the Pledged
Collateral, to the extent permitted by applicable law.
(c) PLEDGE OF FRENCH STOCK. Upon the earlier to occur of (i) an
Event of Default hereunder, and (ii) the occurrence of a
default, and the continuance thereof beyond any applicable
cure period, under any agreement with respect to indebtedness
for borrowed money (other than purchase money financing and
capital leases) to which the Company is a party, including,
without limitation, the Credit Agreement, the Company shall
immediately pledge to the Secured Party, and grant to the
Secured Party a security interest in, the French Stock, and
take all actions and execute all documents necessary, at the
expense of the Company, to create and perfect the Secured
Party's interest in such French Stock.
6. APPLICATION OF PROCEEDS. The proceeds of any Pledged
Collateral obtained pursuant to the exercise of any remedy set
forth in Section 5 shall be applied promptly by Secured Party
(i) FIRST, to the payment of all costs and expenses made
or incurred by the Secured Party in connection with
the enforcement of the Company's obligations
hereunder and the exercise of the Secured Party's
rights and remedies;
(ii) SECOND, to the indefeasible payment in full in cash
of the unpaid Secured Obligations, and
(iii) THIRD, to Company, or its successors or assigns, or
to whomsoever may be
3
<PAGE>
lawfully entitled to receive the same or as a court
of competent jurisdiction may direct, of any surplus
then remaining from such proceeds.
7. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Company hereby
appoints Secured Party its attorney-in-fact with an interest,
with full authority in the place and stead of Company and in
the name of Company, or otherwise, from time to time in
Secured Party's discretion, to take any action and to execute
any instrument consistent with terms of this Agreement and the
Credit Agreement which the Secured Party may deem necessary or
advisable to accomplish the purposes of this agreement. The
foregoing grant of authority is a power of attorney coupled
with an interest and such appointment shall be irrevocable for
the term of this Agreement. Company hereby ratifies all that
such attorney shall lawfully do or cause to do be done by
virtue hereof.
8. TERMINATION; RELEASE. When (i) all the Secured Party's
obligations under the Guaranty have been released and
terminated AND (ii) all the Secured Obligations have been
indefeasibly paid in full and have been terminated, this
Agreement shall terminate, and the Secured Party shall
promptly release all liens existing in connection herewith.
9. GOVERNING LAW. This Agreement, including the validity hereof
and the rights and obligations of the parties hereunder, shall
be construed in accordance with and governed by the laws of
the Commonwealth of Massachusetts.
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IN WITNESS WHEREOF, the Company has executed this Agreement as a sealed
instrument as of the date first above written.
BIOSPHERE MEDICAL, INC.
By: /s/ Robert M. Palladino
----------------------------------
Name: Robert M. Palladino
Title: Vice President & Chief
Financial Officer
5
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Exhibit 10.10
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXCLUSIVE LICENSE AND KNOW-HOW AGREEMENT
NO. L99037
by and between the undersigned:
LE CENTRE NATIONAL DE LA RECHERCHE SCIENTIFIQUE, national public
scientific and technological institution, whose head office is at 3 Rue
Michel Ange, 75794 PARIS Cedex 16, herein represented by its Executive
Director, Catherine BRECHIGNAC (hereinafter called the "CNRS")
and
L'UNIVERSITE LOUIS PASTEUR STRASBOURG 1, public scientific and
professional institution, whose head office is at 4 Rue Blaise Pascal,
67070 Strasbourg Cedex, herein represented by its president, Jean-Yves
MERINDOL (hereinafter designated the "UNIVERSITY")
CNRS and the UNIVERSITY being hereinafter designated together as the
"INSTITUTIONS"
the INSTITUTIONS herein acting in their own name and on behalf of the
Laboratoire de Chimie Bioorganique, URA No. 1386 CNRS/UNIVERSITE LOUIS
PASTEUR-STRASBOURG 1, and the Integrated and Cellular Neurophysiology
Laboratory, URA No. 1446 CNRS/UNIVERSITE LOUIS PASTEUR-STRASBOURG 1
(hereinafter designated the "LABORATORIES").
party of the first part
AND
BIOSPHERE MEDICAL INC., corporation registered in the UNITED STATES in
the State of Massachusetts, whose head office is at 111 Locke Drive,
Marlborough, MA 01752, United States, herein represented by its
President and Chief Executive Officer Jean-Marie VOGEL, (hereinafter
designated "BIOSPHERE MEDICAL INC.").
party of the second part.
The INSTITUTIONS and BIOSPHERE MEDICAL INC are hereinafter designated
together as the "PARTIES".
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
WHEREAS:
The INSTITUTIONS and I.B.F. BIOTECHNICS signed a license agreement No.
L90128 on November 26, 1990 for the use of Patents and Know-how in
order to manufacture and sell the Products in the Domain, as these
terms are defined in License Agreement L90128.
I.B.F. BIOTECHNICS has changed its corporate name and is now called
BIOSEPRASA, business corporation with capital of FRF 21,300,000,
registered in the Registry of Business Names and Corporations of
Nanterre under No. B 331 502 641, whose intra-community VAT No. is FR
12 331 502 641 and whose head office is at 35 Avenue Jean Jaures, 92390
Villeneuve La Garenne. Until May 17, 1999, BIOSEPRA-SA was a subsidiary
of BIOSPHERE MEDICAL INC. when it became a subsidiary of Life
Technologies, a corporation registered in the USA.
BIOSEPRA-SA, BIOSPHERE MEDICAL INC and the INSTITUTIONS have agreed to
amend the terms of license L90128.
BIOSEPRA-SA, BIOSPHERE MEDICAL INC and the INSTITUTIONS have agreed
that license L90128 will be cancelled by mutual consent and replaced by
two licenses:
- License No. L99036, granted to BIOSEPRA-SA, for the working of the
PATENTS OF THE AGREEMENT and the KNOW-HOW OF THE AGREEMENT,
limited solely to the use of TRANSFECTAM, in all domains excluding
medical.
- License No. L99037, granted to BIOSPHERE MEDICAL INC for the
working of the PATENTS OF THE AGREEMENT and the KNOW-HOW OF THE
AGREEMENT only in the medical domain (excluding in particular the
domain of research reagents).
Finally, it was agreed that CNRS, starting with the coming into force
of this agreement, would resume at its expense the management and
industrial property fees relative to the PATENTS OF THE AGREEMENT.
ACCORDINGLY, THE PARTIES HERETO HAVE AGREED TO THE FOLLOWING:
Preliminary Clause - DEFINITIONS
PATENTS OF THE AGREEMENT means:
- the French patent application filed on [**] under no. [**],
entitled "[**]" in the name of [**], citing as inventors[**] and
[**],
- the French patent application filed on [**] under no. [**],
entitled "[**]" in the name of [**], citing as inventors [**]
and [**],
- and the extensions abroad of the French patent applications
cited above, the French and foreign patents corresponding to
these applications, and the later complementary certificates of
protection.
A list of the PATENTS OF THE AGREEMENT appears in Schedule 1 to
this Agreement.
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DATE OF COMING INTO FORCE means the last signature date of this
Agreement.
DATE OF FIRST MARKETING means the date on which a PRODUCT OF THE
AGREEMENT is first marketed.
DISTRIBUTORS means all corporations or legal entities acting on
their own behalf and for their personal account as purchasers of
PRODUCTS OF THE AGREEMENT packaged or not for their resale.
DOMAIN OF THE CONTRACT means the applications of the PRODUCTS OF
THE AGREEMENT only in the medical domain (specifically excluding
the domain of research reagents).
PARTIES means the INSTITUTIONS and BIOSPHERE MEDICAL INC.
PRODUCTS OF THE AGREEMENT means all products implementing some or
all of the PATENTS OF THE AGREEMENT and/or KNOW-HOW OF THE
AGREEMENT or which could not be developed, used, fabricated or
marketed without using some or all of the KNOW-HOW OF THE
AGREEMENT and/or infringing some or all of the PATENTS OF THE
AGREEMENT.
KNOW-HOW OF THE AGREEMENT means a set of technical information,
whether written, graphic or oral, whatever medium used, acquired
by the LABORATORIES during their research until the DATE OF COMING
INTO FORCE, and concerning the application of the invention that
is the subject of the PATENTS OF THE CONTRACT.
SUB-LICENSEE means any third party that has obtained from
BIOSPHERE MEDICAL INC a license to develop, use, manufacture or
market the PRODUCTS OF THE AGREEMENT in the DOMAIN OF THE
AGREEMENT.
TERRITORY OF THE AGREEMENT means the whole world.
TRANSFECTAM means a lipopolyamine used as a transfection agent
marketed by BIOSEPRA-SA under the registered trade name
Transfectam.
NET SALES means the gross amounts invoiced by BIOSPHERE MEDICAL
INC to its customers, including the DISTRIBUTORS, for the sales of
the PRODUCTS OF THE AGREEMENT, after deduction of the usual
commercial discounts, balances resulting from returns of the
PRODUCTS OF THE AGREEMENT, sales, purchase, import and value added
taxes and transport costs.
The plural may be understood to refer to the singular and
vice-versa.
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Section 1 - SUBJECT, NATURE AND SCOPE OF THE AGREEMENT
1.1 By this agreement, the INSTITUTIONS grant BIOSPHERE MEDICAL INC,
which accepts, an exclusive license for the PATENTS OF THE
AGREEMENT and the KNOW-HOW OF THE AGREEMENT in the TERRITORY OF
THE AGREEMENT for the development, use, manufacture and marketing
of the PRODUCTS OF THE AGREEMENT within the DOMAIN OF THE
AGREEMENT.
BIOSPHERE MEDICAL INC agrees not to work the PATENTS OF THE
AGREEMENT and the KNOW-HOW OF THE AGREEMENT outside the TERRITORY
OF THE AGREEMENT or the DOMAIN OF THE AGREEMENT.
1.2 The license granted under 1.1 of this agreement is accompanied by
granting by the INSTITUTIONS to BIOSPHERE MEDICAL INC the right to
sub-license the PATENTS OF THE AGREEMENT and the KNOW-HOW OF THE
AGREEMENT to SUB-LICENSEES for the development, use, manufacture
and marketing of the PRODUCTS OF THE AGREEMENT in the TERRITORY OF
THE AGREEMENT and DOMAIN OF THE AGREEMENT.
1.3 Exclusivity means that the INSTITUTIONS agree not to grant another
license on the PATENTS OF THE AGREEMENT and the KNOW-HOW OF THE
AGREEMENT for the working of the PRODUCTS OF THE AGREEMENT in the
DOMAIN OF THE AGREEMENT and in the TERRITORY OF THE AGREEMENT. The
INSTITUTIONS however retain the right to use the PATENTS OF THE
AGREEMENT and the KNOW-HOW OF THE AGREEMENT for research purposes
and to work them directly.
Section 2 - TERM
2.1 This Agreement will come into force on the DATE OF COMING INTO
FORCE and remain in force except if cancelled early as provided in
section 14 below:
2.1.1 In any country where there is no or no longer a PATENT OF
THE AGREEMENT (applied for or issued) in force, for 10
years after the DATE OF FIRST MARKETING in this country
(or for the countries that are members of the European
Union, for 10 years after the DATE OF FIRST MARKETING in
one of the member countries of the European Union).
After the 10-year period, the license will be
non-exclusive and free in the countries where there is no
or is no longer a PATENT OF THE AGREEMENT in force.
2.1.2 In countries where there is a PATENT OF THE AGREEMENT in
force, for the term of the validity of the said PATENT OF
THE AGREEMENT (possibly extended by a Complementary
Certificate of Protection or equivalent authorization),
when this term exceeds the period provided in 2.1.1.
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2.2 License L90128 is cancelled by mutual consent starting on the date
of coming into force of license No. L99036 granted to BIOSEPRA-SA.
Section 3- SUB-LICENSE
3.1 BIOSPHERE MEDICAL INC may, in application of the stipulations of
section 1.2 above, grant sub-licenses to SUB-LICENSEES in the
DOMAIN OF THE AGREEMENT and in the TERRITORY OF THE AGREEMENT on
condition of having obtained prior written consent from the
INSTITUTIONS as to the person of the SUB-LICENSEES and the terms
of the sub-license agreement. Moreover, BIOSPHERE MEDICAL INC
agrees to convey to the INSTITUTIONS a copy of these sub-license
agreements within one (1) month of their signing.
3.2 BIOSPHERE MEDICAL INC will remain responsible to the INSTITUTIONS
for the execution by its SUB-LICENSEES of all obligations placed
on BIOSPHERE MEDICAL INC in this agreement.
Section 4 - TRANSFER OF THE LICENSE AGREEMENT
4.1 This agreement is entered into INTUITU PERSONAE. Accordingly, it
is personal, non-assignable and non-transferable subject to any
sub-licenses granted by BIOSPHERE MEDICAL INC in compliance with
the stipulations of 1.2 and 3 of this agreement and stipulations
of 4.2 below.
4.2 In the case of the take-over, merger, absorption, assignment or
transfer of BIOSPHERE MEDICAL INC or of its activities to another
legal entity or any other transformation of BIOSPHERE MEDICAL INC
seeking to modify the INTUITU PERSONAE characteristics taken into
account for this Agreement, this Agreement many not be transferred
or assigned except with the consent of the INSTITUTIONS. This
consent can only be refused if the INSTITUTIONS justify it in
writing within thirty (30) days of notification by BIOSPHERE
MEDICAL INC that the transfer of this agreement would place it in
a conflict of interest. Without a duly explained refusal within
thirty (30) days of receipt of notice from BIOSPHERE MEDICAL INC
informing the INSTITUTIONS of a request to transfer, the consent
will be deemed granted and the transfer may take place
automatically.
In the case of the consent by the INSTITUTIONS, it is now agreed
that the said legal entity will be, in any event, subject to the
same obligations as those placed on BIOSPHERE MEDICAL INC in this
agreement, unless the new parties together agree otherwise.
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<PAGE>
A supplement to this agreement between the INSTITUTIONS and the
said legal entity must be prepared simultaneous to the merger or
transfer executed with BIOSPHERE MEDICAL INC in which the option
chosen by the new parties, in compliance with the previous
paragraph, is set out.
Section 5 - DELIVERY OF KNOW-HOW
BIOSPHERE MEDICAL INC acknowledges that it has received the
KNOW-HOW OF THE AGREEMENT before the DATE OF COMING INTO FORCE.
Section 6 - WORKING
6.1 BIOSPHERE MEDICAL INC agrees to work this license and to apply
diligence to develop, manufacture and sell the PRODUCTS OF THE
AGREEMENT in the DOMAIN OF THE AGREEMENT and in the TERRITORY OF
THE AGREEMENT and to find markets, especially by use of serious
commercial marketing and reasonable advertising efforts.
BIOSPHERE MEDICAL INC agrees to satisfy the orders it receives by
delivering the PRODUCTS OF THE AGREEMENT within the shortest
possible time and to ensure product support.
6.2 BIOSPHERE MEDICAL INC, without prejudice to what is provided in
the following paragraph, is prohibited from using for commercial
promotion purposes the names "Centre National de la Recherche
Scientifique" or "CNRS" or UNIVERSITE LOUIS PASTEUR - STRASBOURG
1", any trademark or distinctive sign belonging to the
INSTITUTIONS and any adaptation of them as well as the name of the
inventors and of any agent of the INSTITUTIONS without having
received in advance of any such use the written consent of the
INSTITUTIONS and, where appropriate, of the individual person
concerned.
Only to provide information on the origin of the license, the
words "CNRS-UNIVERSITY LOUIS PASTEUR-STRASBOURG 1 License" may
appear on any advertising document, technical or explanatory
materials related to the PRODUCTS OF THE AGREEMENT. It is the
responsibility of BIOSPHERE MEDICAL INC to ensure that this
notice, because of its form or the context in which it is placed,
cannot be construed as a warranty offered by the INSTITUTIONS
concerning the PRODUCTS OF THE AGREEMENT.
BIOSPHERE MEDICAL INC must impose the same obligations on any
SUB-LICENSEES and DISTRIBUTORS.
6.3 BIOSPHERE MEDICAL INC hereby acknowledges that it has the
competence required to use the KNOW-HOW OF THE AGREEMENT and the
PATENTS OF THE AGREEMENT and to develop, use, manufacture or
market the PRODUCTS OF THE AGREEMENT.
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<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
6.4 BIOSPHERE MEDICAL INC will market the PRODUCTS OF THE AGREEMENT
under its own trade names or those for which it has regularly
obtained a license. The INSTITUTIONS may not claim any right to
these trade names or to the clientele of BIOSPHERE MEDICAL INC.
Any administrative authorization obtained by BIOSPHERE MEDICAL INC
for the manufacture and/or marketing of the PRODUCTS OF THE
AGREEMENT will be done on behalf of BIOSPHERE MEDICAL INC or any
person it designates; the INSTITUTIONS may not, subject to what is
provided in 6.5 below, claim any right to any of them.
6.5 Notwithstanding the stipulations of 6.4 above, BIOSPHERE MEDICAL
INC agrees to convey to the INSTITUTIONS a copy of all
administration authorizations (including Marketing Authorizations)
it obtains in order to manufacture and/or market the PRODUCTS OF
THE AGREEMENT.
Section 7 - FINANCIAL TERMS AND CONDITIONS
7.1 In consideration for this agreement, BIOSPHERE MEDICAL INC shall
pay CNRS on behalf of the INSTITUTIONS the following amounts:
7.1.1 Royalties
DIRECT WORKING
In case of direct working, BIOSPHERE MEDICAL INC shall pay
CNRS on behalf of the INSTITUTIONS an annual royalty equal
to [**] of NET SALES. This royalty is payable on all
PRODUCTS OF THE AGREEMENT sold, whatever the country of
the TERRITORY OF THE AGREEMENT where the PRODUCTS OF THE
AGREEMENT are sold.
INDIRECT WORKING
In case of indirect working, BIOSPHERE MEDICAL INC shall
pay CNRS on behalf of the INSTITUTIONS [**] of the sums of
all kinds (lump sums, royalties, guarantee minimums, etc.)
received by BIOSPHERE MEDICAL INC from its SUB-LICENSEES,
whether these payments are due upon the signing of the
sub-license agreements or at later stages of their
implementation. The above notwithstanding, the lump sums
paid to BIOSPHERE MEDICAL INC by SUB-LICENSEES as part of
research and development agreements containing sub-license
of PATENTS OF THE AGREEMENT will not be included in the
royalty base provided herein.
7
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
In order to avoid any ambiguity, if BIOSPHERE MEDICAL INC
were to sell PRODUCTS OF THE AGREEMENT to a third party
(including a DISTRIBUTOR), who then resells them, only the
sale of BIOSPHERE MEDICAL INC results in the payment of
royalties to the INSTITUTIONS (at the rate of [**]), the
INSTITUTIONS not collecting any royalty on the resale of
the PRODUCTS OF THE AGREEMENT by this third party.
7.1.2 Guarantee Minimum Annual Royalties
a) Starting in 1999, BIOSPHERE MEDICAL INC guarantees
the INSTITUTIONS a minimum annual royalty of [**].
b) BIOSPHERE MEDICAL INC may be released from these
guaranteed minimums on condition of its notifying
CNRS of its intention at least three months before
the planned date of the annual closing of the
accounts of BIOSPHERE MEDICAL INC (as provided in
Section 8) by registered letter with acknowledgement
of receipt. The INSTITUTIONS may then either convert
the exclusive license into a non-exclusive license or
cancel this agreement by applying the cancellation
clauses.
In case of conversion of the exclusive license into a
non-exclusive license, the guaranteed minimums will
not longer be due by BIOSPHERE MEDICAL INC starting
on January 1 of the fiscal year after the conversion
of the exclusive license into a non-exclusive
license.
7.2 Either PARTY may ask for revision of the financial terms and
conditions of the license if as a result of economic imbalances
that it will be the responsibility of the said PARTY to
demonstrate, the balance of contractual relations has been
modified to the point of making it prejudicial to execute its
obligations. As long as the PARTIES have not signed a
supplementary agreement formalizing their agreement on the amount
of these revised rates or on the definition of the royalty base,
the rates and base provided herein remain payable.
7.3 Any change to the financial conditions of this license must be the
subject of a complementary agreement.
Such revision may in no case be retroactive and will only take
effect starting on January 1 of the year following the change.
Section 8 - ACCOUNTING - MONITORING OF ROYALTIES
8.1 BIOSPHERE MEDICAL INC will keep accounting records from which can
be identified all elements necessary for the accurate evaluation
of the commercial transactions related to this Agreement.
8
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BIOSPHERE MEDICAL INC agrees to have this obligation to keep
appropriate accounting records respected by its SUB-LICENSEES.
The accounts will end each year on the date on which BIOSPHERE
MEDICAL INC closes its books for the year, i.e. December 31.
8.2 Any payment of royalties due under this Agreement will be preceded
by the sending by BIOSPHERE MEDICAL INC to CNRS of a statement of
commercial transactions related to this Agreement on which will
appear:
- the number of this License Agreement,
- the NET SALES by country for each PRODUCTS OF THE AGREEMENT,
as well as the sums of any kinds received by BIOSPHERE MEDICAL
INC from its SUB-LICENSEES,
- the applicable rate,
- the calculation of the sums due to the INSTITUTIONS.
Such statement of commercial transactions will be sent each year
to the Service Financier, Delegation du Siege du CNRS, 3 rue
Michel-Ange, 75794 PARIS Cedex 16 within 30 (thirty) days of the
closing of the accounts of BIOSPHERE MEDICAL INC.
The sums due from BIOSPHERE MEDICAL INC must be paid within 35
(thirty-five) days of the date of the issuing of an invoice by
CNRS, to the person and the bank address shown below.
Payments will be made to CNRS by cheque payable to the Agent
Comptable Principal du CNRS, Paierie Generale Paris - Bank code:
30091 - Branch Code: 75200 - Account. No. 20003000336- Key 91.
Cheques are sent to the attention of the Agent Comptable Principal
du CNRS, 3 rue Michel-Ange - 75794 PARIS Cedex 16.
8.3 The sums due to the INSTITUTIONS will be paid in French francs (or
in euros when this currency replaces French francs).
It should be remembered that the French franc (and other
currencies of the European Monetary System) will be replaced by
the euro, sole European currency, in application of the Treaty of
the European Union.
As provided by the general principles of currency law, references
to francs (or other EMS currencies) will then be automatically
considered references to the euro.
This substitution will not in itself amend the terms of the
agreement or waive its execution or give one PARTY the right
unilaterally to amend or terminate it. It will occur on the date
and in the conditions defined by community regulations.
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8.4 Where no commercial transaction is performed, BIOSPHERE MEDICAL
INC must nevertheless send CNRS within 30 (thirty) days of the
date that BIOSPHERE MEDICAL INC closes its books each year
indicated in 8.1 above, a statement attesting to the absence of
any operation during that year and indicating the causes of the
absence of sales.
8.5 Any amount not paid by BIOSPHERE MEDICAL INC within the times
given above will result in interest charged on sums overdue,
calculated pro rated according to the rules applicable to French
Public Institutions (which, at the DATE OF COMING INTO FORCE, was
the current legal interest rate increased by 2 points) without
prejudice to the right of the INSTITUTIONS to cancel this
agreement in application of section 14, Cancellation.
8.6 The sums due by BIOSPHERE MEDICAL INC to CNRS on behalf of the
INSTITUTIONS will be increased by the legal taxes in force on the
date they are due, in particular the V.A.T. if applicable.
8.7 Any accounting will be deemed available to the INSTITUTIONS or a
representative authorized by them until the date of expiration of
this agreement extended by 1 (one) year. The INSTITUTIONS will
have the right to check the accuracy of the royalty accounts of
BIOSPHERE MEDICAL INC During such a check a public accountant will
be designated by the INSTITUTIONS and his fees and expenses will
be paid by the INSTITUTIONS except if there is an adjustment of
more than 5% (five percent) of the amount of the sums actually
paid by BIOSPHERE MEDICAL INC as the result of this check, in
which case the expenses and fees of the public accountant will be
paid by BIOSPHERE MEDICAL INC.
8.8 The sums collected by CNRS on behalf of the INSTITUTIONS under
this agreement in any case belong to it definitively and
irremediably, and may in no case be restored to BIOSPHERE MEDICAL
INC. Moreover, any sums remaining due by BIOSPHERE MEDICAL INC on
the date of expiration or cancellation of this agreement may be
paid to CNRS on behalf of the INSTITUTIONS.
Section 9 - NON-DISCLOSURE
9.1 Each PARTY agrees to keep confidential the scientific and
technical information belonging to the other PARTY and any
information of any kind relative to the other PARTY it may learn
during the pre-contractual negotiations or on the occasion of the
execution of this Agreement. Each PARTY will not publish or convey
any or all of the confidential information to third parties except
with the written consent of the other PARTY.
BIOSPHERE MEDICAL INC agrees in particular to keep confidential
and maintain confidential all the knowledge that is conveyed to it
as part of the KNOW-HOW OF THE AGREEMENT.
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The PARTIES agree to have the same undertaking made by their
personnel and any person attached to their service in any
capacity.
The confidentiality agreements reciprocally binding on the PARTIES
as provided herein do not apply to the information for which the
PARTY that receives it can prove:
a) that it was disclosed them after obtaining prior written
authorization from the other PARTY or the disclosure was made
by the other PARTY;
b) that it was in the public domain at the time it was conveyed
by the other PARTY or that it fell into the public domain
after this release without its fault;
c) that it was received from a third party legitimately;
d) that at the date it was conveyed by the other PARTY, it was
already in its possession;
e) that its disclosure was imposed by the application of a legal
provision or required regulation or by the application of a
final court decision or an arbitration ruling.
The exceptions listed above are not cumulative.
9.2 Each PARTY agrees not to file an application for a patent or other
industrial property title including the confidential information
of the other PARTY without having obtained the other PARTY's prior
written authorization to do so.
9.3 This confidentiality requirement will remain in force throughout
this Agreement and for 5 (five) years after its expiration or
cancellation.
9.4 The stipulations of this section may not obstruct:
- the obligation on researchers of each of the PARTIES to this
agreement to produce a progress report to the organization to
which they report, this report not being a disclosure in the
meaning of the Industrial Property laws,
- the defense of theses by researchers whose scientific activity
is related to the subject of this Agreement;
- the dissemination by BIOSPHERE MEDICAL INC of documents
seeking to promote the marketing of the PRODUCTS OF THE
AGREEMENT.
Section 10 - MAINTAINING THE PATENTS OF THE AGREEMENT IN FORCE
10.1 The fees for maintaining in force of the PATENTS OF THE
AGREEMENT will be paid the responsibility of CNRS starting from
the DATE OF COMING INTO FORCE.
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10.2 If for any reason CNRS decides to abandon one of the PATENTS OF
THE AGREEMENT, it must so inform BIOSPHERE MEDICAL INC, with
reasonable advance notice. BIOSPHERE MEDICAL INC may then take
over for CNRS in maintaining this PATENT OF THE AGREEMENT in
force.
If the PATENTS OF THE AGREEMENT are licensed to other licensees
than BIOSPHERE MEDICAL INC and if CNRS decides to stop paying
the Industrial Property expenses for some or all of the said
patents, it is agreed that section 10.2 of this agreement must
be adjusted through a supplementary agreement to allow a
distribution among all licensees of the Industrial Property
expenses not assumed by the INSTITUTIONS .
10.3 It will be up to BIOSPHERE MEDICAL INC to ask CNRS by registered
letter with acknowledgement of receipt to request a
complementary protection certificate with PATENTS OF THE
AGREEMENT OR ANY EQUIVALENT TITLE. BIOSPHERE MEDICAL INC will
take care of undertaking this step sufficiently in advance to
enable the delivery of the certificate or title. In any case,
this procedure will be done at the risks and expense of
BIOSPHERE MEDICAL INC. CNRS may not oppose this request except
for reasonable and detailed reasons. In no case may CNRS be held
responsible except for gross negligence on its part for the
failure of this procedure.
Section 13 - WARRANTIES
11.1 This Agreement is made with no other warranty than that of the
material existence of the PATENTS OF THE AGREEMENT and the
KNOW-HOW OF THE AGREEMENT. In application of this Section, the
INSTITUTIONS offer no warranty, explicit or implicit, concerning
the PATENTS OF THE AGREEMENT and the KNOW-HOW OF THE AGREEMENT,
in particular with respect to their usefulness or suitability
for any function.
11.2 Possible random events, risks and perils with respect to the
execution of this Agreement and any legal defects contained in
one or more of the PATENTS OF THE AGREEMENT are the
responsibility of BIOSPHERE MEDICAL INC alone, which accepts
them. Accordingly, in case of the rejection or cancellation of
one or more of the PATENTS OF THE AGREEMENT, the dependence of
the said patents on a prior dominating patent, in case where the
PRODUCTS OF THE AGREEMENT because of the use of the PATENTS OF
THE AGREEMENT or the KNOW-HOW OF THE AGREEMENT were declared
infringed by a final court decision, the INSTITUTIONS will not
be required either to return the sums already paid by BIOSPHERE
MEDICAL INC nor reduce those due until the date of the final
legal decision nor the payment of any damages to BIOSPHERE
MEDICAL INC in compensation for the harm caused by such
rejection, cancellation, dependence or infringement.
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11.3 BIOSPHERE MEDICAL INC may not call the INSTITUTIONS in warranty
in case of damage or prejudice of any kind caused by the
PRODUCTS OF THE AGREEMENT, since BIOSPHERE MEDICAL INC is solely
responsible to its customers and/or any third parties for the
quality and performances of the PRODUCTS OF THE AGREEMENT.
11.4 BIOSPHERE MEDICAL INC is solely responsible for ensuring that
the PRODUCTS OF THE AGREEMENT are compliant with applicable laws
and regulations.
Section 12 - DISALLOWANCE - NULLITY
If in the TERRITORY OF THE AGREEMENT, an administrative decision
or a final court decision disallows wholly or in part and/or
nullifies wholly or in part one or more of the PATENTS OF THE
AGREEMENT and/or restricts the liberty of its working, BIOSPHERE
MEDICAL INC may not claim from the INSTITUTIONS any
compensation, reimbursement, reduction of sums due at the time
of the issuing of the administrative or final court decision.
Thereafter, BIOSPHERE MEDICAL INC:
- must, as long as no appreciable competition arises in this
country, continue to pay the INSTITUTIONS for the country
considered, in consideration for the KNOW-HOW OF THE
AGREEMENT, the compensation provided in section 7 of this
Agreement.
- may, starting from the time where appreciable competition
appears in this country, negotiate a new compensation due from
BIOSPHERE MEDICAL INC to the INSTITUTIONS, it being understood
that all other stipulations of this Agreement will continue in
any case to apply for the PATENTS OF THE AGREEMENT still in
force.
Section 13 - INFRINGEMENTS
13.1 The INSTITUTIONS and BIOSPHERE MEDICAL INC will inform each
other as soon as possible of any case of infringement by a third
party of which they learn and/or of any claim or action for
infringement that targets them.
13.2 a)If in the case of infringement of one or more of the
PATENTS OF THE AGREEMENT by a third party, the INSTITUTIONS
may take action at their expense against the infringing party,
it being understood that any compensation and damages awarded
by the court will completely and irrevocably belong to the
INSTITUTIONS.
13
<PAGE>
This stipulation will not obstruct BIOSPHERE MEDICAL INC from
intervening in the case, at its expense, to obtain
compensation for its own injury. The compensation and damages
that may be awarded at the outcome of such a suit will then be
completely and irrevocably theirs.
b)If the INSTITUTIONS take no action, BIOSPHERE MEDICAL INC
may, if it so desires, after formal notice of action addressed
to CNRS - by registered mail with acknowledgement of receipt
-- that has been more than one month without response, file
sue for infringement on its own initiative and on its own
behalf. In this case, the cost of the proceedings will be paid
solely by it, and any compensation and damages awarded by the
court will then be completely and irrevocably theirs.
c)The stipulations of 13.2 b) above are applicable subject to
the compulsory legal provisions applicable in the country
where the infringement takes place.
d)The stipulations of 13.2 do not apply to cases of
infringement of the PATENTS OF THE AGREEMENT outside the
DOMAIN OF THE AGREEMENT and the TERRITORY OF THE AGREEMENT and
the PRODUCTS OF THE AGREEMENT, which are under the
jurisdiction of the INSTITUTIONS alone or of any third party
they so designate.
13.3 If suits for infringement are filed against BIOSPHERE MEDICAL
INC or any of its SUB-LICENSEES or DISTRIBUTORS on the occasion
of the working of the PRODUCTS OF THE AGREEMENT, because of the
use of the PATENTS OF THE AGREEMENT and/or the KNOW-HOW OF THE
AGREEMENT, the INSTITUTIONS will convey to BIOSPHERE MEDICAL INC
the elements they have available for its defense or for the
defense of its SUB-LICENSEES or DISTRIBUTORS. If at the outcome
of such a suit for infringement, the said companies are found
guilty, BIOSPHERE MEDICAL INC will hold the INSTITUTIONS safe;
as provided in section 11, BIOSPHERE MEDICAL INC is not allowed
to call them in guarantee or claim from the INSTITUTIONS any
compensation, reimbursement of sums of any kind already paid to
the INSTITUTIONS or any reduction of sums already due at the
time of the final court decision. In case of the cancellation of
one of the PATENTS OF THE AGREEMENT, the provisions of sections
11 and 12 will be applied without being overridden.
13.4 The PARTIES agree to provide each other with all documents and
elements it may need on the occasion of such proceedings as
described above.
14
<PAGE>
Section 14 - CANCELLATION - EXPIRATION
14.1 This Agreement will be automatically cancelled in case of
cessation of activity, dissolution or bankruptcy of BIOSPHERE
MEDICAL INC.
If BIOSPHERE MEDICAL INC becomes the object of bankruptcy
proceedings and the INSTITUTIONS want to cancel this Agreement,
the INSTITUTIONS will so inform BIOSPHERE MEDICAL INC by
registered mail with acknowledgement of receipt. Subject to the
compulsory legal provisions applicable in the case of class
action proceedings in force in the United States in the State of
Massachusetts, this Agreement will be cancelled automatically 3
(three) months after the sending by CNRS of a registered letter
with acknowledgement of receipt setting out the reasons for the
cancellation.
14.2 This Agreement may be cancelled by either of the PARTIES in case
of failure of the other PARTY to execute one or more of the
obligations contained in its various clauses, in particular
Section 6 (Working) and Section 7 (Financial Terms and
Conditions). This cancellation will take effect only 3 (three)
months after the complaining PARTY has sent a registered letter
with acknowledgement of receipt setting out the reasons for the
complaint unless within that time, the defaulting PARTY has
satisfied its obligations or provided proof of its being
prevented from doing so as the result of a case of force
majeure. The exercise of this cancellation option does not
relieve the defaulting party from satisfying the obligations
contracted until the date the cancellation takes effect, without
prejudice to the payment of damages due by the defaulting PARTY
in compensation for the prejudice experienced by the complaining
PARTY from the early cancellation of this Agreement.
14.3 In case of cancellation of this Agreement, the sub-licensing
agreements entered into with the SUB-LICENSEES before the
cancellation date of this Agreement may only remain in force
subject to a written agreement, negotiated in good faith,
between the INSTITUTIONS and the said SUB-LICENSEES.
14.4 If this Agreement expires or is cancelled, BIOSPHERE MEDICAL INC
agrees:
- to no longer work and not to allow the direct or indirect
working of the PATENTS OF THE AGREEMENT until they expire;
- not to disclose and not to work or let work directly or
indirectly the KNOW-HOW OF THE AGREEMENT as long as the
KNOW-HOW OF THE AGREEMENT has not become a matter of the
public record;
- to restore to the INSTITUTIONS within the month following the
expiration or the cancellation of this Agreement, all
documents and materials that the INSTITUTIONS may have sent it
without being able to keep copies.
15
<PAGE>
Moreover, in case of early cancellation of this license, BIOSPHERE
MEDICAL INC agrees to send to the INSTITUTIONS all the results
obtained on the invention covered by the PATENTS OF THE AGREEMENT or
by using the KNOW-HOW OF THE AGREEMENT and authorizes the
INSTITUTIONS to communicate them to third parties subject to the
signature by the said third parties of a non-disclosure agreement and
to work, directly or indirectly, the said results.
Section 15 - INVENTORIES
If BIOSPHERE MEDICAL INC or its SUB-LICENSEES has PRODUCTS OF THE
AGREEMENT in stock on the date of the expiration or cancellation of
this Agreement, they will be authorized to sell these PRODUCTS OF THE
AGREEMENT within 6 (six) months after the expiration or cancellation
date of this Agreement, subject first to sending the INSTITUTIONS on
the date of expiration or cancellation of this Agreement an inventory
list and send to respecting the conditions of Section 7 herein with
respect to the financial terms and conditions.
Section 16 - TOTALITY AND LIMITS OF THE AGREEMENT
16.1 This Agreement expresses all of the obligations of the PARTIES
relative to its object. No general or specific conditions
appearing in the documents sent or given to the PARTIES may be
included in this Agreement.
16.2 This Agreement may not be amended or renewed except by a
Complementary Agreement signed by the duly authorized
representatives of the PARTIES.
16.3 It is stipulated that the relationships being established
between the PARTIES under this Agreement confer no right other
than those mentioned herein. It is understood that this
Agreement does not contain, in particular, assignment for the
benefit of BIOSPHERE MEDICAL INC of any right outside the DOMAIN
OF THE AGREEMENT and the TERRITORY OF THE AGREEMENT and the
PRODUCTS OF THE AGREEMENT nor any right on the patents other
than the PATENTS OF THE AGREEMENT or any know-how other than the
KNOW-HOW OF THE AGREEMENT.
Section 17 - HEADINGS
In case of problems in interpretation between any of the headings of
the clauses and any of the clauses, the headings are declared
non-existent.
16
<PAGE>
Section 18 - NULLITY OF ONE CLAUSE
If one or more stipulations of this Agreement are considered invalid
or declared so by application of a law, a regulation - and in
particular the law of the European Union - or after a final decision
of a competent jurisdiction, the other stipulations will retain all
their force and scope, and the PARTIES will proceed without delay to
make the necessary modifications while respecting, wherever possible,
the meeting of the minds present at the time this Agreement is
signed.
Section 19 - WAIVER
The fact that one of the PARTIES is unable to act on the failure by
the other PARTY to satisfy one of the obligations contained herein
may not be construed for the future as being a waiver of the
obligation involved.
Section 20 - DISPUTES - APPLICABLE LAW
20.1 In case of a disagreement involving the validity, interpretation
or execution of this Agreement, the PARTIES will attempt to
resolve their differences out of court.
20.2 In case of persistent disagreement, the dispute will be brought
before the competent French jurisdictions and this Agreement
will be subject to French laws and regulations.
20.3 This Section will remain in force notwithstanding the expiration
or cancellation of this Agreement.
Section 21 - REGISTRATION IN THE NATIONAL REGISTER OF PATENTS
21.1 This Agreement may be registered in the National Register of
Patents, kept by the Institut National de la Propriete
Industrielle (National Institute of Industrial Property) and the
national registers of patents kept by the national offices of
Industrial Property concerned by the PATENTS OF THE AGREEMENT at
the case and expense of BIOSPHERE MEDICAL INC.
21.2 Any tax registration required for this Agreement will be done by
BIOSPHERE MEDICAL INC at its expense.
Section 22 - LANGUAGES
This Agreement has been established only in the French language.
17
<PAGE>
Section 23 - NOTICE
Any notice required for this Agreement will be sent by registered
mail with acknowledgment of receipt, to the PARTY concerned at the
following address:
For the INSTITUTIONS
CNRS
Delegation aux Entreprises
3 rue Michel Ange
75794 PARIS Cedex 16
for BIOSPHERE MEDICAL INC
BIOSPHERE MEDICAL INC
Attention: Mr. Jean-Marie VOGEL
111 Locke Driver
Marlborough, MA
01752 United States
Done in three original copies, one for CNRS, one for UNIVERSITE and one
for BIOSPHERE MEDICAL INC.
Done in Paris JULY 15, 1999 signed in MARLBOROUGH
JUNE 6, 1999
For the Directeur General
and per
Assistant to the Delegue aux Entreprise
Joseph BAIXERDAS
[signature] [signature]
Catherine BRECHIGNAC Jean-Marie VOGEL
Directeur General du CNRS President, CEO of
BIOSPHERE MEDICAL INC
[signed]
President of ULP
J.Y. MERINDOL
per JULY 2, 1999
Vice President, Research and Doctoral Training
B. EHRESMANN
Jean-Yves MERINDOL
President of the UNIVERSITE LOUIS PASTEUR STRASBOURG 1
18
<PAGE>
SCHEDULE 1
LIST OF PATENTS OF THE AGREEMENT
19
<PAGE>
LIST OF LIPOPOLYAMINE PATENTS
<TABLE>
<CAPTION>
COUNTRY TYPE HOLDERS FILED PUBLICATION AGREEMENT EXPIRATION PROCEDURE
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
GERMANY EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010 Agreement
04 JUN 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
AUSTRIA EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010 Agreement
04 JUN 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
BELGIUM EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010 Agreement
04 JUN 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
CANADA NP CNRS 12 APR 1990 12 APR 2016 Examination
18 MAR 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
DENMARK EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010 Agreement
04 JUN 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
SPAIN EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010 Agreement
04 JUN 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
UNITED STATES NP CNRS 17 APR 1990 15 DEC 1992 17 APR 2010 Agreement
15 DEC 1992
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
UNITED STATES CNT CNRS 31 JUL 1992 Abandoned
03 FEB 1994
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
UNITED STATES CNTI CNRS 03 FEB 1994 19 DEC 1995 19 DEC 2012 Agreement
19 DEC 1995
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
UNITED STATES DIV1 CNRS 07 JUN 1995 01 APR 1997 01 APR 2014 Agreement
01 APR 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
FRANCE CNRS 17 APR 1989 19 OCT 1990 15 JUL 1991 17 APR 2009 Agreement
05 JUL 1991
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
FRANCE EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010 Agreement
04 JUN 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
GREECE EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010 Agreement
04 JUN 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
COUNTRY TYPE HOLDERS FILED PUBLICATION AGREEMENT EXPIRATION PROCEDURE
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
ISRAEL CNRS 12 APR 1990 30 MAR 1997 12 APR 2010 Agreement
30 mar 1993
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
ITALY EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010 Agreement
04 JUN 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
JAPAN CNRS 17 APR 1990 29 OCT 1997 17 APR 2016 Agreement
29 OCT 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
LUXEMBOURG EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010 Agreement
04 JUN 1997
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
NETHERLANDS EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
EUROPEAN PROC. EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
UNITED KINGDOM EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
SWEDEN EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
SWITZERLAND EPO CNRS 13 APR 1990 24 OCT 1990 04 JUN 1997 13 APR 2010
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
<CAPTION>
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
COUNTRY TYPE HOLDERS FILED PUBLICATION AGREEMENT EXPIRATION PROCEDURE
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
FRANCE DIVI CNRS 24 JUL 1989 26 OCT 1990 05 JUL 1991 12 APR 2009 Agreement
05 JUL 1991
- -------------------- ---------- ------------ ---------------- ----------------- --------------- ------------------- ----------------
</TABLE>
21
<PAGE>
Exhibit 10.12
Stock and Warrant Purchase Agreement
dated February 4, 2000
The following parties have entered into the Stock and Warrant Purchase
Agreement attached hereto to purchase shares of Common Stock and warrants to
purchase shares of Common Stock of BioSphere Medical, Inc.:
<TABLE>
<CAPTION>
Purchaser Shares Purchased Shares Underlying Warrants
- -----------------------------------------------------------------------------------------
<S> <C> <C>
ABS Employees' Venture 27,777 6,944
Fund Limited Partnership
- -----------------------------------------------------------------------------------------
ACI Capital / BSMD, LLC 16,666 4,166
- -----------------------------------------------------------------------------------------
ACI Capital / BSMDI, LLC 177,777 44,444
- -----------------------------------------------------------------------------------------
Biopergs, LLC 27,777 6,944
- -----------------------------------------------------------------------------------------
Cerberus Partners, L.P. 55,556 13,889
- -----------------------------------------------------------------------------------------
Cerberus International, LTD. 111,112 27,778
- -----------------------------------------------------------------------------------------
Pequod Investments, L.P. 100,000 25,000
- -----------------------------------------------------------------------------------------
Pequod International, LTD 66,668 16,667
- -----------------------------------------------------------------------------------------
Richard Gallen & Co. Pension 11,112 2,778
Trust 002
- -----------------------------------------------------------------------------------------
Ursus Capital, L.P. 15,000 3,750
- -----------------------------------------------------------------------------------------
John M. Carnuccio 5,555 1,388
- -----------------------------------------------------------------------------------------
Jean-Marie Vogel 5,555 1,388
- -----------------------------------------------------------------------------------------
David P. Southwell 5,555 1,388
- -----------------------------------------------------------------------------------------
Timothy J. Barberich 27,777 6,944
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STOCK AND WARRANT PURCHASE AGREEMENT
STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement"), dated February
__, 2000, by and between BioSphere Medical, Inc., a Delaware corporation (the
"Company"), and the investor named on the signature page hereof (the
"Investor").
W I T N E S S E T H
WHEREAS, the Company is offering for sale up to 700,000 shares (the
"Shares") of its Common Stock (as defined below) and warrants (the "Warrants")
to purchase up to 175,000 shares of Common Stock, at the aggregate price of
$9.00 for one share of Common Stock and a Warrant to purchase one-fourth of one
share of Common Stock (the "Per Share Purchase Price"), pursuant to a Private
Placement Memorandum dated February 2, 2000 (the "Memorandum"), this transaction
generally being herein referred to as the "Private Placement"; and
WHEREAS, the Investor desires to purchase from the Company shares of
Common Stock on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for good and valuable consideration the receipt of which
is hereby acknowledged, the parties agree as follows:
1. DEFINITIONS. Unless specifically defined herein, capitalized terms
used herein have the meaning ascribed to such terms in the Memorandum except
that, unless the context requires otherwise, the following terms have the
meanings indicated:
"Business Day" shall mean any day except Saturday, Sunday and any day
which shall be in Boston, Massachusetts a legal holiday or a day on which
banking institutions are authorized or required by law or other government
action to close.
"Common Stock" shall mean the Common Stock, par value $0.01 per share,
of the Company.
"Investor Shares" shall mean the shares of Common Stock subscribed for
hereunder by the Investor and the shares of Common Stock issuable upon exercise
of the warrants purchased hereunder by the Investor, together with any shares of
Common Stock issued in respect of such shares pursuant to a dividend or
distribution, stock split, recapitalization, or similar transaction.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Warrant Certificate " shall mean the Warrant Certificate representing
a warrant to purchase shares of Common Stock issued pursuant to the Warrant
Agreement.
<PAGE>
"Warrant Agreement" shall mean that certain Warrant Agreement, dated as
of February __, 2000, by and between the Company and the Investor.
2. PURCHASE OF COMMON STOCK AND WARRANTS; SUBSEQUENT SALE.
(a) PURCHASE. Subject and pursuant to the terms and conditions
set forth in this Agreement, the Company agrees that it will issue and sell to
the Investor and the Investor agrees that it will purchase from the Company, at
the Per Share Purchase Price, (i) __________ shares of Common Stock and (ii) a
Warrant to purchase up to _______ shares of Common Stock on the terms and
conditions set forth in the Warrant Agreement. The aggregate purchase price for
the shares of Common Stock and the Warrant shall be $_______ (the "Aggregate
Purchase Price"). The shares of Common Stock and the Warrant are being offered
pursuant to the Memorandum.
(b) OTHER INVESTORS. The Company proposes to enter into a form
of Stock and Warrant Purchase Agreement with other investors (the "Other
Investors") on terms no more favorable to such other Investors than the terms
set forth herein. The Investor and the Other Investors are hereinafter referred
to collectively as the "Investors."
3. DELIVERIES AT CLOSING.
(a) DELIVERIES BY THE INVESTOR. At the Closing of the
transactions contemplated hereby, the Investor shall deliver to the Company the
following:
(1) the Aggregate Purchase Price by wire transfer of
immediately available funds to an account designated by the Company as set forth
on Annex VI hereto;
(2) an executed Investor Questionnaire in the form
attached as Annex I;
(3) a executed Managed Account Representation Letter,
if applicable, in the form attached as Annex II;
(4) a completed copy of Annex III representing and
warranting as to shares beneficially owned prior to the consummation of the
transactions contemplated hereby; and
(5) a completed Registration Statement Questionnaire
in the form attached as Annex IV.
(b) DELIVERIES BY THE COMPANY.
(1) On or more certificates representing the Investor
shares registered in the name of the Investor or its nominee(s), as the Investor
has specified in writing to the Company;
(2) an executed Warrant Agreement; and
2
<PAGE>
(3) One or more Warrant Certificate representing the
Warrant registered in the name of the Investor or its nominee(s), as the
Investor has specified in writing to the Company.
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
(a) INVESTOR REPRESENTATIONS, WARRANTIES AND COVENANTS. The
Investor represents, warrants and agrees as follows:
(1) The Investor has received and reviewed a copy of
the Memorandum, and all appendices and supplements (if any) thereto, relating to
the Shares and understands that no Person has been authorized to give any
information or to make any representations that were not contained in the
Memorandum, and the Investor has not relied on any such other information or
representations in making a decision to purchase the Investor Shares. The
Investor has had access to such financial and other information and has had the
opportunity to ask questions and receive answers as deemed necessary in respect
of the decision to purchase the Shares, and has consulted with advisors
concerning the proposed investment in the Company. The Investor understands that
an investment in the Company involves a high degree of risk for the reasons,
among others, set forth under the caption "RISK FACTORS" in the Memorandum.
(2) The Investor has decided to invest in the Shares
and, in making the decision to so invest, is not in any way relying on the fact
that any other Person has decided to invest in the Shares.
(3) The Investor represents that the Investor (or, if
applicable, each managed account on whose behalf the Investor Shares are being
purchased by such Investor) is a sophisticated investor or is an "accredited
investor" as defined in Rule 501 under the Securities Act of 1933, as amended
(the "Securities Act"), as certified by the Investor pursuant to the Investor
Questionnaire attached hereto as ANNEX I. The Investor further represents that
the Investor (or, if applicable, each managed account on whose behalf the
Investor Shares are being purchased) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risk of an investment in the Shares and can bear the economic risk of loss of
the entire investment in the Shares being purchased.
(4) The Investor understands and expressly
acknowledges and agrees that none of the Shares has been, or will be, registered
or qualified under the Securities Act, or under any applicable securities laws
of any State of the United States ("Applicable State Law") and therefore may not
be offered, sold, transferred, assigned, pledged, hypothecated or otherwise
disposed of, directly or indirectly, unless subsequently registered or qualified
under the Securities Act and under Applicable State Law or unless any exemptions
from the registration requirements of the Securities Act and Applicable State
Law are available, in each case to the extent permitted by the terms of this
Agreement.
3
<PAGE>
(5) The Investor understands and agrees that all
certificates representing the Investor Shares shall bear a legend which will be
substantially in the form of the following:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED,
TRANSFERRED OR HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT
PURSUANT TO (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT OR (2) RULE 144
OR 144A UNDER SUCH ACT OR ANY OTHER AVAILABLE EXEMPTION FROM
REGISTRATION UNDER SUCH ACT RELATING TO DISPOSITION OF
SECURITIES."
(6) The Investor (or, if applicable, each managed
account on whose behalf the Investor Shares are being purchased by the Investor)
will acquire the Investor Shares pursuant to this Agreement for its own account
for investment and not with a view to, or in connection with, the resale or
distribution thereof or in any arrangement or understanding with any other
persons regarding the distribution of such Shares in violation of the Securities
Act. The Investor hereby covenants and agrees to execute a lockup agreement,
containing a ninety (90) day restriction on the sale of Investor Shares, and
other standard terms and conditions, with any requesting underwriter
participating in a primary offering (as defined in Section 5.1(a)(1) below).
(7) The Investor hereby covenants and agrees with the
Company not to make any sale of the Investor Shares without causing the
prospectus delivery requirement under the Securities Act to be satisfied or
otherwise complying with the Securities Act, and the Investor acknowledges and
agrees that the Shares are not transferable on the books of the Company unless
the certificate submitted to the transfer agent evidencing the Investor Shares
is accompanied by (1) a separate certificate (i) in the form of ANNEX V hereto,
(ii) executed by an officer of, or other authorized person designated by, the
Investor, and (iii) to the effect that (A) the Investor Shares have been sold in
accordance with a registration statement pursuant to Section 5 and (B) the
requirement of delivering a current prospectus has been satisfied; or (2) an
opinion of counsel reasonably satisfactory to the Company stating that
registration is not required under the Securities Act. The Investor acknowledges
that there may be times when the Company may suspend the use of the prospectus
forming a part of a registration statement in the event and during such period
pending negotiations relating to, or consummation of, a transaction or the
occurrence of any other event that would require additional disclosure of
material information by the Company in the registration statement and disclosing
such information would adversely affect the Company (as to which the Company
has a BONA FIDE business purpose for preserving confidentiality) that would
make it impractical or inadvisable to cause the registration statement to be
filed or to become effective or to amend or supplement the registration
statement or which otherwise renders the Company unable to comply with the
Securities and Exchange Commission (the "Commission") requirements. In such
event, the Company may suspend the use of such prospectus until such time as
an amendment to such registration statement has been filed by the
4
<PAGE>
Company and declared effective by the Commission, or until such time as the
Company has filed an appropriate report with the Commission pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); PROVIDED,
HOWEVER, that such suspension shall not be for a period of more than 30
consecutive trading days during any one (1) suspension period or more than 60
trading days in any one (1) year period. The Investor hereby covenants and
agrees that it will not sell any Investor Shares pursuant to said prospectus
during the period commencing at the time at which the Company gives the Investor
written notice of the suspension of the use of said prospectus and ending the
earlier of 30 consecutive trading days after such notice or the date on which
the Company gives the Investor written notice that the Investor may thereafter
effect sales pursuant to said prospectus.
(8) The execution and delivery of this Agreement by
the Investor and the performance of this Agreement and the consummation by the
Investor or the Investor's advisory clients, as the case may be, of the
transactions contemplated hereby have been duly authorized by all necessary
(corporate, in the case of a corporation) action of the Investor and, if
applicable, the Investor's advisory clients; and this Agreement, when duly
executed and delivered by the Investor, will constitute a valid and legally
binding instrument, enforceable in accordance with its terms against the
Investor or any of the Investor's advisory clients, as the case may be, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether the issue of enforceability
is considered in a proceeding in equity or at law) and except as the
indemnification and contribution agreements of the Investor in Section 5(d)
hereof may be legally unenforceable.
(9) The Investor represents that:
(A) If the Investor is a corporation, it
is a corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with full power and authority
(corporate and other) to perform its obligations under this Agreement. If the
Investor is a limited liability company, it is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (limited
liability company and other) to perform its obligations under this Agreement.
The person executing this Agreement on behalf of the Investor is authorized to
act for the Investor in purchasing the Shares.
(B) If the Investor is a corporation
acting in an advisory capacity, it is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority (corporate and other) to act on
behalf of its advisory clients under this Agreement. If the Investor is a
limited liability company acting in an advisory capacity, it is a limited
liability company duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with full power and authority
(corporate and other) to act on behalf of its advisory clients under this
Agreement
(C) If the Investor is a trust, the trustee
thereunder has been duly appointed as trustee of such Investor with full power
and authority to act on behalf of such Investor and to perform the obligations
of such Investor under this Agreement. Furthermore, the trustee under such
5
<PAGE>
trust has independently determined that the purchase of the Investor Shares is a
suitable investment for such trust as authorized by the terms thereof and
applicable laws and regulations.
(D) If the Investor is a limited
partnership, it is a limited partnership duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, with full
power and authority to perform its obligations under this Agreement.
(E) If the Investor is a limited
partnership acting in an advisory capacity, it is a limited partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, with full power and authority to act on behalf
of its advisory clients under this Agreement.
(F) If the Investor is a corporation,
limited liability company, partnership, trust or other form of business entity,
the execution and delivery of this Agreement will not contravene or result in a
default under any provision of existing law or regulations to which the Investor
is subject, the provisions of its trust instrument, charter, by-laws or other
governing documents or any indenture, mortgage or other agreement or instrument
to which it is a party or by which it is bound and does not require on its part
any approval, authorization, license or filing from or with any foreign,
federal, state or municipal board or agency which has not been obtained or duly
made.
(G) If the Investor is an individual,
the Investor has full power and authority to perform its obligations under this
Agreement.
(10) The Investor agrees to complete and execute and
return to the Company (a) the Investor Questionnaire attached as ANNEX I to this
Agreement representing that the Investor is investing in Shares as an
"accredited investor;" (b) if the Investor is acting on behalf of a managed
account in the purchase of any Investor Shares, the Managed Accounts
Representation Letter attached as ANNEX II to this Agreement; and (c) the
Registration Statement Questionnaire attached as ANNEX IV, in each case together
with an executed signature page to this Agreement. The Investor represents and
warrants that the answers thereto are true and correct as of the date hereof and
will be true and correct as of the effective date of the Registration Statement
(as defined in Section 5). The Investor further represents and warrants that it
is not purchasing the Investor Shares on behalf of any managed account other
than as listed in the Managed Account Representation Letter.
(11) The Investor has not entered into any contracts,
arrangements, understandings or relationships (written or otherwise) with any
other Person or Persons (other than the Company or a limited partner/member or
affiliate of Investor, which in any case shall not violate any securities laws)
with respect to any securities of the Company (including but not limited to
transfer or voting of any of the securities, finder's fees, joint ventures, loan
or option arrangements, puts or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies) or the operations,
management or control of the Company; the Investor is not bound together, under
common control with, in a common enterprise with, or otherwise acting in concert
with, any other Person or Persons (other than a limited partner/member or
affiliate of Investor, which in any case shall not violate any securities laws)
in connection with the transactions contemplated by this Agreement; and the
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<PAGE>
Investor does not own any securities of the Company which are pledged or
otherwise subject to a contingency the occurrence of which would give another
Person voting power or investment power over such securities.
(12) Except as otherwise set forth in ANNEX III: (i)
as of the date hereof, the Investor did not beneficially own any shares of
Common Stock; and (ii) as of the date of this Agreement, the Investor does not
beneficially own any shares of Common Stock. The Company acknowledges that
certain of the members/limited partners of Investor may own shares of Common
Stock; PROVIDED that such member/limited partner is an "accredited investor" as
defined in Rule 501 of the Securities Act.
(13) No state, federal or foreign regulatory
approvals, permits, licenses or consents or other contractual or legal
obligations are required for the Investor to enter into this Agreement or
otherwise purchase the Investor Shares.
(b) COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS. The
Company hereby represents, warrants and agrees as follows:
(1) The Company and each of its subsidiaries has been
duly organized and is validly existing in good standing under the laws of the
jurisdiction of its organization, with full power and authority (corporate and
other) to perform its obligations under this Agreement and the Warrant Agreement
and to consummate the transactions contemplated hereby and thereby.
(2) The execution, delivery and performance of this
Agreement and the Warrant Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action of the Company and each of the Agreement and
the Warrant Agreemet has been duly executed and delivered by the Company; and
this Agreement and the Warrant Agreement, when duly executed and delivered by
the Investor, will constitute a valid and legally binding instrument of the
Company enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether the issue of enforceability
is considered in a proceeding in equity or at law) and except as the
indemnification and contribution agreements of the Company in Section 5(d)
hereof may be legally unenforceable.
(3) The Investor Shares have been duly authorized by
the Company, and when issued and delivered by the Company against payment
therefor as contemplated hereby and in accordance with the terms of the
Memorandum, the Investor Shares will be validly issued, fully paid and
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interests in respect of the issuance thereof.
(4) The execution and delivery of this Agreement and
the Warrant Agreement, the consummation by the Company of the transactions
herein and therein contemplated and the compliance by the Company with the terms
hereof and thereof do not and will not violate the
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<PAGE>
Certificate of Incorporation of the Company, or the By-Laws of the Company, or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of their properties or assets are subject, or any
applicable statute or any order, judgment, decree, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties or assets; and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the valid
authorization, execution, delivery and performance by the Company of this
Agreement, the issue of the Investor Shares or the consummation by the Company
of the other transactions contemplated by this Agreement, except for such
consents, approvals, authorizations, registrations or qualifications as may be
required under Federal or state securities or "blue sky" laws or, with respect
to requirements applicable to the Investor.
(5) The information contained in the following
documents, which the Company has furnished to the Investor does not contain any
untrue statement of material fact or omit to state any material fact necessary
in order to make the statements therein in light of the circumstances in which
they were made not misleading as of the respective final dates of the documents.
Each of the documents listed in (A) through (F) below complied as to form in all
material respects with the applicable requirements of the Securities Act or
Exchange Act.
(A) the Company's Annual Report to Stockholders
on Form 10-K for the fiscal year ended
December 31, 1998 (without exhibits);
(B) Amendment No. 1 to the Company's Annual
Report for the fiscal year ended December
31, 1998 on Form 10-K/A;
(C) Notice to Shareholders and Proxy Statement
for its Annual Meeting of Shareholders held
June 16, 1999;
(D) the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 30,
1999;
(E) the Company's Current Report on Form 8-K,
filed with the SEC as of June 2, 1999;
(F) Amendment No. 1 to Current Report on Form
8-K/A, filed with the SEC on August 2, 1999;
(G) the Company's January 31, 2000 Press Release
regarding Fourth Quarter and Year End
Financial Results; and
(H) the Memorandum.
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<PAGE>
(6) The balance sheets attached to the Company's January
31, 2000 Press Release regarding Fourth Quarter and Year End Financial Results
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis, are consistent in all material respects with the
books and records of the Company and accurately present in all material respects
the financial position of the Company and its subsidiaries as of December 31,
1999. There has been no material adverse change in the financial condition or
business or results of operations of the Company or its subsidiaries since
September 30, 1999.
(7) Except as disclosed in the documents referred to in
paragraph (5) above, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
affecting the Company or any of its subsidiaries, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business, condition (financial or other), or results of operations
of the Company and its subsidiaries taken as a whole or the transactions
contemplated by this Stock and Warrant Purchase Agreement or any of the
documents contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under this Stock and Warrant Purchase Agreement or any of such other
documents.
(c) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Investor herein and in the certificates for the Investor Shares delivered
pursuant hereto shall survive the execution of this Agreement, the delivery to
the Investor of the Investor Shares being purchased and the payment therefor.
5. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.
(a) REGISTRATION RIGHTS; REGISTRATION PROCEDURES AND EXPENSES.
(1) If at any time or times after the date hereof, the
Company shall determine or be required to register any shares of its Common
Stock or other equity securities for sale under the Securities Act (whether in
connection with a public offering of securities by the Company (a "primary
offering"), a public offering of securities by stockholders of the Company (a
"secondary offering") or both), but not in connection with a registration
effected solely to implement an employee benefit plan or a transaction to which
Rule 145 or any other similar rule of the Commission under the Securities Act is
applicable, the Company shall:
(i) Promptly give written notice thereof to each of the
Investors.
(ii) Use reasonable best efforts to effect the
registration under the Securities Act of all Investor Shares (but not any other
shares) which such Investors request to be registered in a writing delivered to
the Company within 20 days after such Investors' receipt of the notice referred
to above, subject to subparagraph (iii) below.
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<PAGE>
(iii) In the case of the registration of shares of
Common Stock by the Company in connection with an underwritten public offering,
(i) the Company shall not be required to include any Investor Shares in such
underwriting unless the Investors thereof accept the terms of the underwriting
as agreed upon between the Company and the underwriter or underwriters selected
by it, and (ii) if the underwriter(s) determines that marketing factors require
a limitation on the number of Investor Shares to be offered, the Company shall
not be required to register Investor Shares of the Investors in excess of the
amount, if any, of shares of the capital stock which the principal underwriter
of such underwritten offering shall reasonably and in good faith agree to
include in such offering in excess of any amount to be registered for the
Company, and in the event of any such limitation the number of Investor Shares
of any Investor requesting inclusion in such registration shall be based upon
the relative holdings of Common Stock of all Investors requesting such
registration (and if any Investor would thus be entitled to include more
Investor Shares than such Investor requested to be registered, the excess shall
be allocated among other requesting Investors PRO RATA based upon their relative
holdings of Common Stock). All expenses relating to the registration and
offering of Investor Shares pursuant to this Section 5(a)(1) and pursuant to
Section 5(a)(2) below shall be borne by the Company, except that the Investors
shall bear underwriting and selling commissions attributable to their Investor
Shares being registered and any transfer taxes on shares being sold by such
Investors.
(2) The Company shall:
(a) Subject to the provisions of Section 5(c) below,
prepare and file with the Commission within 120 days of the Closing a
registration statement (the "Registration Statement") to enable the public
offering and sale of the Investor Shares by the Investor from time to time
through the over-the-counter market or in privately-negotiated transactions or
otherwise.
(b) Use reasonable best efforts, subject to receipt of
necessary information from the Investor, to cause the Registration Statement to
become effective as promptly as practicable after filing thereof and in any
event not more than 75 days after such filing.
(c) Promptly prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep the Registration Statement
effective for a period not exceeding the second anniversary of the Closing, or
such shorter period which will terminate on the earlier of the date when (i) the
Shares held by the Investor may be sold without registration under the
Securities Act or (ii) all of the Shares covered by such Registration Statement
have been sold pursuant to such Registration Statement or otherwise.
(d) Promptly furnish to the Investor with respect to
the Investor Shares registered under the Registration Statement (and to each
underwriter, if any, of such Investor Shares) such number of copies of the
Registration Statement and any amendment or supplement thereto and of
prospectuses and preliminary prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Investor may reasonably
request, in order to keep the Investor
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<PAGE>
apprised of the progress of the registration process and to facilitate the
public sale or other disposition of all or any of the Investor Shares by the
Investor.
(e) Promptly file documents required of the Company for
customary "blue sky" clearance in states specified in writing by the Investor
and reasonably required by the Investor in order to resell its Investor Shares;
PROVIDED, HOWEVER, that the Company shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented.
(f) Promptly inform the Investor when any stop order by
the Commission has been issued with respect to the Investor Shares and use its
best efforts to promptly cause such stop order to be withdrawn.
(g) Take such other actions as may reasonably be
necessary to effect the registration of the resale of the Investor Shares in
accordance with the terms of this Agreement and to allow such Investor Shares to
trade in the same market system or exchange where the Company's Common Stock
then trades.
(h) File the reports required to be filed by it under
the Securities Act and the Exchange Act (or, if the Company is not required to
file such reports, it will, upon the request of any holder of Investor Shares,
make publicly available other information so long as necessary to permit sales
under Rule 144 under the 1933 Act), all to the extent required from time to time
to enable the Investor to sell Investor Shares without registration under the
Securities Act within the limitations provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission; PROVIDED,
HOWEVER, that nothing in this Agreement shall require the Company to file
reports under the Securities Act or the Exchange Act, to register any of its
securities under the Exchange Act, or to make publicly available any information
concerning the Company at any time when it is not required by law or by any
agreement by which it is bound to do any of the foregoing.
A questionnaire related to the Registration Statement to be completed by the
Investor is attached hereto as ANNEX IV.
(b) TRANSFER OF SHARES. The Investor agrees not to effect any
disposition of the Shares or the right to purchase the Shares that would
constitute a sale within the meaning of the Securities Act except as
contemplated in Sections 5(a)(1) and (2) or pursuant to an exemption from
registration under the Securities Act. The Investor agrees to promptly notify
the Company of any changes in the information set forth in any registration
statement regarding the Investor Shares or the Investor.
(c) The Investor hereby acknowledges and agrees that in the
event that the Company makes any filing with the SEC in connection with a
primary underwritten offering within 120 days following the Closing Date, the
time period for preparing and filing a Registration Statement as
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contemplated by Section 5(a)(2) above shall be extended until September 30, 2000
and the Company shall use its reasonable best efforts, subject to the receipt of
necessary information from the Investor, to cause the Registration Statement to
become effective as promptly thereafter as practicable and in any event not more
than 75 days after such filing.
(d) INDEMNIFICATION AND CONTRIBUTION. For the purpose of this
Section 5(d):
(1) The term "Selling Shareholder" shall include the
Investor, officers, directors, trustees, or any affiliate of such Investor and
each person, if any, who controls the Selling Shareholder within the meaning of
the Securities Act;
(2) The term "Registration Statement" shall include (i) the
Registration Statement and any final prospectus, exhibit, supplement or
amendment included in or relating to the Registration Statement and (ii) any
registration statement filed in connection with Section 5(a)(1) and any final
prospectus, exhibit, supplement or amendment included in or relating to such
registration statement; and
(3) The term "untrue statement" shall include any untrue
statement or alleged untrue statement, or any omission or alleged omission to
state in the Registration Statement a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The Company agrees to indemnify and hold harmless each Selling
Shareholder from and against any losses, claims, damages or liabilities to which
such Selling Shareholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or arise out of any failure by the Company to fulfill any
undertaking included in the Registration Statement and the Company will
reimburse such Selling Shareholder for any reasonable legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim, PROVIDED, HOWEVER, that the Company shall not be
liable in any such case to the extent that such loss, claim, damage or liability
arises out of, or is based upon, any such untrue statement or omission made in
such Registration Statement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Selling Shareholder
specifically for use in preparation of the Registration Statement, or the
failure of such Selling Shareholder to comply with the covenants and agreements
contained in Sections 3(a) and 5(c) hereof respecting sale of the Shares or any
statement or omission in any prospectus that is corrected or made not misleading
in any subsequent prospectus that was delivered to the Investor prior to the
pertinent sale or sales by the Investor. The Company will reimburse such Selling
Shareholder, as the case may be, for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim.
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The Investor agrees to indemnify and hold harmless the Company (and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, each officer of the Company who signs the Registration
Statement and each director of the Company) from and against any losses, claims,
damages or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any failure to
comply with the covenants and agreements contained in Sections 3(a) and 5(b)
hereof respecting sale of the Shares, or any untrue statement of a material fact
contained in the Registration Statement on the effective date thereof if such
untrue statement was made in reliance upon and in conformity with written
information furnished by or on behalf of the Investor specifically for use in
preparation of the Registration Statement, PROVIDED, HOWEVER, that such Investor
shall not be liable in any such case to the extent that the Investor has
furnished in writing to the Company information expressly for use in such
Registration Statement or any amendment thereof or supplement thereto which
corrected or made not misleading information previously furnished to the Company
prior to the filing of the Registration Statement, and if thereafter, has
notified the Company of such information immediately upon its occurrence or the
Investor's knowledge of its occurrence. The Investor will reimburse the Company
(or such officer, director or controlling person), as the case may be, for any
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim. In no event shall the
liability of the Investor hereunder be greater in amount than the dollar amount
of the proceeds received by such Investor upon the sale of the Shares giving
rise to such indemnification obligation.
Promptly after receipt by any indemnified person of a notice of a claim
or the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 5(d), such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person and such
indemnifying person shall be entitled to participate therein, and, to the extent
it shall wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the indemnifying
person to such indemnified person of its election to assume the defense thereof,
such indemnifying person shall not be liable to such indemnified person for any
legal expenses subsequently incurred by such indemnified person in connection
with the defense thereof, PROVIDED, HOWEVER, that if there exists or shall exist
a conflict of interest that would make it inappropriate, in the opinion of
counsel to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person; PROVIDED, HOWEVER, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel for all indemnified parties.
If the indemnification provided for in this Section 5(d) from the
indemnifying person is unavailable to an indemnified person hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to herein, then
the indemnifying person, in lieu of indemnifying such indemnified person, shall
contribute to the amount paid or payable by such indemnified person as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative
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fault of the indemnifying person and indemnified persons in connection with the
actions which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative fault of
such indemnifying person and indemnified persons shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact, has been made by, or
relates to information supplied by, such indemnifying person or indemnified
persons, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in this Section 5(d), any reasonable legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Investor shall be
required to contribute any amount in excess of the dollar amount of the proceeds
received by such Investor upon the sale of the Shares giving rise to such
contribution obligation. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) TERMINATION OF CONDITIONS AND OBLIGATIONS. The conditions
precedent imposed by Section 2 or this Section 5 upon the transferability of the
Investor Shares shall cease and terminate as to any particular number of the
Investor Shares when such Investor Shares shall have been effectively registered
under the Securities Act and sold or otherwise disposed of in accordance with
the intended method of disposition set forth in the registration statement
covering such Investor Shares or at such time as an opinion of counsel
satisfactory to the Company shall have been rendered to the effect that such
conditions are not necessary in order to comply with the Securities Act.
(f) INFORMATION AVAILABLE. So long as a registration statement
is effective covering the resale of the Investor Shares, the Company will
furnish to the Investor:
(1) As soon as practicable after available (but in the
case of the Company's Annual Report to Shareholders, within one hundred twenty
(120) days after the end of each fiscal year of the Company), one copy of (i)
its Annual Report to Shareholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting principles
by a national firm of certified public accountants), (ii) if not included in
substance in the Annual Report to Shareholders, its Annual Report on Form 10-K
or equivalent form, (iii) its Quarterly Reports to Shareholders, (iv) if not
included in substance in its Quarterly Reports to Shareholders, its quarterly
reports on Form 10-Q or equivalent form, and (v) a full copy of the particular
registration statement covering the Shares (the foregoing, in each case,
excluding exhibits);
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(2) Upon the reasonable request of the Investor, all
exhibits excluded by the parenthetical to subparagraph (i) of this Section 5(f)
and all other information that is made available to shareholders; and
(3) Upon the reasonable request of the Investor, an
adequate number of copies of the prospectuses to supply to any other party
requiring such prospectuses;
and the Company, upon the reasonable request of the Investor, will meet with the
Investor or a representative thereof at the Company's headquarters to discuss
all information relevant for disclosure in the registration statement covering
the Investor Shares and will otherwise cooperate with any Investor conducting an
investigation for the purpose of reducing or eliminating such Investor's
exposure to liability under the Securities Act, including the reasonable
production of information at the Company's headquarters.
8. MISCELLANEOUS.
(a) FEES AND EXPENSES. The Company shall reimburse the
Investor for its out-of-pocket expenses incurred in connection with (i) the
transactions contemplated hereby and (ii) the procedures in Section 5(a)(2)(a)
through (h) hereof, other than fees and expenses, if any, of counsel or other
advisors to the Investor upon delivery to the Company of reasonable
documentation setting forth such out-of-pocket expenses. Notwithstanding the
foregoing the Company shall reimburse the Investors for the reasonable fees and
expenses (not to exceed $15,000) of one counsel to the Investors in connection
with (i) the transactions contemplated hereby and (ii) the procedures in Section
5(a)(2)(a) through (h) hereof upon delivery to the Company of reasonable
documentation. The parties hereto acknowledge and agree that the Company shall
have no obligation to reimburse the Investors, and the Investors shall be solely
liable for, all such fees and expenses of counsel in excess of $15,000.
(b) BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be
binding upon, and shall inure solely to the benefit of, each of the parties
hereto, and each of their respective heirs, executors, administrators,
successors and permitted assigns, and no other person shall acquire or have any
right under or by virtue of this Agreement. The Investor may not assign any of
its rights or obligations hereunder to any other person or entity without the
prior written consent of the Company.
(c) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
may be amended only by written execution by both parties. By executing this
Agreement below, the Investor agrees to be bound by all of the terms,
provisions, warranties, covenants and conditions contained herein. Upon
acceptance by the Company, this Agreement shall be binding on both parties
hereto.
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(d) CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE ENFORCED,
GOVERNED AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS
PRINCIPLES. FURTHERMORE, EACH INVESTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE UNITED
STATES OF AMERICA FOR THE DISTRICT OF MASSACHUSETTS IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(e) NOTICES. All notices, requests, consents and other
communication hereunder shall be in writing, shall be mailed by first class
registered or certified mail, or nationally recognized overnight express courier
postage prepaid, and shall be deemed given when so mailed and shall be delivered
as addressed as follows:
if to the Company, to:
BioSphere Medical, Inc.
111 Locke Drive
Marlborough, Massachusetts 01752
Attn: Robert Palladino
Chief Financial Officer
with a copy mailed to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: Stuart M. Cable, P.C.
or to such other person at such other place as the Company shall designate to
the Investor in writing; and
if to the Investor, at its address as set forth at the end of this Agreement, or
at such other address or addresses as may have been furnished to the Company in
writing.
(f) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one in the same agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BIOSPHERE MEDICAL, INC.
By:
------------------------------------
Name:
Title:
Accepted and Agreed as of the date
first above written:
- --------------------------------------
Name of Investor (Print)
By:
----------------------------------
Name:
Title
Address:
--------------------------
--------------------------
--------------------------
Telephone:
--------------------------
Facsimile:
Nominee (name in which Investor Shares are to
be registered, if different than name of Investor)
Address of Nominee:
- ---------------------------------------
- ---------------------------------------
- ---------------------------------------
Taxpayer I.D. Number:
---------------------
(if acquired in the name of a nominee, the taxpayer
I.D. number of such nominee)
S-1
<PAGE>
(CONTINUED ON NEXT PAGE)
Designated Bank__________________________
Address__________________________________
ABA No.
Account No.______________________________
Attention _______________________________
EACH INVESTOR EXECUTING THESE PURCHASE AGREEMENT SIGNATURE
PAGES ON BEHALF OF ONE OR MORE MANAGED ACCOUNTS SHOULD PROVIDE
THE NAME OF, AND FOREGOING INFORMATION WITH RESPECT TO, EACH
SUCH MANAGED ACCOUNT.
S-2
<PAGE>
ANNEX I
INVESTOR QUESTIONNAIRE
The Shares are being offered for sale to "accredited investors" as that
term is defined in Rule 501 under the Securities Act of 1933, as amended (the
"Act").
The undersigned entity certifies that it (and each managed account on
whose behalf Investor Shares are being purchased by it) is an "accredited
investor" because it is (check one or more items below):
_____ i. a bank as defined in section 3(a)(2) of the Act whether acting
in its individual or fiduciary capacity;
_____ ii. a savings and loan association or other institution as defined
in section 3(a)(5)(A) of the Act whether acting in its
individual or fiduciary capacity;
_____ iii. a broker dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934, as amended;
_____ iv. an insurance company as defined in section 2(13) of the Act;
_____ v. an investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act");
_____ vi. a business development company as defined in section 2(a)(48) of
the 1940 Act;
_____ vii. a Small Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958;
_____ viii. a plan established and maintained by a state or its political
subdivision for the benefit of its employees, provided that such
plan has total assets in excess of $5,000,000;
_____ ix. an employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 ("ERISA"),
provided that the investment decision is made by a plan
fiduciary, as defined in section 3(21) of ERISA, and the plan
fiduciary is either a bank, savings and loan association,
insurance company or registered investment adviser or provided
that the employee benefit plan has total assets in excess of
$5,000,000; or if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;
<PAGE>
ANNEX I
Page 2
_____ x. a private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
_____ xi. an organization described in section 501(c)(3) of the Internal
Revenue Code, not formed for the specific purpose of acquiring
the Investor Shares, with total assets in excess of $5,000,000;
_____ xii. a director or executive officer, or general partner of the
Company;
_____ xiii. a corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring
the Investor Shares, with total assets in excess of $5,000,000;
_____ xiv. a trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Investor Shares, and
the purchase of the Investor Shares is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) under
the Act;
_____ xv. a natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his purchase exceeds
$1,000,000;
_____ xvi. a natural person who had an individual income in excess of
$200,000 in each of 1998 and 1999 or joint income with that
person's spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching the same income
level in 2000;
_____ xvii. an entity in which all of the equity owners are accredited
investors (described in any of (i) - (xvi) above).
INVESTOR:
By:
--------------------------
Name:
Title:
<PAGE>
ANNEX II
[Form of Managed Accounts Representation Letter]
BioSphere Medical, Inc.
111 Locke Drive
Marlborough, MA 01752
Ladies and Gentlemen:
Reference is hereby made to (i) that certain Stock and Warrant Purchase
Agreement, dated as of February __, 2000 (the "Agreement"), by and between you
and the undersigned relating to the purchase of shares of the common stock, par
value $0.01 per share (the "Common Stock"), of BioSphere Medical, Inc.
("BioSphere"), and warrants (the "Warrants") to purchase shares of Common Stock
and (ii) the certain Warrant Agreement, dated as of February __, 2000 (the
"Warrant Agreement"), by and between BioSphere and the Investor regarding the
Warrants. Capitalized terms used herein that are not defined herein have the
meaning set forth in the Agreement.
The undersigned has executed or is executing the Agreement and the
Warrant Agreement as an Investor.
This Managed Accounts Representation Letter will serve to advise you
that in executing the Agreement, the undersigned has acted for or on behalf of
one or more persons ("Accounts") pursuant to authority granted to the
undersigned by each such Account.
The undersigned hereby represents and warrants to, and covenants and
agrees with, you that:
i. the shares of Common Stock and Warrants being purchased
under the Agreement by or for an Account are being purchased
for the benefit of the Account and the undersigned is not
acting for itself but is acting as a fiduciary on behalf of
such Account;
ii. the representations and warranties of the Investor set forth
in Section 3(a)(iii) of the Agreement are true and correct
as to each Account and the Investor Shares being purchased
by or for such Account;
iii. each such Account will be fully bound by and subject to the
Agreement in all respects as an Investor;
<PAGE>
iv. the undersigned is fully authorized by each such Account to
enter into the Agreement with full authority regarding the
investment in and disposition of the Investor Shares, the
evaluation of the merits and risks of the investment and to
execute this Managed Accounts Representation Letter for or
on behalf of such Account;
v. the undersigned is registered or licensed as either an
investment adviser or a dealer or broker and is in
compliance with all investment adviser or dealer and broker
requirements, as the case may be, in connection with the
sale of the Investor Shares and with all the statutes, rules
and regulations with respect to registration or licensing in
each state in which the Investor Shares are sold by the
undersigned; and
Executed as of the date as of which the Agreement is executed by the
undersigned.
ACCOUNT MANAGER:
-------------------------------------
By:
---------------------------------
Name:
Title:
On behalf of the following accounts:
<PAGE>
ANNEX III
NUMBER OF SHARES BENEFICIALLY OWNED
<PAGE>
ANNEX IV
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement,
please provide us with the following information:
1. Pursuant to the "Selling Shareholder" section of the Registration
Statement, please state your or your organization's name exactly as it should
appear in the Registration Statement:
2. Please provide the following information, as of the Closing Date:
(1) (2)
Number of shares
Number of Shares if any, which will
which are being be owned after
included in the completion of sale
Registration of Shares included
Statement (if all in the Registration
purchased, put all) statement
------------------- ---------
3 Have you or your organization had any position, office or other
material relationship within the past three (3) years with the Company or its
affiliates other than as disclosed in the Memorandum?
___ Yes ___ No
If yes, please indicate the nature of any such relationship below:
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
<PAGE>
ANNEX V
Attention:
INVESTOR'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly authorized by]
______________ [fill in official name of individual or institution] hereby
certifies that he/she [said institution] is the Investor in the shares evidenced
by the attached certificate, and as such, sold such shares on ________ [date] in
accordance with registration statement number ___________________ [fill in the
number of or otherwise identify registration statement] and the requirement
of delivering a current prospectus and current annual and quarterly reports
by the Company has been complied with in connection with such sale.
Print or Type:
Name of Investor
(Individual or
Institution) ______________________________
Name of Individual
representing
Investor (if an
Institution): ______________________________
Title of Individual
representing
Investor (if an
Institution): ______________________________
Signature by:
Individual Investor or
Individual representing
Investor: ______________________________
<PAGE>
ANNEX VI
WIRE INSTRUCTIONS
Fleet Bank
100 Federal Street
Boston, MA 02167
ABA #: 011-000-138
Acct Name: BioSepra Inc.
Acct Officer: Kim Martone
Acct #: 9372882412
<PAGE>
Exhibit 10.13
Warrant Agreement
dated February 4, 2000
The following parties have entered into the Warrant Agreement attached
hereto in connection with warrants to purchase shares of Common Stock of
BioSphere Medical, Inc.:
<TABLE>
<CAPTION>
Purchaser Shares Underlying Warrants
- -----------------------------------------------------------------
<S> <C>
ABS Employees' Venture 6,944
Fund Limited Partnership
- -----------------------------------------------------------------
ACI Capital / BSMD, LLC 4,166
- -----------------------------------------------------------------
ACI Capital / BSMDI, LLC 44,444
- -----------------------------------------------------------------
Biopergs, LLC 6,944
- -----------------------------------------------------------------
Cerberus Partners, L.P. 13,889
- -----------------------------------------------------------------
Cerberus International, LTD. 27,778
- -----------------------------------------------------------------
Pequod Investments, L.P. 25,000
- -----------------------------------------------------------------
Pequod International, LTD 16,667
- -----------------------------------------------------------------
Richard Gallen & Co. Pension 2,778
Trust 002
- -----------------------------------------------------------------
Ursus Capital, L.P. 3,750
- -----------------------------------------------------------------
John M. Carnuccio 1,388
- -----------------------------------------------------------------
Jean-Marie Vogel 1,388
- -----------------------------------------------------------------
David P. Southwell 1,388
- -----------------------------------------------------------------
Timothy J. Barberich 6,944
- -----------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
BY AND BETWEEN
BIOSPHERE MEDICAL, INC.
AND
THE PURCHASER NAMED HEREIN
DATED AS OF February 4, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
ARTICLE I
WARRANT CERTIFICATES.....................................................................................1
Section 1.1 Forms of Warrant Certificates..........................................................1
Section 1.2 Execution of Warrant Certificates......................................................1
Section 1.3 Registration of Warrant Certificates...................................................2
Section 1.4 Exchange and Transfer of Warrant Certificates..........................................2
Section 1.5 Lost, Stolen, Mutilated or Destroyed Warrant Certificates..............................3
Section 1.6 Cancellation of Warrant Certificates...................................................3
ARTICLE II
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS..........................................................3
Section 2.1 Exercise Price.........................................................................3
Section 2.2 Registration of Warrants and Warrant Shares............................................3
Section 2.3 Procedure for Exercise of Warrants.....................................................3
Section 2.4 Issuance of Common Stock...............................................................4
Section 2.5 Certificates for Unexercised Warrants..................................................4
Section 2.6 Reservation of Shares..................................................................4
Section 2.7 No Impairment..........................................................................4
ARTICLE III
ADJUSTMENTS AND NOTICE PROVISIONS........................................................................5
Section 3.1 Adjustment of Exercise Price...........................................................5
Section 3.2 No Adjustments to Exercise Price.......................................................5
Section 3.3 Adjustment of Number of Shares.........................................................5
Section 3.4 Reorganizations........................................................................5
Section 3.5 Verification of Computations...........................................................6
Section 3.6 Notice of Certain Actions..............................................................6
Section 3.7 Certificate of Adjustments.............................................................7
Section 3.8 Warrant Certificate Amendments.........................................................7
Section 3.9 Fractional Shares......................................................................7
ARTICLE IV
MISCELLANEOUS............................................................................................8
Section 4.1 Payment of Taxes and Charges...........................................................8
Section 4.2 Changes to Agreement...................................................................8
Section 4.3 Assignment.............................................................................8
Section 4.4 Successor to Company...................................................................8
Section 4.5 Notices................................................................................8
Section 4.6 Defects in Notice......................................................................9
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 4.7 Governing Law and Consent to Jurisdiction..............................................9
Section 4.8 Standing..............................................................................10
Section 4.9 Counterparts..........................................................................10
Section 4.10 Availability of the Agreement.........................................................10
Section 4.11 Entire Agreement......................................................................10
WARRANT AGREEMENT
COMPANY SIGNATURE PAGE..................................................................................11
WARRANT AGREEMENT
PURCHASER SIGNATURE PAGE................................................................................12
EXHIBIT A - FORM OF WARRANT CERTIFICATE.........................................................................A-1
</TABLE>
(ii)
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated as of February __, 2000, is entered into
by and between BioSphere Medical, Inc., a Delaware corporation (the
"Company"), and the undersigned purchaser (the "Purchaser").
WITNESSETH:
WHEREAS, the Company proposes to sell pursuant to a Stock and Warrant
Purchase Agreement, dated as of February __, 2000 (the "Purchase Agreement"), by
and between the Company and the Purchaser, ___ shares of common stock, par value
$.01 per share, of the Company (the "Common Stock") and warrants (each, a
"Warrant", and collectively, the "Warrants") to purchase up to an aggregate of
___ shares (subject to adjustment) of Common Stock (the Common Stock issuable
upon exercise of the Warrants being referred to herein as the "Warrant Shares");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
WARRANT CERTIFICATES
Section 1.1 FORMS OF WARRANT CERTIFICATES. The warrant certificates
(the "Warrant Certificates") shall be issued in registered form only and,
together with the form of the election to purchase (the "Election to Purchase"),
and assignment (the "Assignment") to be attached thereto, shall be substantially
in the form of EXHIBIT A attached hereto and, in addition, may have such
letters, numbers or other marks of identification or designation and such
legends, summaries, or endorsements stamped, printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as, in any particular case, may be required in
the opinion of counsel for the Company, to comply with any law or with any rule
or regulation of any regulatory authority or agency, or to conform to customary
usage.
Section 1.2 EXECUTION OF WARRANT CERTIFICATES. The Warrant Certificates
shall be executed on behalf of the Company by its Chairman or President or any
Vice President and attested to by its Secretary or Assistant Secretary, either
manually or by facsimile signature printed thereon. In case any authorized
officer of the Company who shall have signed any of the Warrant Certificates
shall cease to be an officer of the Company either before or after delivery
thereof by the Company to any Purchaser, the signature of such person on such
Warrant Certificates shall be valid nevertheless and such Warrant Certificates
may be issued and delivered to those persons entitled to receive the Warrants
represented thereby with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be an officer of the Company.
<PAGE>
Section 1.3 REGISTRATION OF WARRANT CERTIFICATES. The Company shall
number and register the Warrant Certificates in a register as they are needed.
The Company may deem and treat the registered holder(s) of the Warrant
Certificates (the "Holders") as the absolute owner(s) thereof for all purposes.
Section 1.4 EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES. The Warrants
(and any Warrant Shares issued upon exercise of the Warrants) shall be
transferable only in accordance with the terms of this Agreement and the
Purchase Agreement and shall bear a legend in substantially the following form:
"NEITHER THE ISSUANCE OF SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE ISSUANCE OF ANY SECURITIES ISSUABLE UPON
THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), NOR UNDER THE
SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES
MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE
UNDER THE SECURITIES ACT OR (ii) ANY EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. ANY TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS
CONTAINED IN A STOCK AND WARRANT PURCHASE AGREEMENT DATED AS
OF FEBRUARY 4, 2000, AS AMENDED FROM TIME TO TIME, AND THE
TERMS AND CONDITIONS CONTAINED IN A WARRANT AGREEMENT DATED AS
OF FEBRUARY 4, 2000, AS AMENDED FROM TIME TO TIME. A COMPLETE
AND CORRECT COPY OF THE FORM OF SUCH STOCK AND WARRANT
PURCHASE AGREEMENT OR WARRANT AGREEMENT WILL BE FURNISHED BY
THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE."
The Company may from time to time register the transfer of any
outstanding Warrant Certificates in a warrant register to be maintained by the
Company upon surrender thereof accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company duly executed by the
Holder or Holders thereof or by the duly appointed legal representative thereof
or by a duly authorized attorney. Upon any such registration of transfer, a new
Warrant Certificate shall be issued to the transferee(s).
2
<PAGE>
Warrant Certificates may be exchanged at the option of the Holder(s)
thereof, when surrendered to the Company at the address set forth in Section 4.5
hereof for another Warrant Certificate or Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrant Shares; PROVIDED that the
Company shall not be required to issue any Warrant Certificate representing any
fractional Warrant Shares.
Section 1.5 LOST, STOLEN, MUTILATED OR DESTROYED WARRANT CERTIFICATES.
If any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall issue, execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated Warrant Certificate, or in lieu of or in
substitution for a lost, stolen or destroyed Warrant Certificate, a new Warrant
Certificate representing an equivalent number of Warrants or Warrant Shares. If
required by the Company, the Holder of the mutilated, lost, stolen or destroyed
Warrant Certificate must provide indemnity sufficient to protect the Company
from any loss which it may suffer if the Warrant Certificate is replaced. Any
such new Warrant Certificate shall constitute an original contractual obligation
of the Company, whether or not the allegedly lost, stolen, mutilated or
destroyed Warrant Certificate shall be at any time enforceable by anyone.
Section 1.6 CANCELLATION OF WARRANT CERTIFICATES. Any Warrant
Certificate surrendered upon the exercise of Warrants or for exchange or
transfer, or purchased or otherwise acquired by the Company, shall be canceled
and shall not be reissued by the Company; and, except as provided in Section 2.5
hereof in case of the exercise of less than all of the Warrants evidenced by a
Warrant Certificate or in Section 1.4 in an exchange or transfer, no Warrant
Certificate shall be issued hereunder in lieu of such canceled Warrant
Certificate. Any Warrant Certificate so canceled shall be destroyed by the
Company.
ARTICLE II
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 EXERCISE PRICE. Each Warrant Certificate shall, when signed
by the Chairman or President or any Vice President and attested to by the
Secretary or Assistant Secretary of the Company, entitle the Holder thereof to
purchase from the Company, subject to the terms and conditions of this
Agreement, the number of fully paid and nonassessable Warrant Shares evidenced
thereby at a purchase price of $20.00 per share or such adjusted number of
Warrant Shares at such adjusted purchase price as may be established from time
to time pursuant to the provisions of Article III hereof, payable in full in
accordance with Section 2.3 hereof, at the time of exercise of the Warrant.
Except as the context otherwise requires, the term "Exercise Price" as used in
this Agreement shall mean the purchase price of one share of Common Stock,
reflecting all appropriate adjustments made in accordance with the provisions of
Article III hereof.
Section 2.2 REGISTRATION OF WARRANTS AND WARRANT SHARES. Except as
provided in the Purchase Agreement, the Warrants and Warrant Shares shall not be
registered for resale under the Securities Act of 1933, as amended.
Section 2.3 PROCEDURE FOR EXERCISE OF WARRANTS. The Warrants may be
exercised at the Exercise Price at any time after the date hereof and prior to
the Expiration Date (as hereinafter defined). The Warrants shall expire at 5:00
p.m., Boston time, on February 4, 2005 (the "Expiration Date"). The Warrants may
be exercised by surrendering the Warrant Certificates representing such Warrants
to the
3
<PAGE>
Company at its address set forth in Section 4.5 hereof, together with the
Election to Purchase duly completed and executed, accompanied by payment in
full, as set forth below, to the Company of the Exercise Price for each Warrant
Share in respect of which such Warrants are being exercised. Such Exercise Price
shall be paid in full by cash or a certified check or a wire transfer in same
day funds in an amount equal to the Exercise Price multiplied by the number of
Warrant Shares then being purchased.
Section 2.4 ISSUANCE OF COMMON STOCK. As soon as practicable after the
Date of Exercise (as defined in Section 3.9) of any Warrants, the Company shall
issue, or cause its transfer agent to issue, a certificate or certificates for
the number of full Warrant Shares, registered in accordance with the
instructions set forth in the Election to Purchase, together with cash for
fractional shares as provided in Section 3.10. All Warrant Shares issued upon
the exercise of any Warrants shall be validly authorized and issued, fully paid,
non-assessable, free of preemptive rights and (subject to Section 4.1 hereof)
free from all taxes, liens, charges and security interests in respect of the
issuance thereof. Each person in whose name any such certificate for Warrant
Shares is issued shall be deemed for all purposes to have become the holder of
record of the Common Stock represented thereby on the Date of Exercise of the
Warrants resulting in the issuance of such shares, irrespective of the date of
issuance or delivery of such certificate for Warrant Shares.
Section 2.5 CERTIFICATES FOR UNEXERCISED WARRANTS. In the event that,
prior to the Expiration Date, a Warrant Certificate is exercised in respect of
fewer than all of the Warrant Shares issuable on such exercise, a new Warrant
Certificate representing the remaining Warrant Shares shall be issued and
delivered pursuant to the provisions hereof; PROVIDED that the Company shall not
be required to issue any Warrant Certificate representing any fractional Warrant
Shares.
Section 2.6 RESERVATION OF SHARES. The Company shall at all times
reserve and keep available, free from preemptive rights, for issuance upon the
exercise of Warrants, the maximum number of its authorized but unissued shares
or treasury shares, or both, of Common Stock which may then be issuable upon the
exercise in full of all outstanding Warrants.
Section 2.7 NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Warrants,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holders against impairment. Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any Warrant Shares receivable upon the exercise of the Warrants above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and non-assessable Warrant
Shares upon the exercise of any Warrant, and (c) use reasonable best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under the Warrants.
4
<PAGE>
ARTICLE III
ADJUSTMENTS AND NOTICE PROVISIONS
Section 3.1 ADJUSTMENT OF EXERCISE PRICE. In case the Company shall (i)
declare a dividend or make a distribution on the outstanding shares of its
Common Stock in shares of its Common Stock, (ii) subdivide or reclassify the
outstanding shares of its Common Stock into a greater number of shares, or (iii)
combine or reclassify the outstanding shares of its Common Stock into a smaller
number of shares, the Exercise Price in effect immediately after the record date
for such dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding immediately before such dividend, distribution,
subdivision, combination or reclassification, and of which the denominator shall
be the number of shares of Common Stock outstanding immediately after such
dividend, distribution, subdivision, combination or reclassification. Any shares
of Common Stock of the Company issuable in payment of a dividend shall be deemed
to have been issued immediately prior to the record date for such dividend for
purposes of calculating the number of outstanding shares of Common Stock of the
Company under this Section 3.l. Such adjustment shall be made successively
whenever any event specified above shall occur.
Section 3.2 NO ADJUSTMENTS TO EXERCISE PRICE. No adjustment in the
Exercise Price in accordance with the provisions of Section 3.1 hereof need be
made unless such adjustment would amount to a change of at least 0.5% in such
Exercise Price; PROVIDED, HOWEVER, that the amount by which any adjustment is
not made by reason of the provisions of this Section 3.2 shall be carried
forward and taken into account at the time of any subsequent adjustment in the
Exercise Price.
Section 3.3 ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to Section 3.l hereof, each Warrant shall thereupon
evidence the right to purchase that number of Warrant Shares (calculated to the
nearest hundredth of a share) obtained by multiplying the number of Warrant
Shares purchasable immediately prior to such adjustment upon exercise of the
Warrant by the Exercise Price in effect immediately prior to such adjustment and
dividing the product so obtained by the Exercise Price in effect immediately
after such adjustment.
Section 3.4 REORGANIZATIONS. In case of any capital reorganization,
other than in the cases referred to in Section 3.1 hereof, or the consolidation
or merger of the Company with or into another corporation (other than a merger
or consolidation in which the Company is the continuing corporation and which
does not result in any reclassification of the outstanding shares of Common
Stock or the conversion of such outstanding shares of Common Stock into shares
of other stock or other securities or property), or the sale or conveyance of
the property of the Company as an entirety or substantially as an entirety
(collectively such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of Warrant Shares theretofore deliverable) the number of shares of
stock or other securities or property to which a holder of the number of Warrant
Shares which would otherwise have been deliverable upon the exercise of such
Warrant would have been entitled upon such Reorganization if such Warrant had
been exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the
5
<PAGE>
Board of Directors of the Company, shall be made in the application of the
provisions herein set forth with respect to the rights and interests of Holders
so that the provisions set forth herein shall thereafter be applicable, as
nearly as possible, in relation to any shares or other property thereafter
deliverable upon exercise of Warrants. Any such adjustment shall be made by and
set forth in a supplemental agreement prepared by the Company or any successor
thereto, between the Company and any successor thereto, and shall for all
purposes hereof conclusively be deemed to be an appropriate adjustment.
Section 3.5 VERIFICATION OF COMPUTATIONS. The Company shall select a
firm of independent public accountants (which may be its outside auditors),
which selection may be changed from time to time, to verify each computation
and/or adjustment made in accordance with this Article III. The certificate,
report or other written statement of any such firm shall be conclusive evidence
of the correctness of any computation made under this Article III. Promptly upon
its receipt of such certificate, report or statement from such firm of
independent public accountants, the Company shall deliver a copy thereof to each
Holder.
Section 3.6 NOTICE OF CERTAIN ACTIONS. In the event the Company shall
(a) declare any dividend payable in Common Stock to the holders of its Common
Stock, or (b) effect any reclassification of its Common Stock (other than a
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization or any consolidation or
merger (other than a merger in which no distribution of securities or other
property is made to holders of Common Stock) or any sale, transfer or other
disposition of its property, assets and business substantially as an entirety,
or the liquidation, dissolution or winding up of the Company; then, in each such
case, the Company shall cause notice of such proposed action to be mailed to
each Holder at least thirty (30) days prior to such action; PROVIDED, HOWEVER,
that in the event that the Company provides public notice of such action
specifying the information set forth below at least ten (10) days prior to such
action, the Company shall be deemed to have satisfied its obligation to provide
notice pursuant to this Section 3.6. Such notice shall specify the date on which
the books of the Company shall close, or a record be taken, for determining
holders of Common Stock entitled to receive such stock dividend or other
distribution or such rights or options, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer, other
disposition, liquidation, dissolution, winding up or exchange shall take place
or commence, as the case may be, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to receive securities or
other property deliverable upon such action, if any such date has been fixed.
Such notice shall be mailed in the case of any action covered by item (a) of
this Section 3.6, at least ten (10) days prior to the record date for
determining holders of the Common Stock for purposes of receiving such payment
or offer, and in the case of any action covered by item (b) of this Section 3.6,
at least ten (10) days prior to the earlier of the date upon which such action
is to take place or any record date to determine holders of Common Stock
entitled to receive such securities or other property.
Section 3.7 CERTIFICATE OF ADJUSTMENTS. Whenever any adjustment is to
be made pursuant to this Article III, the Company shall prepare a certificate
executed by the Chief Financial Officer of the Company, setting forth such
adjustments to be mailed to each Holder at least fifteen (15) days prior
thereto, such notice to include in reasonable detail (a) the events
precipitating the adjustment, (b) the computation of any adjustments, and (c)
the Exercise Price and the number of shares or the securities or other property
6
<PAGE>
purchasable upon exercise of each Warrant after giving effect to such
adjustment. Such Certificate shall be accompanied by the accountant's
verification required by Section 3.5 hereof.
Section 3.8 WARRANT CERTIFICATE AMENDMENTS. Irrespective of any
adjustments pursuant to this Article III, Warrant Certificates theretofore or
thereafter issued need not be amended or replaced, but certificates thereafter
issued shall bear an appropriate legend or other notice of any adjustments;
PROVIDED the Company may, at its option, issue new Warrant Certificates
evidencing Warrants in such form as may be approved by its Board of Directors to
reflect any adjustment in the Exercise Price and number of Warrant Shares
purchasable under the Warrants.
Section 3.9 FRACTIONAL SHARES. The Company shall not be required upon
the exercise of any Warrant to issue fractional Warrant Shares which may result
from adjustments in accordance with this Article III to the Exercise Price or
number of Warrant Shares purchasable under each Warrant. If more than one
Warrant is exercised at one time by the same Holder, the number of full Warrant
Shares which shall be issuable upon the exercise thereof shall be computed based
on the aggregate number of Warrant Shares purchasable upon exercise of such
Warrants. With respect to any final fraction of a share called for upon the
exercise of any Warrant or Warrants, the Company shall pay an amount in cash to
the Holder of the Warrants in respect of such final fraction in an amount equal
to the Fair Market Value of a share of Common Stock as of the Date of Exercise
of such Warrants, multiplied by such fraction. All calculations under this
Section 3.9 shall be made to the nearest hundredth of a share.
As used in this Agreement: (a) the term "Fair Market Value," on a per
share basis, means the average of the daily Closing Prices (as hereinafter
defined) of the Common Stock for the five (5) consecutive Trading Days (as
hereinafter defined) ending the Trading Day immediately preceding the Date of
Exercise; (b) the term "Date of Exercise" with respect to any Warrant means the
date on which such Warrant is exercised as provided herein; (c) the term
"Closing Price" for any date shall mean the last sale price reported in THE WALL
STREET JOURNAL regular way or, in case no such reported sale takes place on such
date, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed if that is the principal market for the
Common Stock or, if not listed or admitted to trading on any national securities
exchange or if such national securities exchange is not the principal market for
the Common Stock, the last sale price as reported on The Nasdaq Stock Market,
Inc.'s National Market ("Nasdaq") or its successor, if any, or if the Common
Stock is not so reported, the average of the reported bid and asked prices in
the over-the-counter market, as furnished by the National Quotation Bureau,
Inc., or if such firm is not then engaged in the business of reporting such
prices, as furnished by any similar firm then engaged in such business and
selected by the Company or, if there is no such firm, as furnished by any member
of the National Association of Securities Dealers, Inc. ("NASD") selected by the
Company or, if the Common Stock is not quoted in the over-the-counter market,
the fair value thereof determined in good faith by the Company's Board of
Directors as of a date which is within 15 days of the date as of which the
determination is to be made; and (d) the term "Trading Days" with respect to the
Common Stock means (i) if the Common Stock is quoted on Nasdaq or any similar
system of automated dissemination of quotations of securities prices, days on
which trades may be made on such system or (ii) if the Common
7
<PAGE>
Stock is listed or admitted for trading on any national securities exchange,
days on which such national securities exchange is open for business.
ARTICLE IV
MISCELLANEOUS
Section 4.1 PAYMENT OF TAXES AND CHARGES. The Company will pay all
taxes (other than income taxes) and other government charges in connection with
the issuance or delivery of the Warrants and the initial issuance or delivery of
Warrant Shares upon the exercise of any Warrants and payment of the Exercise
Price. The Company shall not, however, be required to pay any additional
transfer taxes in connection with the subsequent transfer of Warrants or any
transfer involved in the issuance and delivery of Warrant Shares in a name other
than the name in which the Warrants to which such issuance relates were
registered, and, if any such tax would otherwise be payable by the Company, no
such issuance or delivery shall be made unless and until the person requesting
such issuance has paid to the Company the amount of any such tax, or it is
established to the reasonable satisfaction of the Company that any such tax has
been paid.
Section 4.2 CHANGES TO AGREEMENT. No amendment of this Agreement may be
made without the written consent of the parties hereto. Any such amendment shall
be in writing, shall specifically reference this Agreement and shall be signed
by the parties hereto.
Section 4.3 ASSIGNMENT. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Holders shall bind and
inure to the benefit of their respective successors and assigns.
Section 4.4 SUCCESSOR TO COMPANY. In the event that the Company merges
or consolidates with or into any other corporation or sells or otherwise
transfers its property, assets and business substantially as an entirety to a
successor corporation, the Company shall use reasonable commercial efforts to
have such successor corporation assume each and every covenant and condition of
this Agreement to be performed and observed by the Company.
Section 4.5 NOTICES. Any notice or demand required by this Agreement to
be given or made by any Holder to or on the Company shall be sufficiently given
or made if sent by first-class or registered mail, postage prepaid, addressed as
follows:
BioSphere Medical, Inc.
111 Locke Drive
Marlborough, MA 01752
Attn: Chief Financial Officer
With a copy to:
Goodwin, Procter & Hoar LLP
8
<PAGE>
Exchange Place
Boston, MA 02109
Attn: Stuart M. Cable, P.C.
Any notice or demand required by this Agreement to be given or made by the
Company to or on any Holder shall be sufficiently given or made if sent by
first-class or registered mail, postage prepaid, addressed to such Holder and
sent to the following address:
___________________________
___________________________
___________________________
Attn:______________________
With a copy to:
___________________________
___________________________
___________________________
Attn:______________________
Any notice or demand required by this Agreement to be given or made by the
Company to or on any Holder shall be sufficiently given or made, whether or not
such holder receives the notice, five (5) days after mailing, if sent by
first-class or registered mail, postage prepaid, addressed to such Holder at its
last address as shown on the books of the Company. Otherwise, such notice or
demand shall be deemed given when received by the party entitled thereto.
Section 4.6 DEFECTS IN NOTICE. Failure to file any certificate or
notice or to mail any notice, or any defect in any certificate or notice
pursuant to this Agreement shall not affect in any way the rights of any Holder
or the legality or validity of any adjustment made pursuant to Section 3.1
hereof, or any transaction giving rise to any such adjustment, or the legality
or validity of any action taken or to be taken by the Company.
Section 4.7 GOVERNING LAW AND CONSENT TO JURISDICTION. THIS AGREEMENT
AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER SHALL BE GOVERNED BY THE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS
PRINCIPLES. FURTHERMORE, EACH INVESTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE UNITED
STATES OF AMERICA FOR THE DISTRICT OF MASSACHUSETTS IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND EACH WARRANT CERTIFICATE.
9
<PAGE>
Section 4.8 STANDING. Nothing in this Agreement expressed and nothing
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Holders of any right, remedy or claim under or by reason of this
Agreement or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors, and the Holders.
Section 4.9 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
and all of which together shall constitute one and the same instrument.
Section 4.10 AVAILABILITY OF THE AGREEMENT. The Company shall keep
copies of this Agreement available for inspection by Holders during normal
business hours. Copies of this Agreement may be obtained upon written request
addressed to the Company at the address set forth in Section 4.5 hereof.
Section 4.11 ENTIRE AGREEMENT. This Agreement, including the Exhibits
referred to herein and the other writings specifically identified herein or
contemplated hereby, is complete, reflects the entire agreement of the parties
with respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
10
<PAGE>
WARRANT AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by
the parties as of the day and year first above written.
BIOSPHERE MEDICAL, INC.,
a Delaware corporation
By:_____________________________________
Name:
Title:
<PAGE>
WARRANT AGREEMENT
PURCHASER SIGNATURE PAGE
Accepted and Agreed as of the date first written above.
--------------------------------
By:_________________________________
Name:
Title:
Notice Information:
--------------------------
--------------------------
--------------------------
--------------------------
--------------------------
--------------------------
<PAGE>
EXHIBIT A - FORM OF WARRANT CERTIFICATE
NEITHER THE ISSUANCE OF SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
ISSUANCE OF ANY SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
NOR UNDER THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED,
EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
WHICH IS EFFECTIVE UNDER THE SECURITIES ACT OR (ii) ANY EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS CONTAINED IN A STOCK AND WARRANT PURCHASE AGREEMENT DATED
AS OF FEBRUARY ___, 2000, AS AMENDED FROM TIME TO TIME, AND THE TERMS AND
CONDITIONS CONTAINED IN A WARRANT AGREEMENT DATED AS OF FEBRUARY , 2000, AS
AMENDED FROM TIME TO TIME. A COMPLETE AND CORRECT COPY OF THE FORM OF SUCH STOCK
AND WARRANT PURCHASE AGREEMENT OR WARRANT AGREEMENT WILL BE FURNISHED BY THE
ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
No. __ W-__
Certificate for ________________ Warrants
NOT EXERCISABLE AFTER 5:00 P.M.,
BOSTON TIME, ON FEBRUARY 4, 2005
BIOSPHERE MEDICAL, INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that__________________, a corporation, or its registered
assigns is the registered holder (the "Registered Holder") of Warrants set forth
above, each of which represents the right to purchase one fully paid and
non-assessable share of common stock, par value $.01 per share (the "Common
Stock"), of BioSphere Medical, Inc., a Delaware corporation (the "Company"), at
the Exercise Price (as defined in the Warrant Agreement) at the times specified
in the Warrant Agreement, by surrendering this Warrant Certificate, with the
form of Election to Purchase attached hereto duly executed and by paying in full
the Exercise Price. Payment of the Exercise Price shall be made as set forth in
the Warrant Agreement (as hereinafter defined). No Warrant may be exercised
after 5:00 P.M., Boston time, on February 4, 2005 (the "Expiration Date"). All
Warrants evidenced hereby shall thereafter become void, subject to the terms of
the Warrant Agreement hereinafter referred to.
A-1
<PAGE>
Prior to the Expiration Date, subject to any applicable laws, rules or
regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate and in accordance
with the terms of the Warrant Agreement hereinafter referred to, the Registered
Holder shall be entitled to transfer this Warrant Certificate, in whole or in
part, upon surrender of this Warrant Certificate at the principal office of the
Company with the form of assignment set forth hereon duly executed. Upon any
such transfer, a new Warrant Certificate or Warrant Certificates representing
the same aggregate number of Warrants to purchase the shares of the Common Stock
will be issued in accordance with instructions in the form of assignment.
Upon the exercise of less than all of the Warrants to purchase the
shares of the Common Stock evidenced by this Warrant Certificate, there shall be
issued to the Registered Holder a new Warrant Certificate in respect of the
Warrants not exercised.
Prior to the Expiration Date, the Registered Holder shall be entitled
to exchange this Warrant Certificate, with or without other Warrant
Certificates, for another Warrant Certificate or Warrant Certificates for the
same aggregate number of Warrants to purchase the shares of the Common Stock,
upon surrender of this Warrant Certificate at the principal office of the
Company.
Upon certain events provided for in the Warrant Agreement, the Exercise
Price and the number of shares of Common Stock issuable upon the exercise of
each Warrant are required to be adjusted.
No fractional shares will be issued upon the exercise of Warrants. As
to any final fraction of a share of Common Stock which the Registered Holder of
one or more Warrant Certificates, the rights under which are exercised in the
same transaction, would otherwise be entitled to purchase upon such exercise,
the Company shall pay the cash value thereof determined as provided in the
Warrant Agreement. No Warrant Certificate representing any fractional Warrant
Shares will be issued.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement dated as of February 4, 2000 (the "Warrant Agreement") by and
among the Company and the Purchaser (as defined in the Warrant Agreement) and is
subject to the term and provisions contained in the Warrant Agreement. All
capitalized terms not defined herein shall have the meanings given such terms as
set forth in the Warrant Agreement.
This Warrant Certificate shall not entitle the Registered Holder to any
of the rights of a stockholder of the Company, including, without limitation,
the right to vote, to receive dividends and other distributions, or to attend or
receive any notice of meetings of stockholders or any other proceedings of the
Company.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its facsimile corporate seal.
BIOSPHERE MEDICAL, INC.
By: ____________________________________
Name:
Title:
[Seal] Attest:
By:________________________________________
Name:
Title: Secretary
A-3
<PAGE>
[Form of Assignment]
FOR VALUE RECEIVED, the undersigned hereby irrevocably sells, assigns
and transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant Certificate, with respect to the number of
Warrants to purchase the shares of the Common Stock set forth below:
NAME OF ASSIGNEE ADDRESS NO. OF WARRANTS
---------------- ------- ---------------
and does hereby irrevocably constitute and appoint _____________________ true
and lawful Attorney, to make such transfer on the books of BioSphere Medical,
Inc., maintained for that purpose, with full power of substitution in the
premises.
Dated: __________ ___, _____ _____________________________________________
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
A-4
<PAGE>
[Form of Election To Purchase]
The undersigned hereby irrevocably elects to exercise ____________ of
the Warrants represented by this Warrant Certificate and to purchase the shares
of Common Stock issuable upon the exercise of said Warrants, and requests that
certificates for such shares be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER)
DELIVER TO:
---------------------------------------------------------------------
(NAME)
at
------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
In full payment of the purchase price with respect to the exercise of
Warrants to purchase shares of the Common Stock, the undersigned:
/_/ hereby tenders payment of $________ by cash, certified check,
cashier's check or money order payable in United States
currency to the order of the Company; or
If the number of Warrants to purchase the shares of the Common Stock
hereby exercised is less than all the Warrants represented by this Warrant
Certificate, the undersigned requests that a new Warrant Certificate
representing the number of such full Warrants not exercised be issued and
delivered as follows:
A-5
<PAGE>
ISSUE TO:
-----------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
--------------------------------------------------------------------
(NAME)
at
------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
Date: __________ ___, ______ ____________________________________________
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
PLEASE INSERT SOCIAL SECURITY OR TAX
I.D. NUMBER OF HOLDER
------------------------------------------
A-6
<PAGE>
Exhibit 10.15
[Page 1]
================================================================================
SUBLEASE AGREEMENT
================================================================================
BETWEEN THE UNDERSIGNED
GUERBET S.A.
A Corporation with a capital of 56,807,560 French Francs
listed in the Registry of Commerce and Companies
of Bobigny under the number B 308 491 521
domiciled at Villepinte 93420, 15 rue de Vanesses
represented herein by Mr. Michel GUERBET, President and Managing Director
on one hand
AND
BIOSPHERE MEDICAL
A Corporation with a capital of 1,000,000 French Francs
domiciled at Zone Industrielle de Louvres
Rue de la Briqueterie - 95380 LOUVRES
Registry of Commerce and Companies of PONTOISE, 98 B 885
represented herein by Ms. Marie-Paule LEROY LANDERCY, in her capacity as
Chairman of the Board of Directors
on the other hand,
<PAGE>
[Page 2]
THE FOLLOWING PRIOR DECLARATIONS HAVE BEEN MADE:
1. Pursuant to the terms of an instrument received by Mr. GUEROULT, associated
notary, on October 28, 1991, GUERBET S.A. contracted with U.I.S. - UNION
POUR LE FINANCEMENT D'IMMEUBLES DE SOCIETES - SICOMI - for real-estate
leasing pertaining to a real-estate property located in LOUVRES (Val
d'Oise) in the area by the name of "La Briqueterie", comprising
a building used for warehousing and office purposes, workshops and premises
associated therewith, on a ground floor and a first floor [T.N.: US, FIRST
AND SECOND FLOORS] on a portion of the space.
such building comprising a developed floor space of approximately
4,847 m(2) of storage space, approx. 1,621 m(2) of offices, workshops and
associated locations on a plot of approx. 11,504 m(2).
2. The leasing agreement has been agreed to and accepted by a number of
different means, clauses and terms which Ms. Marie-Paule LEROY LANDERCY, in
her capacity set forth above, declares to be perfectly aware of since she
has received a copy of the aforementioned instrument.
3. GUERBET S.A., being unable to currently use itself and through its
subsidiaries the entire floor space being the indivisible object of the
leasing agreement, has made a proposal to BIOSPHERE MEDICAL to sublet on a
revocable basis a part of the space for a specified period of time.
4. Under the leasing agreement binding GUERBET S.A. to U.I.S. and in view of
its indivisible nature, this present sublease agreement is not subject to
the provisions of the decree of September 30, 1953 and is herewith granted
on a revocable basis, which is herewith expressly recognized by BIOSPHERE
MEDICAL.
5. U.I.S. has verbally granted its prior consent to this present subleasing on
a revocable basis.
IN VIEW OF THE ABOVE DECLARATIONS, THE FOLLOWING HAS BEEN STIPULATED AND AGREED:
SUBLEASE ON A REVOCABLE BASIS:
GUERBET S.A., on the basis of a revocable sublease, herewith grants to BIOSPHERE
MEDICAL, for a period of five years from May 1, 1998 and ending on April 30,
2003, the premises comprising a floor space of 1000 m2, which is accepted by Ms.
Marie-Paule LEROY LANDERCY, in her capacity set forth above. A drawing shall be
annexed hereto together with an inventory of the premises.
<PAGE>
[Page 3]
Unless specified otherwise herein, this present sublease shall be solely for the
duration set forth herein, except for termination solely by BIOSPHERE MEDICAL:
by means of six (6) months prior notice. Upon expiration of its term, this
present sublease shall terminate by operation of law without requiring any
formal acts. However, six months prior thereto, BIOSPHERE MEDICAL shall be
entitled to request its extension, which shall be granted for another three-year
period subject to readjustment of the rental fee stipulated hereinafter based on
the change in the domestic INSEE Construction Cost Index.
DUTIES AND TERMS
This present revocable sublease is agreed upon and granted pursuant to the usual
covenants and terms as well as those set forth below which BIOSPHERE MEDICAL
agrees to carry out and accomplish, to wit:
1. to receive the premises leased "as is" without being entitled to require
GUERBET S.A. to carry out any work, repairs or restoration. A check
walk-through report shall be prepared by the parties within eight days
hereof.
2. to keep the leased premises permanently equipped with furniture,
belongings, personal effects, material and merchandise in sufficient
quantity and of sufficient value to ensure payment of the rent and
fulfillment of the terms and conditions of the lease.
3. to strictly remit its personal contributions and professional taxes and to
comply with all taxes, municipal and police duties to which tenants are
usually subject, [and] to reimburse GUERBET S.A. for payments [and] taxes
related with the lease.
4. to maintain and restore the leases to proper conditions of maintenance and
repair as per the statement of premises prepared as of the effective date
of use, to carry out all repairs necessary with the exception of those set
forth in Article 606 Civil Code, and GUERBET S.A. declares, for its part,
that the premises made available to BIOSPHERE MEDICAL are asbestos-free.
5. not to be entitled under any circumstances to assign or transfer its right
of use concerning these present premises or to make the use of the premises
available in any fashion whatsoever, whether free of charge or for
consideration.
6. not to be entitled, without the prior written consent of GUERBET S.A., to
make any change in the disposal of the leased premises, [or] any holes in
the walls for any reason whatsoever. The work, if authorized, shall be
carried out under the supervision of the architect of GUERBET S.A., whose
fees shall be borne by the lessee. Any improvement or adjustment shall
accrue to GUERBET S.A., without indemnification, with the latter being
entitled to demand restoration to the original condition at the expense of
BIOSPHERE MEDICAL.
<PAGE>
[Page 4]
7. to support and bear the cost of the performance of all large-scale repairs
which may become necessary during the term of the lease, without being
entitled to demand any compensation or reduction of the rent set forth
below, even in the event that the duration of the work exceeds forty days,
provided that, once such work commences, it is accomplished promptly and
without interruption.
8. to obtain and to maintain insurance, without recourse against GUERBET S.A.,
for all risks, including fire, with a reputable company in good standing
and throughout the entire term of the lease, covering the furniture, the
material and the merchandise located on the premises, as well as for all
leasing risks and the right of recourse of neighbors, to pay as due the
premiums and contributions of such insurance, all of which must be
justified vis-a-vis GUERBET S.A. at the first request to that effect.
to reimburse GUERBET S.A. for all extra premiums which may be charged,
whether directly in its capacity of lessee of the premises under the
lease-to-purchase agreement, or on the basis of stipulations pertaining to
co-ownership regulations of the building or which would result from the
nature of the use of the premises on the basis of increased risks.
9. to comply with the rules pertaining to the building.
10. not to be entitled under any circumstances to affix any sign, plate or
inscription on the building without the prior and written authorization to
do so by GUERBET S.A. and always in compliance with the rules for the
building.
11. not to be entitled to use the leased premises for any purpose other than as
offices and storage space for its activity of manufacturing and marketing
catheters and guides used in radiology, while such purpose can not
subsequently represent a change to the purpose of the premises set forth in
the leasing agreement.
BIOSPHERE MEDICAL shall furthermore personally assume responsibility for
obtaining all administrative authorizations which may be required and
complying with all regulations in this matter as well as any recourse which
may be lodged on whatever basis in terms of co-ownership due to its
activity.
12. to comply with all provisions of the leasing instrument of October 28, 1991
which may concern BIOSPHERE MEDICAL. In particular, it shall herewith be
specified that this present sublease agreement can not be held against the
owner of the building and that, under any theory, the termination, for any
reason whatsoever, of the leasing agreement shall lead, by operation of
law, to the ultimate termination of this present sublease. BIOSPHERE
MEDICAL therefore declares that it waives all rights and actions both
vis-a-vis the owner and the credit lessee, in particular any compensation
for eviction or the right of renewal of its sublease agreement or
maintenance of the same.
RENT
This present lease is agreed upon and accepted on the basis of an annual rent
with a principal of five hundred thousand French Francs (500,000 FF), exclusive
of taxes and fees, which BIOSPHERE MEDICAL agrees to pay in twelve monthly
installments and in advance to GUERBET S.A.
<PAGE>
[Page 5]
The parties furthermore agree that an exemption of rent and other charges for
twenty-four (24) months from May 1, 1998 is granted to the lessee, to improve
its chances of success:
IT IS EXPRESSLY AGREED THAT:
- - in the event of nonpayment, even for a single charging or rental period
when due, or in case of noncompliance with one of the above terms, this
present sublease shall be rescinded by operation of law if GUERBET S.A. so
desires, one month after a simple request for payment or default notice has
not produced any result, without requiring compliance with the legal
formalities.
- - in the event of the aforementioned rescission, in case BIOSPHERE MEDICAL
refuses to vacate the premises, BIOSPHERE MEDICAL can be forced to comply
therewith on the basis of a simple injunction issued by the President of
the District Court] of the domicile of the leased premises.
ADJUSTMENT CLAUSE
It is expressly agreed that the rent pertaining to this present lease shall be
readjusted in case this present lease is renewed for a period of three years.
Such rent shall be tied, without discount or exemption, to the official
construction cost index published by INSEE, and GUERBET S.A. shall not be
required expressly to make a request to such effect.
The reference indices shall be those of the last civil quarter preceding the
effective date of this present lease and the last civil quarter preceding the
revision date.
FEES
All expenses [and] fees of this present instrument shall be borne by the lessee.
Each party shall assume its own attorney fees.
Issued in PARIS
On April 29, 1998
In three copies
One copy for registration
FOR GUERBET S.A. FOR BIOSPHERE MEDICAL
Signature [ILLEGIBLE] Signature [ILLEGIBLE]
<PAGE>
[Page 6]
[ONE ILLEGIBLE LINE]
Our reference 106
Tax N(o) 844590
Account N(o) 20136L
[LEFT-HAND MARGIN OF THE DOCUMENT]
AUTHENTIC COPY
HYPOTHEQUES ERMONT
December 11, 1991
Provision: 148628
U.O.N(o) 12.305
[RECEIVED STAMP: LARGELY ILLEGIBLE]
OCTOBER 28, 1991
LEASE-TO-BUY AGREEMENT
By UIS for the benefit of GUERBET S.A.
ALLEZ & ASSOCIES, NOTARIES
A company owning a Notary's Office
25, avenue George-V - 75008 Paris
Phone (1) 47 23 61 67 - Fax (1) 47 23 43 45
<PAGE>
[Page 7]
FISCAL STAMP PAID
Authorization N(o) 1/78
of February 15, 1979
[OFFICIAL STAMP - LARGELY ILLEGIBLE]
In nineteen hundred and ninety-one, on the twenty-eight day of October, signed
by the notary on the same date, in Paris (8th Arrondissement), 25 Avenue
George V,
Mr. Jean-Pierre GUEROULT, Associate Notary with the Civil Professional Company
by the name of "ALLEZ & ASSOCIES, NOTARIES", owner of a Notary's Office in Paris
(8th Arrondissement), 25 Avenue George V, has authenticated this present
instrument at the request of the parties identified below:
1) "U.I.S." - UNION POUR LE FINANCEMENT D'IMMEUBLES DE SOCIETES, a banking
institution registered as a financing company, approved as a Real-Estate
Company for Trade and Industry, governed by the law N(o) 66-455 of July 2,
1966 and by the ordinance N(o) 67-837 of September 28, 1967 and subsequent
texts, a corporation with a capital of 281,439,000 French Francs, domiciled
at PARIS (8th Arrondissement), 5 avenue Percier, registered in the
Commercial and Corporation Registry of PARIS under the number B 632 037
248.
Said company is subject to the tax system of Real-Estate Companies for
Trade and Industry on the basis of a ruling by the Minister of Economics
and Finance.
HEREINAFTER REFERRED TO AS "THE LESSOR"
ON ONE HAND
2) the Company by the name of GUERBET S.A., a corporation with a capital of
44,199,200 French Francs, domiciled at VILLEPINTE (Seine-Saint-Denis), 15
rue Vanesses, registered in the Commercial and Corporation Registry of
BOBIGNY under the number B 308 491 521.
HEREINAFTER REFERRED TO AS "THE LESSEE"
ON THE OTHER HAND
<PAGE>
[Page 8]
REPRESENTATION
1) U.I.S. is represented by:
Mr. Francois Xavier LABAYLE, Advisor to the President, residing at
PARIS (8th Arrondissement), 5 Avenue Percier.
ACTING in the name and as the agent of:
Mr. Alain JULIARD, President of the Board of Directors, residing at
PARIS (8th Arrondissement), 5 Avenue Percier.
BY VIRTUE of the powers conferred on him for the purposes of this
present instrument pursuant to the terms of a power of attorney by
private deed dated October 28, 1991 in Paris, attached hereto.
In said power of attorney, Mr. JULIARD acted in his capacity of
President of the Board of Directors, a post to which he was appointed
upon resolution of the Board of Directors of said Company during a
meeting held on December 20, 1990.
2) GUERBET S.A. is represented by Mr. Michel GUERBET, its President,
residing in PARIS (17th Arrondissement), 55 Boulevard Pereire.
SPECIFICALLY authorized for the purposes of this present document upon
resolution of the Board of Directors of said Company of October 25,
1991; a certified copy of the minutes being annexed hereto.
<PAGE>
[Page 9]
WHO, in their capacities set forth above, prior to entering into the agreements
being the subject matter of this present instrument, have declared the
following:
STATEMENT
A TABLE OF CONTENTS
SECTION I: DEFINITIONS Page 6
SECTION II: LEASE Page 6
Article 1: DURATION Page 8
Article 2: RENT Page 8
Article 3: COVENANTS AND TERMS Page 11
a) Occupation Page 11
b) Maintenance - Work Page 12
c) General Terms and Conditions Page 13
Article 4: FEES AND TAXES Page 13
Article 5: ASSIGNMENT - SUBLEASING - MANAGEMENT Page 14
a) Assignment Page 14
b) Subleasing Page 14
c) Management Page 15
d) Assignment by the Lessor Page 15
Article 6: LIABILITY - INSURANCE Page 15
I: Agreements between the Parties Page 15
II: Insurance Page 15
III: Claims/Events of Loss Page 17
a) General Terms and Conditions Page 17
b) Partial Loss Page 18
c) Total Loss Page 19
Article 7: VALUE-ADDED TAX Page 19
<PAGE>
[Page 10]
SECTION III: PROMISE OF SALE Page 19
Article 8: PROMISE OF SALE Page 19
SECTION IV: RESCISSION Page 21
Article 9: RESCISSION BY THE LESSEE Page 21
Article 10: RESCISSION BY THE LESSOR Page 22
TITLE V: EXPROPRIATION Page 23
Article 11: Expropriation Page 23
- Total Expropriation Page 23
- Partial Expropriation Page 23
- Disputes Page 23
TITLE VI MISCELLANEOUS PROVISIONS Page 24
Article 12: DECLARATIONS Page 24
Article 13: Leasing Agreement as Collateral Page 24
Article 14: PUBLICATION OF REAL-ESTATE TRANSACTIONS Page 24
Article 15: ELECTION OF DOMICILE - SPECIFICATION OF JURISDICTION Page 25
Article 16: FEES Page 25
B - STATEMENT
Pursuant to an instrument received by Mr. LETULLE, Associate Notary in PARIS, on
June 29, 1973 and published at the Mortgage Office No. 2 of PONTOISE on August
29, 1973, Volume 6,204, Number 3, U.I.S. purchased, by paying a cash price
received at that time, from the company MACKENZIE HILL SA Societe Anonyme with a
capital of 100,000 French Francs, whose domicile was PARIS (16th
Arrondissement), 19 Rue de la Tour, registered in the Registry of Trade and
Companies of PARIS under the number 70 B 2375, the building being the subject
matter of this present leasing, located in the Industrial Zone of LOUVRES (Val
d'Oise).
<PAGE>
[Page 11]
The title search results are represented in the said record.
C - ECONOMICS OF THE TRANSACTION
Pursuant to the terms of a private deed dated September 14, 1988, U.I.S. granted
GUERBET S.A., and the latter accepted, the rental of the premises owned by it
and located in the Industrial Zone of LOUVRES (Val d'Oise), in accordance with
the clauses, conditions and rent specified therein.
Said instrument specifies that the following premises are affected thereby:
cells 1, 2, 4, 5, and 6 of the building, comprising approx. 4,026 m(2) of
storage space and 1,364 m(2) of office space.
In departure from the clauses of the lease dated September 14, 1988, which did
not grant the option of termination prior to September 1, 1992, the LESSEE
requested the LESSOR, who agreed to this, to ensure financing of the leased
building (cells 1, 2, 4, 5, and 6) on the basis of real-estate leasing.
As a result thereof, GUERBET S.A. requested the LESSOR to amicably rescind said
lease as of that date and specified that the business operated by GUERBET S.A.
on the premises [and its assets] are free of any privilege or collateral.
Furthermore, the premises of cell 3 of the building, comprising a floor space of
approx. 821 m(2) of storage space and 257 m(2) of office space, which are a part
of the same building unit, shall be included in this present leasing, with the
LESSEE agreeing to receive the same in their current condition.
The lease is therefore granted for the entire property of the LESSOR comprising
6 cells, i.e. approx. 4,847 m(2) of storage space, 1,621 m(2) of office space
and annexed premises on a total land area of approx. 11,504 m(2).
To aid the understanding of the stipulations below, the respective roles of the
parties in this present transaction shall be specified as follows:
The LESSEE resorts to this means of financing to have the option of becoming the
owner of the building at the expiration of the leasing agreement by paying a
nominal price after periodic rental payments covering both the financial
amortization as well as the interest on the lease-to-buy.
<PAGE>
[Page 12]
D - LEASING AMOUNT
The amount of the lease-to-buy shall be TWELVE MILLION SEVEN HUNDRED AND
TWENTY-FIVE THOUSAND THREE HUNDRED AND EIGHTEEN FRENCH FRANCS AND FORTY-ONE
CENTIMES (12,725,318.41 FF), excluding VAT corresponding to the value of the
building as stipulated between the parties.
The land appears in the books of the LESSOR at a value of ONE MILLION FRENCH
FRANCS (1,000,000 FF).
Based on the above declarations, the parties agree as follows:
SECTION I - DEFINITIONS
1) Rent: financial amortization included in each installment, plus interest
calculated on the basis of the "remaining financing amount due".
2) Remaining financing amount due: amount of the leasing remaining due after
payment of each installment of rent.
3) T.M.M.: [Taux Moyen Mensuel] - average monthly daily interbank Money Market
rate.
SECTION II - LEASE
By means of this present instrument, the LESSOR leases, in conformity with the
provisions of the Law No. 66-455 of July 2, 1966 and of the Ordinance No. 67-837
of September 28, 1967 concerning real-estate leasing, to the LESSEE, who
accepts, the real-estate property and rights set forth below and hereinafter
referred to as the "BUILDING".
DESIGNATION
A REAL-ESTATE UNIT located in LOUVRES (Val d'Oise) in the area by the name of
"La Briqueterie", comprising:
A building to be used for warehousing and offices annexed thereto necessary for
the use of the warehouse, comprising a ground floor and first floor on a portion
[of the floor space],
and land with an area, according to the records, of eleven thousand five hundred
and four square meters, bordered:
<PAGE>
[Page 13]
- - in front: by the new road number 2;
- - in the back: by Mr. NANSOT or representatives;
- - on the right-hand side: by the company DRAGOCO or representatives;
- - on the left-hand side: by the company MACKENZIE HILL or representatives;
forming the lots with the numbers 41 to 48 of the zoning plan described below,
and listed in the new register of said community as an area by the name of "La
Briqueterie", section F, to wit:
* number 1444 for an area of 14 ares 91 square meters (Lot 41)
* number 1445 for an area of 14 ares 83 square meters (Lot 42)
* number 1446 for an area of 14 ares 74 square meters (Lot 43)
* number 1447 for an area of 14 ares 55 square meters (Lot 44)
* number 1448 for an area of 14 ares 33 square meters (Lot 45)
* number 1449 for an area of 14 ares 11 square meters (Lot 46)
* number 1450 for an area of 13 ares 89 square meters (Lot 47)
* number 1451 for an area of 13 ares 68 square meters (Lot 48)
PLEASE NOTE that the property constituting the subject matter of this present
lease are included in the zoning plan of the ACTIVITY ZONE OF LOUVRES approved
by ordinance of the Prefect of Val d'Oise dated June 28, 1968.
According to a certificate issued on March 9, 1973 by the Prefect of Val d'Oise,
annexed to the transcript of a sales instrument received by Mr. FIXOIS, Notary
at LOUVRES, on March 9, 1973:
<PAGE>
[Page 14]
- - all formalities prescribed by the Decree No. 58-1466 of December 31, 1958,
pertaining to the zoning plan have been fulfilled.
- - the requirements set forth in the authorization ordinance have been met.
* *
*
Furthermore, the documents pertaining to the zoning plan and, in particular, a
copy of the specifications of the zoning plan having five sections, to wit:
SECTION I: RULES
SECTION II: SPECIFICATIONS
SECTION III: SUMMARY OF SUPPORTING DOCUMENTS
SECTION IV: WORK SCHEDULE
SECTION v: BYLAWS OF THE LABOR UNION
have been annexed to the transcript of an instrument received by Mr. FIXOIS,
Notary at LOUVRES, on March 10, 1973.
A copy of said specifications has been annexed to this present instrument.
ARTICLE 1 - DURATION
This present leasing agreement is entered into for a period of fifteen years to
be calculated retroactively from October 1, 1991, i.e. until September 30, 2006.
This agreement is governed by the provisions of the law and ordinance set forth
above; the provisions specified in the second and third Paragraphs of Article
3-1 of Decree No. 53-960 of September 30, 1953, in Article 13 of the Law No.
85-1408 of December 30, 1985 and in Law No. 86-12 of January 16, 1986 are not
applicable hereto.
ARTICLE 2 - RENT
This present lease-to-buy agreement is entered into and accepted on the basis of
a rent which the LESSEE agrees to pay by transfer to the account of the LESSOR
opened under the number 20 1010 14400 with BANQUE N.S.M. (Bank Routing Number
30788, Office Code 00100, RIB Key 02).
<PAGE>
[Page 15]
The rental payments referred to below as "BASE RENT" are due on a quarterly
basis and in advance, on October 1, January 1, April 1 and July 1 of each year,
for the first time on October 1, 1991.
A - BASE RENT
The amount exclusive of V.A.T. of each quarterly base rent on the effective date
of this present instrument is indicated in the schedule attached hereto in
Attachment 1.
B - ADJUSTMENT
Each quarterly base rent above shall be readjusted in terms of 15% of its amount
on the basis of the national construction cost index established by the INSTITUT
NATIONAL DE LA STATISTIQUE ET DES ETUDES ECONOMIQUES (National Institute of
Statistics and Economic Studies) or any other index which may replace it, if
applicable.
In the event that no other index is substituted for such index, the parties
mutually agree to chose another index and calculate, if necessary, an adjustment
index.
In case no agreement is reached between the parties, the replacement index shall
be determined by three experts chosen by mutual agreement between the parties or
designated ex officio by the President of the District Court of Paris, at the
request of the most diligent party.
The first rent, payable on October 1, 1991, shall not be subject to
readjustment.
For subsequent rental payments, the reference index [to be used] throughout the
entire duration of the agreement shall be that of the first quarter of 1991,
i.e. 972.
Insofar as the comparison index is concerned, the last index published on the
due date of each quarterly rental payment shall be used.
<PAGE>
[Page 16]
The new rent shall be calculated by applying to the base rent, at the percentage
rate indicated above, the positive (or negative) difference between the
reference index and the comparison index based on the following formula
[see formula in original document]
Lx = new rent
Lb = base rent
I0 = reference index
I1 = comparison index
The parties agree that the rent actually received by the LESSOR can under no
circumstances be lower than the base rent established above.
C) DUTIES AND TAXES
To the rental payments determined above shall be added duties and taxes and
similar, in particular V.A.T.
The entirety of the terms governing the rental payments set forth above have
been established on the basis of regulatory and taxation provisions currently in
effect; in the event of a change in the regulations, such terms shall be
adjusted in such a way that the net remuneration of the LESSOR remains at all
times equivalent to that resulting from the terms applicable at the time the
agreement was entered into.
D) RENTAL SURCHARGE
A) V.A.T. LEVIED ON THE INVESTMENT (*)
The LESSEE agrees to pay to the LESSOR, as a rental surcharge, interest
calculated on the basis of the "Average Monthly Rate for Interbank Transactions
on the Money Market for Day-to-Day Funds" T.M.M. + one point, PRORATA TEMPORIS,
based on the amount of V.A.T. levied on the investment and settled by the
LESSOR.
This rental surcharge is owed by the LESSEE, PRORATA TEMPORIS, from the
effective date of this present instrument until the day of reimbursement of said
V.A.T. to the LESSOR by the Public Treasury pursuant to the terms provided for
under Decree No. 72-102 of February 4, 1972 and shall be invoiced at that date.
B) RENT-INCREASING CHARGES
The LESSEE agrees to pay to the LESSOR a rental surcharge equivalent to the
amount of so-called "rent-increasing charges", such as insurance premiums for
real-estate property, property tax, etc. This additional rental charge shall be
paid to the LESSOR eight working days prior to payment by the latter of said
charges.
These additional rental charges, plus any taxes, duties and any possible and
similar surcharges, in particular Value-Added Tax, shall be wired to the
LESSOR's bank account identified above.
(*) a) does not apply except to complementary investments.
<PAGE>
[Page 17]
E) DEFAULT INTEREST
Any rent and rental surcharges that have not been paid by their due date, even
partially, shall be subject by law to interest plus taxes, bank charges,
expenses and fees, including those not usually giving rise to a right of
recovery, rendered necessary to ensure their collection. Such interest shall be
calculated on the basis of the amount (including all taxes) remaining unpaid
from the due date until the settlement date, on the basis of the "Average
Monthly Rate for Interbank Transactions on the Money Market for Day-to-Day
Funds" T.M.M plus four points; this rate can not be lower than 15% per annum,
exclusive of taxes.
Furthermore, at the discretion of the LESSOR, the lease can be rescinded by
operation of law pursuant to the terms set forth under Section IV "RESCISSION"
below.
ARTICLE 3 - COVENANTS AND TERMS
This present leasing agreement is entered into on the basis of the following
covenants and terms, which are agreed to by the LESSEE:
A) OCCUPATION
1) The premises constituting the subject matter of this present instrument
shall be used as warehousing space, laboratories, workshops and offices and
annexed premises.
The LESSEE shall be under the obligation, except if otherwise agreed in
writing by the LESSOR, to use the premises for their purpose set forth
above until the expiration of this present lease.
Any total or partial change in activity shall be subject to prior and
written authorization by the LESSOR.
2) The LESSEE shall furnish "the building" and shall keep it permanently
equipped with furniture and furniture objects in a quantity and with a
value sufficient to ensure payment of the rent and fulfillment of the terms
of this present agreement at all times.
3) The LESSEE assumes personal responsibility, without recourse against the
LESSOR, for obtaining all authorizations necessary to occupy "the
building"; the LESSEE agrees to comply, throughout the duration of this
present instrument, with all legal and regulatory provisions applicable in
this matter, and in particular with the documents pertaining to the zoning
plan that applies to the building, a copy of which it acknowledges to have
received.
Furthermore, the LESSEE agrees to inform the LESSOR, by certified letter,
of any fact that may change the conditions of authorization contemplated
above and possibly lead to their abrogation.
The LESSEE in particular agrees to comply with all legal and regulatory
provisions pertaining to safety standards and, specifically, to have
performed, without delay and at its expense and at its sole responsibility,
all work which may become necessary for that purpose, in such a way that
the LESSOR can never be concerned or held to account in this matter.
4) The LESSEE may not undertake anything or have others engage in anything in
"the building" which may adversely impact the order, look or the property
of "the building" or affect the neighbors and shall otherwise comply with
the provisions of the regulations regarding enjoyment or co-ownership.
<PAGE>
[Page 18]
B) MAINTENANCE - WORK
5) The LESSEE receives "the building" as is.
The LESSEE shall keep it in good repair for rental or other uses.
The LESSEE shall perform, at its sole expense, risk and peril, all
maintenance work, including all repairs as defined in Article 606 Civil
Code; the LESSEE shall not be entitled to invoke the provisions of Article
1724 Paragraph 2 Civil Code. At the end of the leasing agreement, the
LESSEE shall restore "the building" to a good serviceable condition.
6) During the entire term of the leasing agreement, the LESSEE shall be
responsible:
- for all apparent faults and defects, which it agrees to repair;
- for all hidden defects which would affect either the fabric of the
building or its fixtures and fittings;
In this matter, the LESSOR can not be held responsible for any reason
whatsoever or at any time.
The LESSEE shall therefore directly exercise any [right of] recourse it
deems fit against the companies having participated in the construction of
"the building" and all third parties which may be involved therein,
including, if applicable, the project supervisor and the contractors, and
the LESSEE shall be under obligation to communicate this prior thereto to
the LESSOR.
Furthermore, the LESSEE agrees to notify the LESSOR, for all fit purposes,
of any faults, apparent or hidden defects, during the month in which they
are discovered, by means of a certified letter with return receipt.
7) The LESSEE shall be entitled to perform in "the building" constituting the
subject matter of this present leasing agreement, at its exclusive expense,
risk and peril and without [right of] recourse or recovery against the
LESSOR, all work involving equipment and installation necessary for or
specific to its professional use.
Any important change in distribution, demolition, breaking of walls, beams
or floors shall be subject to prior and written authorization by the
LESSOR.
The work contemplated in the two preceding paragraphs may only be performed
under the supervision and inspection of the architect designated by the
LESSOR and whose fees shall be borne by the LESSEE. All embellishments and
changes made in such fashion by the LESSEE shall be left in their then
current condition at the end of the leasing agreement, without
compensation, and the LESSOR shall not be entitled to demand restoration of
the premises to their original state.
8) The LESSOR's representatives shall at all times be afforded access to "the
building" for any monitoring or inspection they deem necessary.
<PAGE>
[Page 19]
C) GENERAL TERMS AND CONDITIONS
9) The LESSEE agrees to provide the LESSOR, within six months of the end of
its fiscal year, with a copy of its balance sheet, income statement as well
as, if applicable, reports (management, auditors), for the Annual General
Meeting.
10) The LESSEE shall be required to comply with the provisions pertaining to
accounting publication of leasing transactions, in such a manner that the
LESSOR is never concerned about this matter.
11) The LESSEE agrees, for itself and for its eligible representatives, to
comply with the legislative and regulatory provisions pertaining to
real-estate leasing transactions.
12) THE LESSEE agrees to fulfill all duties the LESSOR may assume pursuant to
the terms of the aforementioned purchase instrument and furthermore agrees
to pay directly to or reimburse the LESSOR for all expenses related
therewith, regardless of their cause and origin, which are included in the
lease amount.
ARTICLE 4 - FEES AND TAXES
The LESSEE shall settle, as and when due, all charges, real-estate
contributions, professional and other taxes and, generally speaking, all taxes,
contributions, and duties owed by it; their payment must be evidenced whenever
the LESSOR requests this.
The LESSEE shall, at the end of the leasing agreement, evidence the payment of
such charges and taxes up until the term of this present instrument.
The LESSEE agrees to pay to the LESSOR, pursuant to the terms provided for in
Article 2 Paragraph D) b), the amount of all contributions and duties connected
with the real-estate property (property taxes, etc.), including all municipal
duties and contributions, in such a way that the rent stipulated in Article 2
above represents for the LESSOR a revenue net of any charges.
It is herewith specified that the LESSOR shall have the right, in case the
LESSEE defaults on payment of any sum owed to third parties for which the LESSEE
has assumed responsibility pursuant to the terms of this present instrument, to
proceed with payment of the sum in question.
The LESSEE shall then reimburse the LESSOR for such sum plus penalties, fines
and all fees paid by the LESSOR. The resulting total in turn shall be increased
by default interest calculated until the date of reimbursement on the basis of
the "Average Monthly Rate for Interbank Transactions on the Money Market for
Day-to-Day Funds" T.M.M plus four points; this rate can not be lower than 14%
per annum, exclusive of taxes.
Furthermore, at the discretion of the LESSOR, this present instrument can be
rescinded pursuant to the terms set forth under Section IV "RESCISSION" below,
any payment notwithstanding.
<PAGE>
[Page 20]
ARTICLE 5 - ASSIGNMENT - SUBLEASING - MANAGEMENT
The assignment, subleasing or the management, with or without a change in
business, can be authorized pursuant to the following conditions, provided they
are not of the kind to lead to the loss of the tax benefit established in this
present instrument for leasing agreements and, in general, for Real-Estate
Companies for Trade and Industry (SICOMI) and as long as they are not prohibited
by any legislative, regulatory or interpretative provision pertaining to the
leasing agreement.
A) ASSIGNMENT
Any planned assignment of this present leasing agreement, regardless by what
means it may take place (pure and simple, assignment, merger, contribution,
takeover, etc.) shall be communicated to the LESSOR by means of a certified
letter with return receipt three months prior to the scheduled effective date of
the assignment.
Such assignment must be authorized in writing by the LESSOR under penalty of
nullity and, if the LESSOR sees it fit to do so, of rescission of this present
leasing agreement.
In case the LESSOR agrees thereto, the following conditions shall be imposed:
- - The assignment must be carried out in the presence of the LESSOR or duly
communicated to the latter by means of a certified letter with return
receipt addressed to its corporate headquarters at least 15 days in
advance.
- - The ASSIGNOR shall transfer to the ASSIGNEE, pursuant to the terms of one
and the same instrument, all rights resulting of this present instrument
and, in particular, the rights associated with the promised sale granted to
the ASSIGNOR under Section III "PROMISE OF SALE" hereinafter; the lease and
the promise of sale forming, pursuant to the joint intention of the
parties, a single indivisible whole, in accordance with the law and
ordinance cited above.
- - The ASSIGNEE shall be required, notably in regard to the LESSOR, to comply
with all obligations resulting from these presents.
- - THE ASSIGNEE shall remain a joint guarantor of the ASSIGNOR and, if
applicable, of the subsequent assignees for payment of rent and compliance
with all terms of this present lease.
B) SUBLEASING
The LESSEE shall be entitled to sublet the property leased as long as it
complies with the stipulations of the first paragraph of this present Article
and the provisions governing the subleasing of property financed through a
lease-to-buy (provisions currently applicable, Section II of the Instruction
(D.G.I) of May 28, 1970, note (B.O.D.G.I 4 H-3-77) of June 7, 1977.
Such sublease must be submitted in advance to the LESSOR for authorization and
may only be granted to reputable and known persons or commercial companies whose
activity in "the building" may only be commercial in nature under penalty of
nullity and, if the LESSOR deems this fit, of rescission of this present leasing
agreement.
Upon expiration of the lease, the LESSOR shall not be under any obligation to
renew the subleasing agreements, with "the building" being leased constituting,
pursuant to the joint intention of the parties, an indivisible whole, even in
the event that it should be physically divisible.
<PAGE>
[Page 21]
All modification or restoration work subsequent to such subleasing shall be at
the sole expense of the LESSEE.
The subleasing agreement shall include a clause pursuant to which the sublessee
declares to have been informed that the subleasing agreement can not be held
against the LESSOR, with the sublessee therefore waiving all rights and actions
vis-a-vis the LESSOR, and agrees to vacate "the building" in the event of
cessation of the leasing agreement for any reason whatsoever (non-request of
compliance with the promise of sale by the LESSEE, rescission, expropriation).
C) MANAGEMENT
The LESSEE can not appoint a manager, whether remunerated or not, over its
assets, whether as a whole or in part, without the prior and written consent of
the LESSOR, under penalty of rescission of this present instrument, if the
latter deems it fit to do so.
D) ASSIGNMENT BY THE LESSOR
In accordance with the provisions of Article I-1 of the Law No. 66-455 of July
2, 1966, modified by Ordinance No. 67-837 of September 28, 1967 cited above, the
LESSOR agrees, in the case of assignment of the property constituting the
subject matter of this present agreement, during the term of its performance, to
make its ASSIGNEE or its subsequent assignees, together with whom it shall
remain a joint guarantor, subject to the fulfillment of all obligations for
which it assumes responsibility pursuant to the terms of this present
instrument.
ARTICLE 6 - LIABILITY - INSURANCE
I. AGREEMENTS BETWEEN THE PARTIES
The LESSEE expressly agrees to waive any recourse against the LESSOR for any
damage whatsoever caused either to "the building" constituting the subject
matter of the leasing agreement or to property of any nature belonging to or
entrusted to the LESSEE as well as for all intangible damage caused to the
LESSEE.
The parties furthermore mutually waive the application of Article 1722 Civil
Code in the circumstances set forth in Paragraph III "CLAIMS/EVENTS OF LOSS"
below.
II. INSURANCE
The transaction constituting the subject matter of the leasing agreement shall
be guaranteed by insurance contracts which the LESSEE agrees to take out both on
its own account as well as for that of the LESSOR for the entire term of the
lease, to wit:
a) Contract "CIVIL LIABILITY INSURANCE FOR OWNERS OF REAL PROPERTY"
(constituting the subject matter of the lease) with regard to neighbors and
third parties, with coverage in the amount usually obtained on the French
insurance market.
b) Insurance Contract for "Damage to Property" (constituting the subject
matter of the lease), guaranteeing the replacement value (subject to an
index-based adjustment clause) of the building and the modifications
considered to be fixtures (including those carried out by the LESSEE
without financing by the LESSOR), covering the risks set forth below:
- - fire, lightning, explosions
- - airplane disaster
- - storms (hurricanes, high winds, tornado, cyclone)
- - smoke,
<PAGE>
[Page 22]
- - impact of ground vehicles,
- - water damage (including locating the leak),
- - damage resulting from improper functioning of automatic extinguishers,
- - strikes, riots, riots, vandalism, ill will, acts of terrorism
and sabotage,
- - electrical damage,
- - loss of rental payments,
- - glass breakage,
- - reimbursement of the "STRUCTURAL DAMAGE" premium to satisfy the
duty of insurance (Article 242.1 Insurance Code) concerning
restoration and repair and/or reconstruction of damaged buildings,
- - fees of decorators, design/construction management, technical control,
and engineering firms,
- - fees necessary to restore the premises in conformity with
construction legislation and regulations,
- - expenses related to relocation, warehousing and reinstallation,
- - expenses related to excavations, demolitions and decontaminations as
well as expenses incurred as the result of measures imposed by means
of administrative decisions.
c) "CIVIL LIABILITY" contract vis-a-vis neighbors and third parties.
d) a "PROPERTY DAMAGE" contract covering the risks set forth below:
- - fire, lightning, explosion, water damage
covering the personal or similar property, in particular materials, tools,
equipment, fittings and goods of any kind belonging to THE LESSEE and located in
the building constituting the subject matter of the leasing agreement.
The contracts shall include a clause by means of which [the LESSEE] waives its
[right of] recourse against the LESSOR.
Additional Provisions
a) The LESSEE agrees to provide the LESSOR with a copy of the annual report
regarding the replacement value of the building, which shall be used to
determine the insurance amounts.
The LESSEE agrees to indicate without delay to the insurers, during the
execution of the insurance contracts and during their term, any element
which may impact their assessment of the risks covered.
b) The agreements entered into by the LESSEE shall contain a clause
specifying:
- - that in the case of rescission or suspension, for any reason whatsoever,
the insurer shall be required to communicate this prior thereto to the
LESSOR. In this case, the LESSOR shall undertake all reasonable measures
and MAY, in particular, pay the premiums on behalf of the LESSEE, WHOM it
may sue for reimbursement by means of all appropriate legal channels.
- - that in case the insurer fails to comply with the above, its guaranty to
the LESSOR shall be called upon.
<PAGE>
[Page 23]
c) The LESSOR shall be designated as the beneficiary of the compensation paid
by the insurers of the LESSEE under the agreements set forth in paragraphs
a) and b) while being obligated to use them for the reconstruction of the
building constituting the subject matter of the leasing agreement, except
for compensation corresponding to the reimbursement of moving and
reinstallation expenses, which shall be paid back to the LESSEE. The LESSEE
in turn agrees to use the compensation received under the "property damage"
contract for the reconstitution of the layout and equipment.
d) The premiums pertaining to the insurance contracts shall be borne by the
LESSEE, and the corresponding V.A.T. shall be rebilled as a rental
surcharge.
e) A copy of the contracts to be entered into by the LESSEE shall be forwarded
to the LESSOR prior to the signing of this present instrument in order to
allow the LESSOR to ascertain that all risks set forth above have been
covered.
f) The LESSEE agrees, by means of a statement by its insurance agent, to
notify the LESSOR each and every year of any amendments made to the
contract or the absence of any changes as well as to evidence the payment
of the premiums.
g) In the event that amendments are made to the insurance contracts set forth
in Article II above and approved prior to the signing of this present
agreement by the LESSOR, the latter reserves the right to have its
insurer-counsel sign any additional insurance contract it deems necessary
and whose premiums shall be assumed by the LESSEE.
III. CLAIMS/EVENTS OF LOSS
A. GENERAL TERMS AND CONDITIONS
1. The LESSEE shall without delay report to the corresponding insurance
companies and to the LESSOR each and every loss, regardless of its scope,
even if such loss does not lead to any apparent damage.
2. In the case of a loss which destroys all or part of "the building" and
which is followed by reconstruction, the LESSEE shall take out, for the
joint account [of the parties], a "STRUCTURAL DAMAGE" contract pursuant to
the terms of the Law of January 4, 1978, a "FULL-COVERAGE CONSTRUCTION
SITE" contract covering all damage suffered by the structure during the
construction until its acceptance, not exceeding the construction cost, and
a "PROJECT SUPERVISOR LIABILITY" contract vis-a-vis the neighbors and third
parties for the transaction constituting the leasing agreement, not to
exceed the guarantee amounts normally obtained on the French insurance
market.
The LESSEE agrees hereinafter to evidence the execution of the contracts
set forth above and of the "DECENNIAL CIVIL LIABILITY" contract pursuant to
the provisions of the Law of January 4, 1978 executed by all persons
subject to the duty to obtain insurance, including the LESSEE.
3. In the event that the property leased is destroyed or damaged while the
guaranty of the insurance companies can not (or only insufficiently) be
called, the LESSEE shall assume the entirety (or the remainder) of the
expenses necessary for the reconstruction of the property having suffered
the loss, to which the LESSEE agrees unless he exercises the options
exercised [SIC - provided] under paragraphs B and C (early rescission of
the leasing agreement).
<PAGE>
[Page 24]
4. The amount of compensation which may be owed by the insurance companies as
the result of a partial or total loss which occurred on the leased premises
shall be negotiated by the LESSEE in the presence of the LESSOR or duly
communicated to the latter.
The LESSEE shall be responsible for paying, during the term of the amicable
dispute or of the court procedure, all rental payments which come due. The
LESSEE shall furthermore pay directly to or reimburse the LESSOR for all
expenses, charges and fees which may be owed.
B. Partial Loss
In the case of partial destruction of "the building" constituting the subject
matter of the leasing agreement, the LESSEE shall not be entitled to rescind
this present agreement, demand payment of any compensation whatsoever nor a
reduction in rent.
The LESSEE shall be responsible for restoring the damaged/destroyed building at
its sole expense, risk and peril after having obtained the necessary
administrative authorizations. The LESSOR in turn agrees to use all compensation
it may receive from the insurance companies, after deduction of all taxes and
duties which may be levied on such compensation, for the payment of the
reconstruction work of the building.
This present agreement shall remain in effect until its normal end and pursuant
to the terms set forth in this present instrument.
In case the restoration can not take place in the absence of the necessary
administrative authorizations and the normal use of "the building" can not
occur, the LESSEE has the following options:
- - to uphold this present leasing agreement for that part of "the building"
which was not destroyed; in this case, the amount representing the rental
share shall be reduced from the date on which the LESSOR receives the
compensation paid by the insurance companies, after deduction of the fees,
taxes and duties levied on such compensation, which are kept by the LESSOR,
- - to demand the rescission of the leasing agreement pursuant to the terms set
forth in Article 9 below, if the loss occurs before ten years have elapsed,
- - to demand the realization of the promise of sale such as set forth in
Article 8 below.
In the latter case, the price shall be calculated as described in Article 8
"Promise of Sale", Item b.
From the price determined as above, the amount, net of any charges, taxes and
duties, of the compensation paid by the insurance company to the LESSOR shall be
deducted. In turn, any taxes and duties which may be incurred by the LESSOR as
the result of such early realization of the promise of sale shall be added to
such price.
Finally, the terms of the sale realized in such a manner for the benefit of the
LESSEE shall be those set forth in Section III of this present agreement.
<PAGE>
[Page 25]
C. TOTAL LOSS
In the event of a loss which results in the total destruction of "the building",
the LESSEE shall be entitled to:
- - reconstruct "the building" destroyed at its sole expense, risk and peril
after having obtained the necessary administrative authorizations. The
LESSOR in turn agrees to use all compensation it may receive from the
insurance companies, after deduction of all taxes and duties which may be
levied on such compensation, for the payment of the reconstruction work of
"the building".
This present agreement shall remain in effect until its normal term and
pursuant to the conditions set forth in this present agreement.
- - to demand the rescission of the leasing agreement pursuant to the terms set
forth in Article 9 below,
[or]
- - to demand the realization of the promise of sale such as set forth in the
paragraph "Partial Loss".
ARTICLE 7 - VALUE-ADDED TAX
This present transaction is subject to value-added tax at the option of the
LESSOR.
SECTION III - PROMISE OF SALE
ARTICLE 8 - PROMISE OF SALE
Within the scope of the provisions set forth in Article 1-2(o) of the Law No.
66-455 of July 2, 1966, modified by the Ordinance No. 67-837 of September 28,
1967, pertaining to leasing agreements, the LESSOR promises to sell to the
LESSEE "the building" above constituting the subject matter of this present
instrument.
The LESSEE accepts the option offered, although without committing itself in any
fashion to exercise it, reserving the right to use such option as it deems fit
by the deadlines and pursuant to the terms specified.
The realization of the promise of sale can be requested by the LESSEE
- - on the expiration date of the leasing agreement,
- - during the term of the leasing agreement, although only at the end of the
tenth year following the effective date of this present agreement and
solely at each anniversary date of such effective date of the leasing
agreement.
The request for realization of such promise of sale shall be formulated by means
of a certified letter with return receipt, addressed to the LESSOR with six
months' advance notice.
<PAGE>
[Page 26]
The validity of this request for realization is subordinate to perfect
compliance by the LESSEE or its possible assignees with all duties and covenants
arising out of this present leasing agreement and subject to the proviso that it
be accompanied by a bank guarantee to ensure the payment of a sum sufficient to
cover the entire purchase price as well as the expenses and charges resulting
from such purchase.
The sale shall be carried out by means of a notarized document to be received by
the notary of the LESSOR, with the consent of the notary of the LESSEE; all
expenses, charges, duties and emoluments related with such sale shall be borne
by the LESSEE.
The sale shall occur pursuant to the usual and statutory terms and without any
guarantee by the LESSOR, in terms of its capacity as SELLER, pursuant to Article
1641 Civil Code and based on a price to be paid in cash on the signing date of
the certified sales instrument, which may vary depending on the conditions set
forth below:
a) Sale upon Expiration of the Leasing Agreement
In the event that the sale takes place upon expiration of the leasing agreement,
the price shall be equivalent to one French Franc.
b) Sale during the Term of the Leasing Agreement
In the event that the sale takes place during the term of the leasing agreement,
the price shall be equivalent to:
- - the purchase price upon expiration of the leasing agreement, as set forth
above,
- - plus the sum resulting from an update, at a rate of 8.5% [8 %?] at the
realization date of the promise of sale, of the rental payments remaining
outstanding until the end of the leasing agreement and readjusted at such
date pursuant to the terms set forth in Article 2 B above.
In case the LESSEE requests the realization of the sale prior to the expiration
of the period set forth in Article 210, Attachment II of the C.G.I, the LESSOR
shall then be under obligation to pay back a proportional part of the V.A.T.
levied on the investment and recovered prior thereto; as a result thereof, in
this case, the LESSEE agrees to pay to the LESSOR, beyond the price set forth
above, the amount of V.A.T. to be paid back by the LESSOR pursuant to Article
210, Attachment II of the C.G.I.
The LESSOR shall at the same time provide the LESSEE with the statement allowing
the latter to recover the V.A.T. paid in such fashion.
<PAGE>
[Page 27]
SECTION IV - RESCISSION
ARTICLE 9 - RESCISSION BY THE LESSEE
This present leasing agreement can be rescinded, at the request of the LESSEE,
under the following circumstances:
1. The rescission can only occur prior to the end of the tenth year and shall
come into effect at the end of the then current leasing year.
2. The LESSEE shall communicate to the LESSOR, by means of a certified letter
with return receipt, its intention to rescind the agreement at least six
months prior to the month on which it wishes such rescission to take
effect.
3. The LESSEE shall pay to the LESSOR, no later than by the effective date of
the rescission, a rescission compensation equivalent to the cumulative
amount of the rental payments, exclusive of taxes, remaining from the
effective date of the rescission until the term set forth in this present
agreement; such amount shall be readjusted at such date pursuant to the
terms set forth in Article 2 B above, plus V.A.T.
4. The LESSEE shall return to the LESSOR, no later than by the effective date
of the rescission, "the building" in perfect conditions of maintenance and
repairs and free from any tenancy or occupation.
5. In the event that, between the rescission date and the normal end date set
forth in this present instrument, the LESSOR should assign "the building"
constituting the subject matter of this present instrument to a third
party, the LESSOR shall be under obligation to pay to the LESSEE, provided
the latter has complied with all its obligations arising out of this
present agreement and, in particular, paid the compensation set forth
above, the net amount of the proceeds of the assignment, after deduction of
the expenses and charges incurred by the LESSOR and for which the LESSEE
would normally have been responsible if the LESSEE had remained on the
premises, as well as the charges, taxes, duties and fees which may result
from the rescission of this present instrument and of the amount of the
contributions to the amortization and contingency accounts pertaining to
"the building" identified above during the period elapsed between the
rescission date and the assignment date.
Under no circumstances, however, must the amount to be paid to the LESSEE
exceed the amount of pre-tax rent remaining outstanding between the date of
the assignment by means of a certified instrument and the term provided for
under this present agreement, if such agreement would have remained in
effect for its full term, and such amount shall be readjusted on aforesaid
date pursuant to the provisions set forth in Article 2 B above.
The parties agree that the terms of the sale (or of the lease contemplated
in Paragraph 6 below) which the LESSOR may grant shall be subject to its
sole diligence and its exclusive discretion, without any intervention by
the LESSEE.
<PAGE>
[Page 28]
6. In the event that, between the rescission date and the term set forth in
the agreement, the LESSOR leases "the building" constituting the subject
matter of this present instrument to a third party, whether on the basis of
a pure and simple lease or of a leasing agreement, the LESSOR shall pay to
the original LESSEE, provided the latter has complied with all its
obligations arising out of this present agreement and, in particular, paid
the compensation set forth above, the rental payments proceeding from the
new tenant during their respective month of collection, after deduction of
a sum equivalent to 10% of the pre-tax amount of each rental payment for
management expenses and of any possible expenses, duties or taxes,
including the amount of contributions to the amortization and contingency
accounts related with the properties identified above during the period
which has elapsed between the rescission date and the effective date of the
new lease; such payments must not exceed the amount of rent which would
have been owed by the original LESSEE in case this present agreement had
not been rescinded.
These payments are furthermore only owed by the LESSOR until the end of the
term set forth in this present agreement.
All possible expenses, charges, duties and fees resulting from the
implementation of this present Article "RESCISSION" shall be borne by the
LESSEE.
ARTICLE 10 - RESCISSION BY THE LESSOR
Upon non-payment of a single rental payment when due, as in the event of any
non-payment of any sum to be paid by the LESSEE pursuant to the terms of this
present instrument, or in the case of non-fulfillment of any term of this
present instrument, this present leasing agreement shall be rescinded by
operation of law, if the LESSOR deems it fit to do so, one month after simple
notification of non-payment or non-compliance or one month after an order to pay
has been communicated to the LESSEE; the declaration of such rescission in court
shall not be required.
The LESSOR shall resume free disposal over "the building" by simple eviction of
the LESSEE by injunction, and subsequent offers can not interrupt the effect of
this clause [sic]. In this case, the LESSOR shall retain the right of payment of
rent accrued and reimbursement of all sums for which the LESSEE is responsible.
The LESSEE shall furthermore be under obligation to pay to the LESSOR, no later
than on the effective date of the rescission, compensation whose amount shall be
determined as set forth in Paragraph 3 of Article 9 above. In the event that the
premises are assigned or rented again, the stipulations of Paragraphs 5 and 6 of
Article 9 above pertaining to sums to be paid to the LESSEE shall be applicable.
<PAGE>
[Page 29]
SECTION V - EXPROPRIATION
ARTICLE 11 - EXPROPRIATION
TOTAL EXPROPRIATION:
In the event that the building is expropriated in its entirety, the leasing
agreement shall be rescinded by operation of law as of the date of the ordinance
resulting in the transfer of property of "the building" to the expropriating
entity.
However, since enjoyment of "the building" may only be granted to the
expropriating entity after payment to the LESSOR of the expropriation
compensation, the LESSEE shall owe to the LESSOR, as of the date of the
aforementioned ordinance and until actual payment of the expropriation
compensation, at which time "the building" must be released without delay, an
occupation compensation equivalent to the amount of the rental payments and
rental surcharges owed for such period; such compensation shall be payable
pursuant to the same terms and at the same times as the rental payments and
rental surcharges.
On the other hand, if the compensation paid to the LESSOR represents, after
deduction of all fees and expenses incurred by reason of the expropriation and
of all taxes that remain outstanding, in particular in terms of capital gains,
an amount higher than the amount resulting from the update of the actuarial rate
of 8% of the rental payments remaining outstanding until the end of the leasing
agreement and readjusted as of the day of payment of the expropriation
compensation pursuant to the terms set forth in Article 2 B above, the LESSOR
shall immediately pay to the LESSEE the difference between these two amounts.
Otherwise, the LESSEE shall be under obligation to immediately pay this
difference to the LESSOR; it shall be specified that the security interest of
the LESSOR in the furniture on the rented premises shall also guarantee payment
of such difference in terms of payment of above compensation.
PARTIAL EXPROPRIATION
In case "the building" is only expropriated in part, the leasing agreement shall
remain in effect for the portion not expropriated. The amount of the leasing
agreement, readjusted pursuant to the same terms as the rental payments, shall
be decreased, from the day on which the expropriation compensation is received
by the LESSOR, by a sum equivalent to the amount of the compensation, after
deduction of all expenses proven by the expropriation manager and of all taxes
owed, in particular in terms of increases in value.
DISPUTES
The amount of the compensations offered by the expropriating authority can only
be accepted by the LESSOR with the consent of the LESSEE, although the latter
must communicate its response no later than one month after it is notified by
the LESSOR that the LESSOR wishes to accept the offers received. Such
notification shall be made by certified letter with return receipt.
In case the LESSEE disagrees regarding the amount of the compensations accepted
by the LESSOR, the latter shall thereinafter grant the LESSEE all powers to
contest the amount of the compensations before the expropriating entity.
<PAGE>
[Page 30]
In the event that the disputes do not lead to an amicable settlement, the LESSOR
agrees to file, upon the first request to that effect by the LESSEE, any
meaningful court action; the LESSEE shall be under obligation to participate in
such actions.
While the protests are pending and until actual payment of the expropriation
compensation, the LESSEE shall owe the LESSOR:
- - in the event of total expropriation: an occupation compensation equivalent
to the amount of the applicable rental payments and rental surcharges for
such period;
- - in the event of partial expropriation: all applicable rental payments and
rental surcharges for such period; the reduction in rent contemplated above
can only take effect as of the day on which the compensation is actually
paid.
The LESSEE shall furthermore be under obligation to directly pay to or reimburse
the LESSOR for all expenses, charges and fees which may be owed.
SECTION VI - MISCELLANEOUS PROVISIONS
ARTICLE 12 - DECLARATIONS
The representative of the LESSEE declares that he is not currently and never has
been subject to judicial reorganization or liquidation or suspension of payments
and that he is current in terms of payment of taxes and contributions to the
Administrations of direct and indirect Social-Security contributions.
ARTICLE 13 -LEASING AGREEMENT AS COLLATERAL
The LESSEE agrees to refrain from providing as liens or collateral to any person
other than the LESSOR the intangible elements from which it benefits under this
present leasing agreement.
ARTICLE 14 -PUBLICATION OF REAL ESTATE TRANSACTIONS
A notarized copy of this present instrument shall be published, in accordance
with the law, at the corresponding Mortgage Registry through the undersigned
associate notary.
The parties declare to have knowledge of the following:
- - for payment of the real-estate publication tax, that the cumulative amount
of the rental payments and charges is TWENTY MILLION TWO HUNDRED FIFTY
THOUSAND FRENCH FRANCS (20,250,000 French Francs), exclusive of taxes.
<PAGE>
[PAGE 31]
- - for the purpose of collection of the salary of the Mortgage Administrator,
the cumulative amount of the rental payments and rental surcharges,
including V.A.T., is TWENTY FOUR MILLION SIXTEEN THOUSAND FIVE HUNDRED
FRENCH FRANCS (24,016,500 French Francs).
The unredeemed part of the price to be paid by the LESSEE for the realization of
the promise of sale is estimated to amount to one French Franc.
POWERS
To comply with the formalities of publication of real-estate transactions, the
parties - acting in pursuit of a common interest - grant all powers to all
clerks of the notary office identified in the headers of this present instrument
for the purpose of preparing and signing any additional instruments correcting
this present instrument to make the same compliant with the mortgage and land as
well as civil registry records.
ARTICLE 15 - ELECTION OF DOMICILE - SPECIFICATION OF JURISDICTION
The parties elect the following domiciles:
- - THE LESSOR: its corporate headquarters.
- - THE LESSEE: its corporate headquarters.
Any dispute arising out of the performance of this present instrument shall be
submitted to the competent Court of PARIS.
ARTICLE 16 - FEES
All expenses, duties, taxes and fees, whether in the present or in the future,
related with this present instrument or which may directly or indirectly be its
result or consequence, in particular in terms of the notarized instrument
required to evidence the transfer of property to the LESSEE during the
realization of the promise of sale stipulated in SECTION III, shall be at the
sole expense of the LESSEE.
WHEREOF INSTRUMENT IN VIVO [HANDWRITTEN NOTES] - six pages
Executed and issued in PARIS (8th Arrondissement), 25 Avenue George V,
On the day and in the month and year indicated above.
Having read this present instrument, the parties signed it together with the
undersigned notary.
[HANDWRITTEN NOTES]
(1) p 5: workshops and annexes ./. (reference mark 20)
(2) p 5: workshops ./.
(3) p 6: workshops and premises ./.
(4) p 9: paid ./.
[BOTTOM OF THE LEFT-HAND MARGIN]
Reference marks: 5
Blank spaces crossed out: 0
Full lines: 0
Words voided: 3
Numbers voided: 0
<PAGE>
[Page 32]
[Handwritten note]
p 14: (5) except as concerns the subleasing agreements granted to companies
of the GUERBET group, to the extent that they comply with the above
provisions.
[THREE SIGNATURES - ILLEGIBLE]
Reference mark (6) page 7: Joined to form the land registry parcel section F No.
1848, a place by the name of "La Briqueterie" with a surface of 1 hectare 15
ares [and] 4 square meters, according to the land registry record No.
1809 dated August 30, 1984./.
(Reference mark specifically approved as not included in the final remark).
Signature [ILLEGIBLE]
Signature [ILLEGIBLE]
<PAGE>
[Page 33]
Page: 1
ATTACHMENT 1
AMORTIZATION SCHEDULE FOR THE ACCOUNT GUERBET S.A.
Annexed to the Copy of an Instrument Received by the Undersigned Associate
Notary on October 28, 1991
INVESTMENT: 12725318.41 F
TRANSACTION DATE: October 1, 1991
TERM: 15 YEARS
[Column Headings, from left to right]
NUMBER
PAYMENT DATE
OUTSTANDING AFTER PAYMENTS
AMORTIZATION
INTEREST
AMOUNT OF PAYMENTS
REGRESSIVE CUMULATIVE AMOUNTS
[Last row]
TOTALS
<PAGE>
[Page 34]
Page: 2
AMORTIZATION SCHEDULE FOR THE ACCOUNT GUERBET S.A.
INVESTMENT: 12725318.41 F
TRANSACTION DATE: October 1, 1991
TERM: 15 YEARS
[Column Headings, from left to right]
NUMBER
PAYMENT DATE
OUTSTANDING AFTER PAYMENTS
AMORTIZATION
INTEREST
AMOUNT OF PAYMENTS
REGRESSIVE CUMULATIVE AMOUNTS
[Last row]
TOTALS
<PAGE>
[Page 35]
CERTIFIED AUTHENTIC COPY produced by an approved xerographic printer on
twenty-nine pages, precisely collated and in conformity with the record bearing
a reproduced remark indicating the number of reference marks, blank spaces
crossed out as well as lines, words, and numbers voided.
Signature [ILLEGIBLE]
Signature [ILLEGIBLE]
<PAGE>
Exhibit 10.16
1/4/00
LEASE
By and Between
1050 HINGHAM STREET REALTY TRUST
Landlord
and
BIOSPHERE, INC.
Tenant
1050 HINGHAM STREET
ROCKLAND, MASSACHUSETTS
<PAGE>
REFERENCE DATA
As used in this Lease, the following terms shall have the respective meaning set
forth below except when and to the extent reference is made to particular
Sections of the Lease:
Date of Lease: January 7, 2000
Landlord: Thomas J. Teuten and John H. Spurr, Jr., Trustees of 1050
Hingham Street Realty Trust
Landlord's Address: 20 Winthrop Square, Boston, Massachusetts 02110-1229.
Tenant: BioSphere, Inc., a Delaware corporation.
Tenant's Address: 111 Locke Drive, Marlboro, Massachusetts 01757
Property: Landlord's land and improvements thereon known as 1050
Hingham Street, Rockland, Massachusetts 02370.
Building: The three-story building located on the Property.
Leased Premises: A portion of the first (1st) floor of the Building as
shown on Exhibit A.
Rentable Square
Footage of the Leased
Premises: 7,797 square feet to be certified by Landlord's
Architect.
Total Rentable
Square Footage of the
Building: 39,771 square feet.
Use of Leased
Premises: Administrative offices for a medical device company and
ancillary uses related thereto including research and
development and light manufacturing to the extent
described in Exhibit D attached hereto and incorporated
herein, provided that such research and development
involve no hazardous materials, solid waste, noise or
fumes beyond the Leased Premises or any impact on the
Building, its operations or the operations of other
tenants in the Building.
Lease Term: Five (5) years.
Specified Commencement
Date: March 15, 2000.
Landlord's Initials________ Tenant's Initials_________
i
<PAGE>
Commencement Date: The Specified Commencement Date or such other date as
determined in accordance with the terms of Section 3.
Base Rent: Lease Annual Monthly
Year Base Rent Installment
----- --------- -----------
1 - 3 $155,940.00 $12,995.00
4 & 5 $161,787.75 $13,482.31
Lease Security: An irrevocable letter of credit (the "Letter of Credit")
or cash Security Deposit of $140,000, to be reduced as
scheduled below, subject to Section 4.
Lease Year Amount
---------- ------
1 $140,000
2 115,500
3 92,400
4 64,400
5 33,600
Base Operating Costs: Operating costs for the calendar year 2000, grossed up to
reflect 100% occupancy for a full calendar year.
Base Taxes: Taxes for the fiscal year ended June 30, 1999.
Electricity: $6,627.45 per year or $552.29 per month.
Tenant's Proportionate
Share: 19.605%
Broker: Meredith & Grew, Incorporated.
Insurance: $1,000,000/$3,000,000 per occurrence public liability;
$1,000,000 per occurrence property damage.
Personal Property insurance for all risks to full
insurable value of personalty in the Leased Premises.
Landlord's Initial
Construction: Landlord shall provide a buildout subject to the
conditions of Schedule A and Tenant Construction
Contribution of up to $31,188 toward the cost of design
and construction of Landlord's Initial Construction to
the extent such cost exceeds $140,346.
Landlord's Initials________ Tenant's Initials_________
ii
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Leased Premises.............................1
2. Use.........................................1
3. Lease Term..................................2
4. Base Rent, Security Deposit.................2
5. Operating Cost Escalation...................3
6. Tax Escalation..............................5
7. Building and Equipment......................7
8. Property of Tenant..........................8
9. Services....................................8
10. Removal of Goods and Tenant's Repairs.......9
11. Improvements, Alterations and Ownership.....9
12. Inspection.................................11
13. Casualty...................................11
14. Condemnation - Eminent Domain..............13
15. Indemnification............................14
16. Liability Insurance........................15
17. Damage to Property of Tenant...............15
18. Injury and Damage..........................15
19. Waiver of Subrogation......................15
20. Assignment, Mortgaging and Subletting......16
21. Signs and Drapes...........................18
22. Landlord's Insurance.......................18
23. Inflammables, Odors........................18
24. Default....................................18
25. Subordination..............................20
26. Holdover...................................21
iii
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
27. Notices....................................21
28. Rules and Regulations......................22
29. Quiet Enjoyment............................22
30. Disputes; Landlord's Reasonableness;
Arbitration................................22
31. Seisin.....................................22
32. Binding Agreement..........................22
33. Notice of Lease............................23
34. Landlord's Right to Cure...................23
35. Hazardous Materials........................23
36. First Offer for Basement Space.............23
37. General Provisions.........................24
Exhibit A1 - Lease Plan
Exhibit A2 - Site Plan
Exhibit B - Rules and Regulations
Exhibit C - Cleaning Specifications
Exhibit D - Clarification of Light Manufacturing Use
Schedule A - Landlord's Initial Construction
Schedule B - Building Standard
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This Lease is made and entered into as of the Date of Lease by and between
Landlord and Tenant (both defined in the Reference Data section) on the
following terms and conditions which the Landlord and Tenant covenant and agree
to keep and perform.
l. Leased Premises. In consideration of the rents and covenants herein
stipulated to be paid and performed by Tenant and upon the terms and conditions
herein specified, Landlord hereby leases to Tenant, and Tenant hereby hires and
takes from Landlord, the Leased Premises (as defined in the Reference Data
section) as indicated by outlining and diagonal marking on the plan labeled
Exhibit A1 which is attached hereto and incorporated herein, excluding elevator
shafts, stairs and other common elements of the Building, on the terms
hereinafter stated, which Leased Premises are hereby agreed to contain the
Rentable Square Footage of the Leased Premises (as defined in the Reference Data
section). The Tenant shall have the right to use in common with others the
elevators, stairs and entrances and exits of the Building and the grounds of the
Property, including the walkways and parking areas as shown in Exhibit A2. At
the present time there are approximately 250 parking spaces. Landlord shall
maintain available for use of Tenants in the Building and their visitors, a
minimum of four (4) parking spaces per 1,000 r.s.f. of total office and basement
area (49,208 r.s.f.) except for reasonable interruption for repairs or
improvements of the parking lot. Landlord reserves the right, on reasonable
notice and at no additional capital cost to Tenant, to change the traffic
patterns on the Property, including without limitation the access to and egress
from the Property, if Landlord reasonably determines that such change will
improve traffic conditions on the Property or adjacent roads.
2. Use. Tenant may use the Leased Premises only for the Use of Leased Premises
(defined in the Reference Data section). Such use and occupation shall at all
times be in compliance with the ordinances of the Town of Rockland, the laws of
The Commonwealth of Massachusetts and the United States of America and any
regulations under any thereof. Tenant shall not use, permit or suffer anything
to be done in the Leased Premises or anything to be brought into or kept in the
Leased Premises, in either case, which occasions undue hazard, discomfort or
annoyance to any other tenants or occupants of the Building, or which in
Landlord's reasonable judgment may tend to impair the reputation or appearance
of the Building and tend to interfere with the proper and economic operation of
the Building by Landlord. Tenant agrees that, except as set forth in the
following sentence for "Kitchen Areas," it shall not use the Leased Premises or
any part thereof, or permit the Leased Premises or any part thereof to be used,
for the preparation or dispensing of food, whether by vending machines or
otherwise. Notwithstanding the preceding sentence of this Section, but subject
to the other terms and conditions of this Section and this Lease, Tenant may
install at its own expense so-called hot-cold water fountains, coffee makers,
beverage vending machines, microwave ovens, refrigerators and sinks ("Kitchen
Areas") for the heating and consumption of food on the Leased Premises by
Tenant's employees only, provided that no cooking, frying, etc. are carried on
in the Leased Premises to such extent as creates odors of any kind beyond the
Kitchen Areas or requires special exhaust venting, and provided further that the
installation and operation of such Kitchen Areas shall not result in any
increase in Landlord's insurance premiums or costs unless such increase is fully
paid for, in advance, by Tenant. Tenant hereby acknowledges that the Building is
not engineered to provide any such special venting.
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3. Lease Term. Subject to the terms, covenants, agreements and conditions
contained herein, Tenant shall have and hold the Leased Premises for the Lease
Term (defined in the Reference Data section), commencing on the Commencement
Date and terminating on the last day of the month in which the date immediately
preceding the applicable anniversary of the "Commencement Date" shall occur (the
"Expiration Date"), unless sooner terminated pursuant to any of the terms and
conditions of this Lease or pursuant to law. The "Commencement Date" shall be
the later to occur of (i) the Specified Commencement Date (defined in the
Reference Data section) or (ii) the date on which Landlord's Initial
Construction (defined in Section 11(a)) is Substantially Complete (as defined in
Schedule A), and in any event on the date on which Tenant occupies any portion
of the Leased Premises for its business purposes, which shall not include entry
for purposes of preparing the Leased Premises for occupancy. In the event
Landlord fails to deliver the Leased Premises to Tenant with the Landlord's
Initial Construction Substantially Completed on or prior to June 24, 2000 then
Tenant may cancel this Lease, without further liability of Tenant to Landlord
upon seven (7) days written notice from Tenant to Landlord; provided however,
that if, within two (2) business days after receipt of such notice, Landlord
provides evidence reasonably satisfactory to Tenant that the Leased Premises
shall be available for occupancy in accordance with this Lease prior to July 15,
2000, then Tenant agrees to revoke such termination as long as the Leased
Premises are so delivered.
After the beginning of the Lease Term, Landlord and Tenant shall, upon the
request of either, execute a letter agreement or other acknowledgment specifying
the dates on which the Lease Term begins and ends.
4. Base Rent; Security Deposit:
(a) Tenant covenants to pay to Landlord during and through the Lease Term,
inclusive, annual "Base Rent" equal to the amounts specified in the
Reference Data section.
Such annual rent is payable in equal monthly installments, in advance, on
the first day of every calendar month during the Lease Term hereof, and a
proportionate part of such monthly installment is payable for any fraction
of a calendar month occurring at the beginning or end of the Lease Term
(such annual rent is hereinafter called the "Base Rent"). Tenant will pay
the Base Rent without notice, demand or deduction, except as specified
above, to the Landlord at Landlord's Address (defined in the Reference
Data section), or at such other place as is designated from time to time
by notice from Landlord to Tenant.
(b) Upon execution of this lease, Tenant shall pay to Landlord a security
deposit, the "Security Deposit", (or in lieu thereof, a letter of credit
as provided below) specified in the Reference Data section as "Lease
Security", which shall be held as security for the Tenant's performance as
herein provided and refunded to the Tenant at the end of this Lease,
subject to Tenant's satisfactory compliance with the conditions hereof.
The Security Deposit shall be kept in a separate interest bearing bank
account subject to withdrawal by Landlord under the terms and conditions
provided below. Provided Tenant is not in default hereunder, Landlord
shall pay any interest accrued and posted to the account to Tenant on or
before July 31 and December 31 of each calendar year during the Lease
Term. Tenant shall be responsible for all taxes, fees, charges or other
expenses associated with such account. At Tenant's option, on
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one occasion during the Lease Term, Tenant may substitute for the Security
Deposit a letter of credit (the "Letter of Credit"). Such Letter of Credit
shall be irrevocable and issued by a banking institution and in a form
reasonably acceptable to Landlord. If the Letter of Credit is issued for a
term shorter than the remainder of the Lease Term, Tenant shall provide
Landlord with a renewal Letter of Credit no later than thirty (30) days
prior to the expiration of such Letter of Credit. If all or any part of
the Lease Security shall be applied to any obligation of Tenant under the
Lease, Tenant shall immediately upon request by Landlord restore the Lease
Security to it's original amount. Provided Tenant has not been in default
of any of the terms of this Lease prior to or at the time of any scheduled
reduction, the amount of the Lease Security shall be reduced on the first
day after the Lease Year specified to the amount specified in the
Reference Data section. Tenant shall not have the right to call upon
Landlord to apply all or any part of the Lease Security to cure any
default or fulfill any obligation of Tenant, and such use shall be solely
in the description of Landlord.
5. Operating Cost Escalation. As used in this Section 5, these words and terms
shall have the following meanings:
(a) "Operating Costs" shall mean all costs incurred and expenditures made
by the Landlord in the operation and management of the Building and the
Property, exclusive of financing expenses and real estate taxes, as
determined in accordance with generally accepted accounting principles.
Operating Costs include, without limitation, costs of janitorial service,
heating, electricity and air-conditioning (except to the extent payable
directly by Tenant as set forth in Section 9 below); maintenance and
repairs to the Building (except for the obligations of Tenant within the
Leased Premises) and the Building HVAC systems and equipment, supplies,
maintenance of the parking areas and grounds, snow removal, management
fees, wages, salaries, benefits, payroll taxes and unemployment
compensation insurance for employees of Landlord, and all the costs for
the cleaning, operation, maintenance or security of the Property;
insurance relating to the Property; legal fees related to the management
of tenants and operation of the Property (except for the negotiation of
Leases and otherwise to the extent such legal fees are charged to
individual tenants) payments other than Taxes (as hereinafter defined) to
the Town of Rockland including, but not limited to, water and sewer
charges; amortization of capital expenditures, including the cost of money
connected therewith, which result in reduction of the increase or rate of
increase in operating expenses; and all other expenses customarily
incurred in connection with the operation of first class office buildings.
Operating costs shall not include:
1) cost of alterations of Tenant space;
2) depreciation, interest and principal payments on mortgages, and other debt
costs; if any;
3) real estate broker's leasing and brokerage commissions or compensations
and advertising and other marketing expenses;
4) costs of special services provided to some; but not substantially all of
the tenants of the Building;
5) rental under any ground or underlying lease or leases;
6) wages, salaries or other compensation paid to employees above the level of
Building Manager;
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7) any expenditures of which Landlord has been or will be reimbursed (other
than pursuant to rent adjustment, escalation or general expense
reimbursement in leases), including insurance and condemnation proceeds,
services contracts and warranties;
8) the cost of correcting defects in the construction of the Building (latent
or otherwise), provided that the foregoing shall not exclude the costs of
normal repair, maintenance and replacement;
9) any compensation paid to clerks, attendants or other persons in commercial
concessions operated by Landlord; if any;
10) accounting fees to the extent not specifically related to the operation of
the Building;
11) any fees and expenses paid to an agent, contractor or manager which is
related to Landlord to the extent such fees or expenses are in excess of
the customary market amounts which would be paid in the absence of such
relationship;
12) expenses for repairs or the work occasioned by condemnation or by a
casualty except amount below the deductible of any insurance policy
carried by Landlord on the Building, provided such deductible does not
exceed $10,000;
13) fines and penalties for violation of governmental laws, regulatory orders
or conditions;
14) environmental compliance or remediation to the extent considered
acceptable cost under GAAP;
15) capital expenditures, except as specified above; and
16) reserves for future capital expenditures.
If the Building shall not have been fully occupied during any portion of a
year for which Operating Costs are being computed, Operating Costs for
such year or portion thereof shall be reasonably projected by Landlord to
the estimated Operating Costs that would have been incurred if the
Building had been fully occupied for such year, and such projected amount
shall be deemed to be the Operating Costs for such year.
(b) "Operating Escalation Statement" shall mean a statement in writing
signed by Landlord, setting forth the amounts payable by Tenant for a
specified computation year pursuant to this Section.
(c) "Tenant's Proportionate Share" shall mean that percentage defined in
the Reference Data section which is a fraction, the numerator of which is
the Rentable Square Footage of the Leased Premises and the denominator of
which is the Total Rentable Square footage of the Building (both as
defined in the Reference Data section).
Operating Costs Excess: If in any calendar year occurring during the Lease
Term, the Operating Costs for such year exceed the Base Operating Costs
(as defined in the Reference Data section), the Tenant shall pay to the
Landlord as additional rent an amount (hereinafter called the "Operating
Costs Excess") equal to the Tenant's Proportionate Share of any such
excess. Beginning with the first installment of Base Rent, and continuing
thereafter during the Lease Term, Tenant shall pay to Landlord on the
first day of each calendar month one-twelfth (1/12) of the sum equal to
Landlord's reasonable estimate of Operating Costs Excess for such calendar
year, and such payments shall be credited to the Operating Costs Excess,
if any, payable for the current calendar year. After the end of each
calendar year, Landlord shall give
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to Tenant the Operating Escalation Statement which shall show the actual
Operating Costs Excess together with the total of estimated payments
applied. Any balance due Landlord shall be payable by Tenant thirty (30)
days following receipt by Tenant of the Operating Cost Escalation
Statement, with any excess estimated payments credited by Landlord to
Tenant against the Rent next due hereunder, provided that any excess
credit shall be repaid to Tenant within ninety (90) days following the end
of the calendar year in which occurs the expiration of the Lease Term,
subject to set off against sums due from Tenant to Landlord.
Part Years: If this Lease shall commence or terminate in the middle of a
computation year, Tenant shall be liable for only that portion of the
Operating Costs Excess in respect of such computation year represented by
a fraction the numerator of which is the number of days of the Lease Term
which falls within the computation year and the denominator of which is
three hundred sixty-five (365).
Data: Upon request made within thirty (30) days of receipt of any
Operating Escalation Statement, Landlord shall promptly provide to Tenant
reasonable data to permit Tenant to verify the Operating Costs contained
therein, but Tenant may not dispute any such element of cost or expenses
not objected to within thirty (30) days of receipt of such data. Any
obligation of Tenant under this Section 5 which shall not have been paid
at the expiration of the Lease Term shall survive such expiration and
shall be paid when and as the amount of same shall be determined together
with interest thereon at the Lease Interest Rate (defined in Section 24)
from the date the Operating Cost Excess was first due to Landlord.
6. Tax Escalation: As used in this Section 6, these words and terms shall have
the following meanings:
(a) "Taxes" shall mean all real estate tax payments to the Town of
Rockland or payments in lieu of thereof, all taxes, assessments and
betterments levied, assessed or imposed by any governmental authority upon
or against the Building and the Property or payments in lieu thereof, but
excluding water and sewer charges. If, at any time during the Lease Term,
any tax or excise on rents or other taxes, however described, are levied
or assessed against Landlord with respect to the rent reserved hereunder,
either wholly or partially in substitution for, or in addition to, real
estate taxes assessed or levied on the Property, or payments in lieu
thereof, such tax or excise on rents shall be included in Taxes; however,
Taxes shall not include franchise, estate, inheritance, succession,
capital levy, transfer, income or excess profits taxes assessed on
Landlord.
(b) "Tax Escalation Statement" shall mean a statement in writing signed by
Landlord, setting forth the amounts payable by Tenant for a specified
computation year pursuant to this Section.
Tax Excess: If in any real estate tax fiscal year occurring during the
Lease Term, the Taxes for such year exceed the Base Taxes (as defined in
the Reference Data section), the Tenant shall pay to the Landlord as
additional rent an amount (hereinafter called the "Tax Excess") equal to
the Tenant's Proportionate Share of any such excess. Beginning with the
first installment of Base Rent, and continuing thereafter during the Lease
Term, Tenant shall pay to Landlord
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on the first day of each calendar month one-twelfth (1/12) of the sum
equal to Landlord's reasonable estimate of the Tax Excess for such fiscal
year, and such payments shall be credited to the Tax Excess, if any,
payable for the applicable fiscal year. Such estimated payments shall be
timed so that Landlord has the amounts available on the due dates for tax
bills in the Town of Rockland. During the fiscal year, Landlord shall give
to Tenant Tax Escalation Statement(s) based upon tax bills received from
time to time from the Town of Rockland, showing the Tax Excess together
with the total of estimated payments applied. Any balance due Landlord
shall be payable by Tenant thirty (30) days following receipt by Tenant of
each Tax Escalation Statement. Any excess estimated payments shall be
carried to the credit of Tenant until the issuance of the last such Tax
Escalation Statement for each fiscal year and if the statement indicates
an overpayment, it shall be credited by Landlord to Tenant against the
Rent next due hereunder, provided that any excess credit shall be repaid
to Tenant within thirty (30) days following the end of the fiscal year in
which occurs the expiration of the Lease Term, subject to set off against
sums due from Tenant to Landlord.
Part Years: If this Lease shall commence or terminate in the middle of a
computation year Tenant shall be liable for only that portion of the Tax
Excess in respect of such computation year represented by a fraction the
numerator of which is the number of days of the herein Lease Term which
falls within the computation year and the denominator of which is
three-hundred sixty-five (365).
Refunds: If, after Tenant shall have made any payment of Tax Excess to
Landlord pursuant to this Section, Landlord shall receive a refund of
taxes paid during or with respect to any real estate tax fiscal year
during the Lease Term hereof as a result of abatement of such Taxes by
legal proceedings, settlement or otherwise (without either party having an
obligation to undertake any such proceedings), Landlord shall pay or
credit to Tenant, Tenant's Proportionate Share of the refund (less the
proportional, pro rata expenses, including administrative costs, attorneys
fees and appraisers fees, incurred in connection with obtaining any such
refund), as relates to Taxes paid by Tenant to Landlord with respect to
any such fiscal year for which a refund is obtained. Tenant shall have no
right to seek or to control any abatement, dispute, or other proceedings
with the Town of Rockland or any other governmental agency or entity in
connection with the Property.
Data: Landlord shall promptly provide to Tenant, upon request made within
thirty (30) days of receipt of any Tax Escalation Statement, reasonable
data to permit Tenant to verify the Taxes contained therein, but Tenant
may not dispute any such element of cost or expenses not objected to
within sixty (60) days of receipt of such Tax Escalation Statement. Any
obligation under this Section of the Tenant which shall not have been paid
at the expiration of the Lease Term shall survive such expiration and
shall be paid when and as the amount of same shall be determined together
with interest thereon at the Lease Interest Rate from the date the Tax
Excess was first due to Landlord.
The additional rent required to be paid by Tenant pursuant to this
Section, together with the Base Rent and the additional rent required to
be paid by Tenant pursuant to this Lease, is hereinafter collectively
called the "Rent."
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7. Building and Equipment: Unless any such damage or violation is caused by
Landlord or its employees or agents, Tenant shall maintain the Leased Premises
and will make all changes and repairs required to keep the Leased Premises in
good repair and condition and in compliance with all applicable laws, orders,
rules or regulations of any governmental agency having jurisdiction including,
without limitation, repairs to doors, locks, hardware, carpets, walls, ceilings,
electrical and lighting fixtures, fixtures and glass in the Leased Premises.
Tenant shall maintain Kitchen Areas and all similar areas in a clean and
sanitary condition free of all vermin, wash any dishes and perform any cleaning
necessary to maintain Kitchen Areas or any other areas in the Leased Premises in
which beverages or foods may be prepared, dispensed or consumed. Tenant shall be
responsible for any damage to the Leased Premises arising out of frozen
sprinkler system pipes caused by Tenant's failure to keep windows in the Leased
Premises closed during cold weather. Landlord shall keep in serviceable
condition and repair the structure and exterior of the Building and the
plumbing, electrical and service lines furnished by Landlord, unless any such
need for repair shall be caused by the negligence or misconduct of Tenant or any
party acting under Tenant. Landlord shall comply with applicable governmental
rules, regulations, laws and ordinances affecting the Building, unless the
violation is caused by Tenant or Tenant's use of the Leased Premises or Tenant's
neglect in connection therewith. The Landlord shall keep the grounds, parking
areas, walkways, common corridors, stairways, elevators and all other public
portions of the Building and Property in serviceable repair and in a reasonably
clean and safe condition, such repair and condition to be to the equivalent
standard prevalent in other office buildings on the South Shore of similar age,
location and condition. Tenant, at its own expense, shall supply all light bulbs
and ballasts having energy efficient characteristics and otherwise reasonably
acceptable to Landlord, tubes or similar devices for lighting the Leased
Premises and Landlord may (but shall be under no obligation to do so) offer to
supply such devices for a fee to be established by Landlord, in its sole
discretion, and to be paid by Tenant to Landlord in addition to any other
payments pursuant to the terms of this Lease. Landlord reserves the right to
interrupt, curtail, stop and suspend the furnishing of any services and the
operation of the plumbing, electrical, heating, ventilation and air-conditioning
systems when necessary by reason of accident or emergency or for repairs,
alterations, replacements or improvements which may become necessary in the
reasonable judgment of Landlord or when Landlord cannot secure supplies or
labor, or by reason of any other cause beyond its control, without liability or
any abatement of rent being due thereby.
Notwithstanding the foregoing or any other provision of the Lease, however,
Tenant shall not be responsible for compliance with any such laws, regulations,
or the like requiring (i) structural repairs or modifications or (ii) repairs or
modifications to the utility or building service equipment or (iii) installation
of new building service equipment, such as fire detection or suppressions
equipment, unless such repairs, modifications, or installations shall be due to
Tenant's particular manner of use of the Leased Premises (as opposed to office
use and research and development generally).
Notwithstanding the above, Landlord shall make reasonable, good faith efforts to
avoid the interruption of any services which it is obligated to provide. Tenant
shall be entitled to an abatement of Rent for interruption of services only to
the extent covered by Landlord's interruption insurance. Tenant shall cooperate
with Landlord by giving Landlord prompt written notice of the need for any
repairs to equipment which Landlord is responsible for or of any interruption in
Building services
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for which Landlord is responsible.
In the event of any emergency situation involving an actual risk to human life
or public safety which would otherwise be the responsibility of Tenant, Landlord
shall have the right, but shall not be required, to pay such sums or to do any
act which is necessary to abate said emergency on a temporary basis. If, and in
the event of, the exercise of such right Landlord incurs costs which are the
responsibility of the Tenant under this Lease, Tenant shall promptly reimburse
Landlord upon receipt of actual proof of the costs incurred.
8. Property of Tenant: Tenant shall not place a load upon any floor of the
Leased Premises which exceeds the floor load per square foot of area which such
floor was designed to carry or which is allowed by law. Business machines and
mechanical equipment and Tenant's other personal property shall be placed and
maintained by Tenant at its expense in settings sufficient to absorb and prevent
vibration, noise and annoyance. Tenant covenants and agrees that all of Tenant's
property of every kind, nature and description which may be in or upon the
Leased Premises or Building, in the public corridors, or on the sidewalks,
areaways and approaches adjacent thereto, during the Lease Term hereof, and any
movement of such property shall be at the sole risk and hazard of Tenant, and
Tenant hereby indemnifies and agrees to save Landlord harmless from and against
any liability, loss, injury, claim or suit resulting directly or indirectly
therefrom.
9. Services:
(a) Except if such is interrupted for reasons beyond Landlord's control or
must be stopped for necessary repairs in the reasonable judgment of the
Landlord, the Landlord shall provide:
1. Access to the Building to duly authorized employees of Tenant 24
hours per day, seven days per week by means of an access control
system.
2. Necessary elevator facilities.
3. Heat and air conditioning to the Leased Premises without
additional charge during regular business hours (from 8:00 a.m. to
6:00 p.m. Monday through Friday and 9:00 a.m. to 1:00 p.m. on
Saturday, except customary holidays, as designated by the Landlord).
By reasonable advance arrangement with the Building's manager, heat
or cooling can be furnished at other times at an hourly rate to be
established by Landlord, in its reasonable discretion, and to be
paid by the Tenant to Landlord in addition to any other payments
pursuant to this Lease.
4. Cleaning of the Leased Premises and the lobby, elevators, public
corridors, washrooms, and stairs which Tenant has the right to use
in common with others, all in accordance with the Cleaning
Specifications attached to this Lease as Exhibit C and made a part
hereof.
5. Normal lighting of the main lobby, elevators, washrooms and
stairs, but not for the Leased Premises.
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6. Shoveling of snow and sanding of ice in the parking areas and on
walkways on the Property in a manner provided by comparable office
buildings in the vicinity.
(b) Electricity, for all uses within the Leased Premises except general
heating and air conditioning referred to in subparagraph 3 above, is to be
paid for by Tenant. Since electricity is not presently metered to the
Leased Premises, it is agreed that a fixed amount as specified as Cost of
Electricity in the Reference Data Section shall be paid by Tenant for
electricity in addition to the Rent. Landlord may at its cost install a
utility meter. Tenant shall thereafter pay the billing authority all bills
for electricity, and this obligation to pay the Cost of Electricity shall
cease. Upon request of the Landlord, the Tenant shall promptly furnish to
the Landlord evidence of such payment.
10. Removal of Goods and Tenant's Repairs. At the expiration of the Lease Term,
the Tenant shall remove its goods and effects (except as elsewhere provided
herein) and will peaceably yield up to Landlord the Leased Premises in as good
order and condition as when delivered to it, excepting ordinary wear and tear,
repairs required to be made by Landlord and damage by fire or casualty or taking
by eminent domain.
Tenant shall be responsible for all damage or injury to the Leased Premises,
fixtures, appurtenances and equipment of Landlord, or to the Building, caused by
Tenant's installation or removal of furniture, fixtures or equipment.
11. Improvements, Alterations and Ownership.
(a) Landlord's Initial Construction. Landlord agrees to perform work and
make installations in the Leased Premises as set forth in Schedule A. Such
work and installations are referred to as "Landlord's Initial
Construction." All of the terms, covenants and conditions of Schedule A.
are incorporated in this Lease by reference and shall be deemed a part of
this Lease as though fully set forth in the body of this Lease.
(b) Alterations. Other than Landlord's Initial Construction, Tenant shall
not make or perform, or permit the making or performance of, any
alterations, installations, decorations, improvements, additional or other
physical changes in or about the Leased Premises (referred to collectively
as "Alterations" without Landlord's prior consent, which consent shall not
be unreasonably withheld, conditioned or delayed. Notwithstanding the
foregoing provisions of this Section or Landlord's consent to any
Alterations, all Alterations shall be made and performed in conformity
with and subject to the following provisions: All Alterations shall be
made and performed at Tenant's sole cost and expense and at such time and
in such manner as Landlord may, from time to time, reasonably designate;
all Alterations shall, when completed, be of such a character as not to
materially reduce the economic value of the Building below its value
immediately before such Alterations; no Alterations shall diminish or
reduce the structural integrity of the Building; alterations shall be made
only by contractors or mechanics approved by Landlord, such approval not
unreasonably to be withheld; no Alteration shall affect any part of the
Building other than the Leased Premises or adversely
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affect any service required to be furnished by Landlord to Tenant or to
any other tenant or occupant of the Building or reduce the value or
utility of the Building; no Alteration shall affect the outside appearance
of the Building; no Alteration shall affect the color or style of any
Venetian blinds (except that Tenant may remove any Venetian blinds
provided that they are promptly replaced by Tenant with building standard
blinds or blinds substantially identical to building standards); all
business machines and mechanical equipment shall be placed and maintained
by Tenant in settings sufficient, in Landlord's reasonable judgment, to
absorb and prevent vibration, noise and annoyance to other tenants or
occupants of the Building; Tenant shall submit to Landlord detailed plans
and specifications (including layout, architectural, mechanical and
structural drawings) for each proposed Alteration and shall not commence
any such Alteration without first obtaining Landlord's approval of such
plans and specifications; prior to the commencement of each Alteration,
Tenant shall have procured and paid for, and exhibited to Landlord, so far
as the same may be required from time to time, all permits and
authorizations of all municipal departments and governmental subdivisions
and authorities having or claiming jurisdiction; prior to the commencement
of each proposed Alteration, Tenant shall furnish to Landlord duplicate
original policies of workmen's compensation insurance or certificates
thereof reasonably satisfactory to Landlord covering all persons to be
employed in connection with such Alteration, including those to be
employed by all contractors and subcontractors, and of comprehensive
public liability insurance (including property damage coverage) in which
Landlord and its agents shall be named as parties insured, which policies
shall be issued by companies, and shall be in form and amounts, reasonably
satisfactory to Landlord and shall be maintained by Tenant until the
completion of such Alteration; no Alterations in or to the electrical
facilities in or serving the Leased Premises shall exceed the capacity of
the existing feeders or wiring installations then serving the Leased
Premises; electrical and air conditioning certificates, and all other
permits, approvals and certificates required by all governmental
authorities shall be timely obtained by Tenant and submitted to Landlord;
all Alterations, once commenced, shall be made promptly and in a good and
workmanlike manner; notwithstanding Landlord's approval of plans and
specifications for any Alteration, all Alterations shall be made and
performed in full compliance with all applicable laws, orders and
regulations (including, but not limited to, the energy conservation
provisions of the Massachusetts Building Code) of Federal, State, County
and Municipal authorities and with all directions of all public officers,
and with all applicable rules, orders, regulations and requirements of the
New England Fire Insurance Rating Organization or any similar body; all
Alterations shall be made and performed in accordance with the Rules and
Regulations; all materials and equipment to be installed, incorporated or
located in the Leased Premises as a result of any Alteration shall be new
and first quality; no such materials or equipment shall be subject to any
lien, encumbrance, chattel mortgage or title retention or security
agreement or any kind; Tenant, before commencement of such Alteration,
shall furnish to Landlord and its mortgagees a statutory lien bond and a
performance bond or other security reasonably satisfactory to Landlord and
such mortgagees in an amount at least equal to the estimated cost of such
Alteration; in the event Landlord or its agents employ any independent
architect or engineer to examine any plans or specifications submitted by
Tenant to Landlord in connection with any proposed Alteration, Tenant
agrees to pay to Landlord a sum equal to any reasonable fees incurred by
Landlord in connection therewith.
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(c) No Consent or Request of Landlord. Nothing in this Lease shall be
deemed or construed in any way as constituting the consent or request of
Landlord, express or implied, by inference or otherwise, to any
contractor, subcontractor, laborer or materialman, for the performance of
any labor or the furnishing of any material for any specific Alteration
to, or repair of, the Leased Premises, the Building, or any part of
either. Any mechanic's or other lien filed against the Leased Premises or
the Building or the Property for work claimed to have been done for, or
materials claimed to have been furnished to, Tenant, or based upon any act
or omission or alleged act or omissions of Tenant, shall be discharged by
Tenant, at Tenant's sole cost and expense, within ten (10) days after the
filing of such lien.
(d) Labor Conflict. Tenant shall not knowingly, at any time prior to or
during the Lease Term, directly or indirectly employ, or permit the
employment of, any contractor, mechanic or laborer in the Leased Premises,
whether in connection with any Alteration or otherwise, if such employment
will interfere or cause any conflict with other contractors, mechanics or
laborers engaged in the construction, maintenance or operation of the
Building by Landlord, Tenant or others. In the event of any such
interference or conflict, Tenant, upon request of demand of Landlord shall
cause all contractors, mechanics or laborers causing such interference or
conflict to leave the Building immediately.
(e) Ownership of Improvements. All appurtenances, fixtures, improvements,
additions and other property attached to or installed in the Leased
Premises, whether by Landlord or Tenant or others, and whether at
Landlord's expense, or Tenant's expense, or the joint expense of Landlord
or Tenant or others, shall be and remain the property of Landlord, except
that any such fixtures, improvements, additions and other property which
is (i) installed at the sole expense of Tenant with respect to which
Tenant has not been granted any credit or allowance by Landlord, whether
pursuant to Schedule A or otherwise, (ii) which are removable without
material damage to the said premises, and (iii) as to which Tenant shall
have given notice to Landlord requesting the identification of such
property without reasonable objection by Landlord, shall be and remain the
property of Tenant and are referred to as "Tenant's Personal Property".
Any replacements of any property of Landlord, whether made at Tenant's
expense or otherwise, shall be and remain the property of Landlord.
12. Inspection. The Landlord and its authorized representatives shall have the
right at all reasonable times to enter the Leased Premises for reasonable
business purposes including, without limitation, inspecting the same and to be
accompanied by representatives of mortgagees, insurers or similar persons, to
make repairs or replacements therein as required by this Lease, to introduce
conduits and pipes or ducts as may be necessary in Landlord's reasonable
judgment; and to exhibit the Leased Premises to prospective tenants or others,
provided, however, that the Landlord shall use reasonable efforts not to unduly
disturb Tenant's use and occupancy. Landlord shall not be liable to Tenant in
any manner for any expense, loss or damage occurring by reason of the aforesaid
entries, nor shall the exercise of any such right be deemed an eviction or
disturbance of Tenant's use or possession, unless caused by the negligence or
misconduct of Landlord, its agents or invitees.
13. Casualty. If the Leased Premises, but not including other improvements made
by Tenant within the Leased Premises (but including Landlord's Initial
Construction), or any part thereof shall
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be damaged by fire or other casualty, Landlord shall proceed with reasonable
diligence, and at the expense of Landlord, to repair or cause to be repaired
such damage; provided, however, that Landlord's obligations with respect to
restoration shall not require Landlord to expend more than the net proceeds of
insurance recovered and available to Landlord. Landlord shall have no
responsibility for any repairs or damage to or replacements of, Tenant's
personal property and property which Tenant may be required to remove as
provided in this Lease. All such repairs and replacements shall be promptly made
by and at the expense of Tenant. If the Leased Premises, but not including the
Improvements within the Leased Premises, or any part thereof, shall have been
rendered unfit for use and occupation hereunder by reason of such damage for a
period of five (5) or more days, the Base Rent or a just and proportionate part
thereof, according to the nature and extent to which the Leased Premises shall
have been so rendered unfit, shall be suspended or abated retroactive to the
date on which such portion of the Leased Premises became unfit for occupancy,
until the Leased Premises (except as to the property which is to be repaired by
or at the expense of Tenant) shall have been restored as nearly as practicably
may be to the condition in which they were immediately prior to such fire or
other casualty. Within sixty (60) days of such damage, Landlord shall give
Tenant notice ("Landlord's Notice") in writing of its reasonable estimate of the
length of time it will take to restore such damage ("Estimated Time to Repair").
If the Estimated Time to Repair is one hundred eighty (180) days or less from
the date of casualty, Landlord shall proceed to make repairs. If Landlord fails
to substantially so restore (to a condition of Substantial Completion as defined
in Schedule A-1) the Leased Premises within one hundred eighty (180) days from
the date of such damage, (as such period may be extended on account of delays in
such completion which are beyond the reasonable control of Landlord), Tenant
may, if it has paid all sums then payable to Landlord, terminate this Lease by
notice to Landlord and this Lease shall terminate forty-five (45) days after
delivery of such notice fully as if such date were the original expiration date
of this Lease; provided, that if Landlord substantially restores the Leased
Premises within such forty-five (45) day period such termination shall be deemed
null and void and the Lease will continue as if such restoration occurred within
the one hundred eighty (180) day period. Landlord shall not be liable for delays
in the making of any such repairs which are due to governmental regulations,
casualties and strikes, unavailability of labor and materials, and other causes
beyond the control of Landlord, nor shall Landlord be liable for any
inconvenience or annoyance to Tenant or injury to the business of Tenant
resulting from such delays in repairing such damage. If the Estimated Time to
Repair, as specified in Landlord's notice, exceeds one hundred eighty (180)
days, Tenant may terminate the Lease by giving written notice ("Tenant's
Notice") to Landlord within five (5) business days of its receipt of Landlord's
Notice specifying the Estimated Time to Repair, the effective date of such
termination to be thirty (30) days from the date of Tenant's Notice.
Notwithstanding the foregoing, if either (a) the Leased Premises shall be
damaged materially by any such fire or other casualty during the last year of
the Lease Term, or (b) all or any substantial part of the Leased Premises or the
Building is so damaged by such fire or other casualty that repair or
reconstruction (may reasonably be expected to take longer than one hundred eight
(180) days from the date of such casualty to complete (in the reasonable
judgment of Landlord) whether or not the Leased Premises shall have been damaged
by such fire or other casualty, then in either such case this Lease and the term
hereof may be terminated at the election of the Landlord by notice in writing of
its election so to terminate given within sixty (60) days of the occurrence of
such casualty, to be effective not less than thirty (30) days after the day on
which such termination notice is received. In the event of any such termination,
this Lease and the Lease Term hereof shall expire as of such effective
termination date
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and the Base Rent and additional rent shall be apportioned as of such date; and
if the Leased Premises or any part thereof shall have been rendered unfit for
use and occupation by reason of such damage the Base Rent for the period from
the date of the fire or other casualty to the effective termination date, or a
just and proportionate part thereof, according to the nature and extent to which
the Leased Premises shall have been so rendered unfit, shall be abated.
14. Condemnation - Eminent Domain.
(a) In the event that the Leased Premises or any substantial part thereof,
or the whole or any substantial part of the Building, or the access
thereto, shall be taken or appropriated by eminent domain or shall be
condemned for any public or quasi-public use, or (by virtue of any such
taking, appropriation or condemnation) shall suffer any damage (direct,
indirect or consequential) for which Landlord or Tenant shall be entitled
to compensation, then (and in any such event) this Lease and the Lease
Term hereof may be terminated at the election of Landlord by a notice in
writing of its election so to terminate which shall be given by Landlord
to Tenant within sixty (60) days following the date on which Landlord
shall have received notice of such taking, appropriation or condemnation.
If the entire Leased Premises or such portion thereof or the access
thereto shall be so taken, appropriated or condemned, such that Tenant
shall be precluded from effectively utilizing the Leased Premises in the
reasonable judgment of Landlord, then (and in any such event) this Lease
and the Lease Term hereof may be terminated at the election of Tenant by a
notice in writing of its election so to terminate which shall be given by
Tenant to Landlord within sixty (60) days following the date on which
Tenant shall have received notice of such taking, appropriation or
condemnation. Upon the giving of any such notice of termination (either by
Landlord or Tenant) this Lease and the Lease Term hereof shall terminate
on or retroactively as of the date on which Landlord or Tenant, as the
case may be, shall be required to vacate any portion of the area so taken,
appropriated or condemned or shall be deprived of the means of access
thereto, provided, however, that Landlord may in Landlord's notice of
termination elect to terminate this Lease and the Lease Term hereof
retroactively as of the date on which such taking, appropriation or
condemnation became legally effective. In the event of such termination
this Lease and the Lease Term hereof shall expire as of such effective
termination date and the Rent shall be apportioned as of such date.
(b) If neither party (having the right so to do) elect to terminate this
Lease and the Lease Term hereof, Landlord shall, with reasonable diligence
and at Landlord's expense, restore the remainder of the Leased Premises
(but not any of Tenant's Personal Property), or the remainder of the means
of access, as nearly as practicably may be to the condition prior to such
taking, appropriation or condemnation, in which event the Rent shall be
adjusted in a manner such that (i) a just proportion of the Base Rent and
additional rent, according to the nature and extent of the taking,
appropriation or condemnation and the resulting permanent injury to the
Leased Premises and the means of access thereto, shall be permanently
abated and (ii) a just proportion of the remainder of the Base Rent and
additional rent, according to the nature and extent of the taking,
appropriation or condemnation and the resultant injury sustained to the
Leased Premises and the means of access thereto, shall be abated until
what remains of the Leased Premises (other than any property to Tenant)
and the means of access thereto shall have been
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restored for permanent use and occupation by Tenant hereunder. Landlord
shall not be liable for any delays in such restoration which are due to
governmental regulations, casualties, strikes, unavailability of labor or
materials, or other causes beyond Landlord's control nor shall Landlord be
liable for any inconvenience or annoyance to Tenant or injury to the
business of Tenant resulting from such delays in such restoration.
Landlord expressly reserves and Tenant hereby assigns to Landlord all
rights to compensation and damages created, accrued or accruing by reason
of any such taking, appropriation or condemnation, but not including
relocation assistance payments by a governmental agency or entity for
which Tenant may be eligible.
(c) If the Leased Premises or any part thereof or the access thereto shall
be taken, appropriated or condemned for any temporary use (i) this Lease
shall be and remain unaffected thereby and Tenant shall continue to pay
the full amount of the Rent hereunder, (ii) Tenant shall be entitled to
receive for itself any award made for such use allocable to the Lease
Term, and (iii) Tenant shall be responsible for any repairs necessary to
restore the Leased Premises to their condition prior to such taking,
appropriation or condemnation, provided that if any such taking,
appropriation or condemnation extends beyond the Lease Term, the costs of
such repairs shall be allocated between Landlord and Tenant in proportion
to the amount of any award each receives. Any taking, appropriation or
condemnation continuing in excess of one year shall be deemed to be a
permanent taking, appropriation or condemnation and shall be governed by
paragraph (a) and (b) above.
15. Indemnification. Tenant hereby indemnifies and covenants to save Landlord
harmless from and against any and all claims, liabilities or penalties asserted
by or on behalf of any person, firm corporation, public authority or other
entity:
(a) On account of or based upon any injury to person, or loss of or damage
to property, sustained or occurring on the Leased Premises on account of
or based upon the act, omission, fault, negligence or misconduct of any
person other than Landlord or its servants, agents or employees;
(b) On account of or based upon any injury to person, or loss of or damage
to property, sustained or occurring in or about the Property and other
than on the Leased Premises (and, in particular, without limiting the
generality of the foregoing, on or about the elevators, stairways, public
corridors, sidewalks, concourses, arcades, approaches, areaways, roof or
other appurtenances and facilities used in connection with the Building or
the Leased Premises) arising out of the use or occupancy of the Building
or the Leased Premises by the Tenant or by any person claiming by, through
or under Tenant, and caused by the act, omission, fault, negligence or
misconduct of any person other than Landlord or its servants, agents or
employees, and in addition to and not in limitation of the foregoing
subdivision (a);
(c) On account of or based upon (including monies due on account of) any
work or thing whatsoever done (other than by Landlord or its contractors,
or agents or employees of either) on the Leased Premises during the Lease
Term and during the period of time, if any, prior to the Commencement Date
when Tenant may have been given access to the Leased Premises;
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and
(d) In respect of any of the foregoing, from and against all costs,
expenses (including, without limitation, reasonable attorneys' fees) and
liabilities incurred in or in connection with any such claim, or any
action or proceeding brought thereon; and in case any action or proceeding
be brought against Landlord by reason of any such claim, Tenant upon
notice from Landlord shall at Tenant's expense resist or defend such
action or proceeding and employ counsel therefor reasonably satisfactory
to Landlord, it being agreed that such counsel as may act for insurance
underwriters of Tenant engaged in such defense shall be deemed
satisfactory.
16. Liability Insurance. Tenant agrees to maintain public liability insurance
and property damage liability insurance in the amounts set forth in the
Reference Data section and to submit and maintain copies of such policies with
the Landlord. The insurers under such policies shall be reasonably satisfactory
to Landlord and such policies shall name as insured parties Landlord, Tenant and
any Mortgagee of which Tenant has received notice or otherwise has actual
knowledge, as their interest may appear, and shall provide twenty (20) days
prior written notice to Landlord or any such Mortgagee of lapse or cancellation.
17. Damage to Property of Tenant. In addition to and not in limitation of the
foregoing, Tenant covenants and agrees that all Tenant's furniture, fixtures and
property of every kind, nature and description which may be in or upon the
Leased Premises or Building, in the public corridors, or on the sidewalks,
areaways and approaches adjacent thereto, during the term hereof, shall be at
the sole risk and hazard of Tenant, and that if the whole or any part thereof
shall be damaged, destroyed, stolen or removed for any cause or reason
whatsoever no part of said damage or loss shall be charged to, or borne by
Landlord. Tenant agrees to maintain all risk insurance on the full insurable
value of all personalty located on the Leased Premises and to submit and
maintain copies of such policies with Landlord.
18. Injury and Damage. Landlord shall not be liable for any injury or damage to
persons or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, electrical disturbance, water, rain or snow or leaks from any part
of the Building or from the pipes, appliances or plumbing works or from the
roof, street or subsurface or from any other place or by dampness or by any
other cause of whatever nature, unless caused by or due to the act, omission,
fault, negligence or misconduct of Landlord, or its agents, servants or
employees; nor shall Landlord or its agents be liable for any such damage caused
by other tenants or persons in the Building or caused by operations in
construction of any private, public or quasi-public work; nor shall Landlord be
liable for any latent defect in the Leased Premises or in the Building.
19. Waiver of Subrogation / Landlord's Insurance.
(a) Tenant and Landlord covenant that with respect to any property
insurance coverage carried by either Tenant or Landlord in connection with
the Leased Premises or the Building whether or not such insurance is
required by the terms of this Lease, such insurance shall provide for the
waiver by the insurance carrier of any subrogation rights against
Landlord, its agents, servants and employees under Tenant's insurance
policies or against Tenant, its agents,
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servants, and employees under Landlord's insurance policies, where such
waiver of subrogation rights does not require the payment of an additional
premium or, if an additional premium is required to be paid, the other
party offers to pay such premium after being notified of such additional
premium.
(b) Notwithstanding any other provision of this Lease, (i) Landlord shall
not be liable to Tenant for any loss or damage, whether or not such loss
or damage is caused by the negligence of Landlord, its agents, servants or
employees, to the extent that such loss or damage is covered by valid and
enforceable insurance carried by Tenant; and (ii) Tenant shall not be
liable to Landlord for any loss or damage, whether or not such loss or
damage is caused by the negligence of Tenant or its agents, servants or
employees, to the extent that such loss or damage is covered by valid and
enforceable insurance carried by Landlord.
(c) Landlord shall procure and keep in force "all risk" property insurance
on the Building with terms and coverage required by any institutional
mortgagee of the Building or, if there exists no such mortgagee, as
reasonably determined by Landlord to be consistent with similar policies
customary for first class buildings in the Greater Boston marketplace.
20. Assignment, Mortgaging and Subletting.
(a) Tenant covenants and agrees that neither this Lease nor the Lease Term
and estate hereby granted, nor any interest herein or therein, will be
assigned, mortgaged, pledged, encumbered or otherwise transferred, and
that neither the Leased Premises, nor any part thereof, will be encumbered
in any manner by reason of any act or omission of Tenant, or used or
occupied, or permitted to be used or occupied, by anyone other than
Tenant, its servants, agents and employees, or for any use or purpose
other than as above stated, or be sublet, or offered, or advertised for
subletting, without in each case, Landlord's prior written consent.
Landlord may refuse to consider a request for such consent and may
withhold such consent unless Tenant shall have agreed to reimburse
Landlord promptly for reasonable expenses, including legal expenses,
incurred by Landlord in connection with such request. If Tenant shall
propose any subletting of more than half of the Leased Premises or any
assignment of this Lease, Landlord shall have the option of terminating
this Lease by giving notice thereof to Tenant.
Any assignment of this Lease made hereunder shall be upon the express
condition that the assignee and Tenant shall promptly execute, acknowledge
and deliver to Landlord an agreement in form and substance satisfactory to
Landlord whereby assignee shall agree to be personally bound by the terms,
covenants, and conditions of this Lease on Tenant's part to be performed
and whereby assignee shall expressly agree that the provisions of this
Section shall, notwithstanding such assignment or transfer, continue to be
binding upon it with respect to all future assignments and transfer. Any
sublease of the Leased Premises or any part thereof shall be expressly
subject to the terms of this Lease and shall contain the agreement of the
subtenant thereunder that, upon Landlord's written request, it will pay
all rents under the sublease directly to Landlord. If, pursuant to the
provisions of this Section, Tenant sublets the Leased Premises or any part
thereof, Tenant shall pay to Landlord as additional rent at the times and
in the manner specified by Landlord, an amount equal to the difference
between all amounts
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which Tenant receives from a subtenant by virtue of such subletting (less
the amortization of reasonable costs incurred by Tenant in direct
connection with such subletting) and the total of the Rent due under this
Lease for the sublet area proportioned on a square foot basis; provided
said difference is greater than zero. No such assignment or subletting of
the Leased Premises by Tenant shall relieve Tenant from the observance or
performance of any of the terms, covenants and conditions of this Lease.
(b) If this Lease be assigned, or if the Leased Premises or any part
thereof be sublet or occupied by anybody other than Tenant and its
employees, Landlord, after default by Tenant hereunder, may collect the
rents from such assignee, subtenant or occupant, as the case may be, and
apply the net amount collected to the Rent herein reserved, but no such
assignment, subletting, occupancy or collection shall be deemed a waiver
of the requirements set forth in subparagraph (a) of this Section, the
acceptance by Landlord of such assignee, subtenant or occupant, as the
case may be, as a tenant, or a release by Tenant of its covenants,
agreements and obligations contained in this Lease. The consent by
Landlord to an assignment or subletting shall not in any way be construed
to relieve Tenant from obtaining the express consent in writing of
Landlord to any further assignment or subletting. No assignment,
subletting or use of the Leased Premises shall affect the purpose for
which the Leased Premises may be used as stated in Section 2.
(c) Notwithstanding the foregoing, Tenant may assign this Lease or
sublease any portion of the Leased Premises to any entity which is a
parent or subsidiary corporation of Tenant or to any entity with which
Tenant may merge or consolidate or to which Tenant may sell all of
substantially all of its assets as a going concern in exchange for
assumption of all or substantially all of its liabilities (any of the
foregoing entities being hereinafter referred to as a "Successor") but
only if such Successor is of comparable character, quality and financial
capacity as Tenant as of the date thereof, in Landlord's judgment;
provided that simultaneously with any such assignment, Tenant shall
deliver to Landlord an agreement in form and substance reasonably
satisfactory to Landlord which contains an appropriate covenant of
assumption by such assignee, and provided further that in the case of any
such assignment or sublease to a Successor, Tenant shall have submitted to
Landlord prior thereof financial information reasonably satisfactory to
Landlord evidencing that such Successor has at least an equivalent net
worth and other financial resources as Tenant and a general business
reputation comparable to or superior to that of Tenant.
(d) The listing of any name other than that of Tenant, whether on the
doors or the Leased Premises or on the Building directory, or otherwise,
shall not operate to vest any right or interest in this Lease or in the
Leased Premises or be deemed to be the written consent of Landlord
mentioned in this Section, it being expressly understood that any such
listing is a privilege extended by Landlord revocable at will by written
notice to Tenant.
(e) Tenant further covenants and agrees that it will not sublease space
from or take an assignment of a lease covering space in the Building from
any other Building tenant, without Landlord's prior written consent.
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(f) Subject to the foregoing provisions of this Section, including,
without limitation, Landlord's right to terminate this Lease in accordance
with paragraph (a) above, Landlord agrees to not unreasonably withhold its
consent to a subletting of all or a portion of the Leased Premises,
provided that the Landlord shall determine, in its reasonable discretion,
that (i) the prospective subtenant or assignee has personal references and
the financial capacity to meet all of the obligations of this Lease and to
carry out its business in a manner consistent with the level of Landlord's
operation of the Building, (ii) the use of the Leased Premises under such
sublease or assignment shall be for a first-class office use which is
consistent with the mix of tenants in and the character of the Building,
(iii) such use shall not materially burden the common areas or operating
systems of the Building, and (iv) space reasonably comparable to that
proposed to be sublet is not available from Landlord in the Building.
21. Signs and Drapes. No signs may be put on or in any window by Tenant. Tenant
may hang its own drapes, provided that such drapes are of a neutral color and
are completely screened from view from the exterior of the Building at all times
by building standard Venetian blinds. Any signs or lettering in the public
corridors or on the doors must be submitted to Landlord and its architect for
written approval of the size, color, design and location of such signs or
lettering before installation. Any sign of Tenant in the Leased Premises or in
the Building must comply with any applicable sign ordinances, and may not
conflict with the terms restricting signs in any other lease of space in the
Building. Notwithstanding the foregoing, Landlord shall provide the initial
building standard signage in the lobby directory.
22. Landlord's Insurance. Tenant will not do or omit to do or keep anything in,
upon or about the Leased Premises, the Building or any adjacent areas which may
prevent the obtaining of any fire, liability or other insurance upon or written
in connection with the Leased Premises, the Building or such adjacent areas or
which may make any such insurance void or voidable or otherwise invalidate the
obligations of the insurer contained therein, or which may create any extra
premiums or increase the rate of any such insurance over that normally
applicable to office buildings. Tenant agrees to pay to Landlord, upon demand,
the amount of any extra premiums or any increase in the rate of such insurance
which results from the business carried on in the Leased Premises by Tenant,
whether or not Landlord has consented to such business. If Tenant installs any
electrical equipment that overloads the lines in the Leased Premises, Tenant
shall, at its expense, make whatever changes are necessary to comply with the
requirements of the insurance underwriter or governmental authorities having
jurisdiction, but such changes shall be made in accordance with the provisions
of Section 11.
23. Inflammables, Odors. Tenant shall not bring or permit to be brought into or
keep in or on the Leased Premises or elsewhere in the Building, any inflammable,
combustible or explosive fluid, material, chemical or substance, or cause or
permit any odors or cooking or other processes, or any unusual or other
objectionable odors to emanate from or permeate the Leased Premises, except as
used in the ordinary course of businesses customarily located in first class
office buildings.
24. Default. If the Tenant shall default in the payment of the Rent or any other
charges due hereunder; or if the Tenant shall default in the performance of any
other of its obligations and such default shall continue for ten (10) days after
written notice thereof by the Landlord to the Tenant (except that if the Tenant
cannot reasonably cure any such default within said ten (10) day period,
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this period may be extended for a reasonable time not to exceed thirty (30)
days, provided that the Tenant commences to cure such default within the ten
(10) day period and proceeds diligently thereafter to effect such cure); or if
the Tenant shall file a petition under any bankruptcy, insolvency law or code,
or if such a petition is filed against Tenant and not dismissed within sixty
(60) days; or if the Tenant shall be adjudicated bankrupt or insolvent according
to law; or if the Tenant shall make any assignment for the benefit of creditors;
or if the Tenant shall file any petition seeking a reorganization, arrangement
or similar relief; or if a receiver, custodian, trustee or similar agent of the
Leased Premises or of all or a substantial part of Tenant's assets shall be
authorized or appointed and not removed within sixty (60) days in the case of an
involuntary appointment; or if Tenant's interest in this Lease is taken upon
execution or other process of law in any action against Tenant; then the
Landlord may lawfully enter the Leased Premises and repossess the same as the
former estate of the Landlord, or terminate this Lease by written notice to
Tenant and, in either event, expel the Tenant and those claiming through or
under the Tenant, and remove their effects (forcibly, if necessary but in
conformity with applicable laws), without being deemed guilty of any manner of
trespass and without prejudice to any other remedy which the Landlord may have
for arrears of Rent and other charges due hereunder or proceeding on account of
breach of covenant, and upon entry or notice as aforesaid, this Lease shall
terminate. The Tenant covenants, in case of any default by Tenant hereunder, to
pay the Landlord all actual and reasonable costs of enforcing its rights under
this Lease (including, without limitation, reasonable attorney's fees and
expenses), loss of rent, reletting expenses, and brokerage fees together with,
as agreed liquidated damages, either of the following options as selected by
Landlord: (i) the amount by which, at the termination of the Lease, the
aggregate of the Rent (including, without limitation, the Operating Costs Excess
and the Tax Excess payments projected on the basis of experience under this
Lease) and other sums payable hereunder projected over a period from such
termination until the normal expiration date of the Lease Term exceeds the
aggregate projected fair market rental value of the Leased Premises for such
period discounted at the then current rate for U.S. Treasury obligations with a
maturity coinciding as closely as possible with the end of the Lease Term, or
(ii) an amount equal to the Rent (including, without limitation, Operating Costs
Excess and Tax Excess payments projected on the basis of experience under this
Lease) and other sums which would have been payable had the Lease not so
terminated (subject to off-set for net rents actually received from reletting
after subtraction of the expenses of reletting), payable upon the due dates as
specified herein.
Landlord may bring legal proceedings for the recovery of such damages, or any
installments thereof, from time to time at its election, and nothing contained
herein shall be deemed to require Landlord to postpone suit until the date when
the Lease Term would have expired if it had not been terminated hereunder.
Nothing herein contained shall be construed as limiting or precluding the
recovery by Landlord from Tenant of any sums or damages (including, without
limitation, reasonable attorneys' fees and expenses) to which, in addition to
the damages particularly provided above, Landlord may lawfully be entitled by
reason of any default hereunder on the part of Tenant.
Landlord and Tenant agree that, for the purpose of computing liquidated damages,
the Tax Excess payments and the Operating Costs Excess payments for the period
between the termination of this Lease pursuant to this Section and the normal
expiration date shall be computed by multiplying both
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the Tax Excess payment and the Operating Costs Excess payment for the year
immediately preceding the year in which termination occurs times the number of
years remaining in the full Lease Term hereby granted on the assumption that the
amount of such Tax Excess payment and Operating Costs Excess payment for the
immediately preceding year would have remained constant for each subsequent year
during the full Lease Term. If this Lease and the Lease Term hereof shall
terminate pursuant to this Section prior to the determination of the initial Tax
Excess payment or Operating Costs Excess payment, the Tax Excess payment and the
Operating Costs Excess payment shall be reasonably estimated by Landlord.
Payment of Base Rent, Additional Rent, any other payment due as Rent, Operating
Costs Excess, Tax Excess and any other obligations of Tenant which are not paid
on the date due plus the applicable grace period, if any, shall, at the option
of Landlord, bear interest at the rate equal to prime rate published in the Wall
Street Journal, plus five (5%) percent per annum, or such lesser rate as may be
the highest rate allowed by law (the "Lease Interest Rate") from the due date
and shall be compounded monthly). If Tenant shall fail to make any payment,
including, without limitation, electricity, telephone or other charges which
Tenant makes directly to a utility or other company when due, and such failure
shall threaten the continued provision of such service to the Leased Premises,
Landlord or other tenants in the Building, Landlord may make such payment on
Tenant's behalf, and such amount shall be due from Tenant as Rent with interest
at the Lease Interest Rate.
25. Subordination.
(a) This Lease and all rights of Tenant hereunder are, and shall remain
unconditionally subject and subordinate in all respects to all mortgages
which are or may hereafter be placed on or affect such Lease and/or the
Property of which the Leased Premises are a part, or any part of such real
property, and/or Landlord's interest or estate therein, and to each
advance made and/or hereafter to be made under any such mortgages, and to
all renewals, modifications, consolidations, replacements and extensions
thereof provided that the holder of record thereof enters into a written
agreement with Tenant binding upon the successors and assigns of the
parties thereto by the terms of which such holder will agree, (a) to
recognize the rights of Tenant under this Lease, (b) in the event of
acquisition of title by said holder through foreclosure proceedings or
otherwise, to perform Landlord's obligations hereunder arising after the
date of such holder's acquisition of title, and (c) to accept Tenant as
tenant of the Leased Premises under the terms and conditions of this
Lease, and Tenant agrees to recognize such holder or any other person
acquiring title to the Leased Premises as Landlord. This Section shall be
self-operative and no further instrument of subordination shall be
required. In confirmation of such subordination, Tenant shall execute and
deliver promptly any certificate acknowledging or confirming such
subordination that Landlord and/or any mortgagee and/or their respective
successors in interest may request.
(b) No act or failure to act on the part of Landlord which would entitle
Tenant under the terms of this Lease, or by law, to be relieved of
Tenant's obligations hereunder or to terminate this Lease shall result in
a release or termination of such obligations or a termination of this
Lease unless (i) Tenant shall have first given written notice of
Landlord's act or failure to act to the holder of any mortgages of whom
Tenant has been given written notice specifying the
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act or failure to act on the part of Landlord which could or would give
basis to Tenant's rights; and (ii) the holder or holders of such
mortgages, after receipt of such notice, have failed or refused to correct
or cure the condition complained of within a reasonable time thereafter,
but nothing contained in this sentence shall be deemed to impose any
obligation on any such holders to correct or cure any such condition.
"Reasonable time" as used above means and includes a reasonable time to
obtain possession of the Building if any such holder elects to do so and a
reasonable time (not to exceed ninety (90) days) to correct or secure the
condition if such condition is determined to exist.
(c) From time to time, within ten (10) days next following Landlord's
request, Tenant shall deliver to Landlord a written statement executed and
acknowledged by Tenant, in form reasonably satisfactory to Landlord, (i)
stating that this Lease is then in full force and effect and has not been
modified (or, if modified, setting forth the specific nature of all
modifications), and (ii) setting forth the date to which the Base Rent has
been paid, and (iii) stating whether or not, to the best knowledge of
Tenant, Landlord is in default under this Lease, and, if Landlord is in
default, setting forth the specific nature of all such defaults. Tenant
acknowledges that any statement delivered pursuant to this paragraph may
be relied upon by any purchaser or owner of the Building, or the Property
or any part thereof, or Landlord's interest in the Building or the
Property or by an mortgagee, or by any assignee of any mortgagee.
(d) Tenant hereby agrees that this Lease shall be subject and subordinate
to all the terms, conditions and provisions of any Master Deed,
Declaration of Trust or By-Laws of any condominium regime created for the
Building and which includes the Leased Premises and Tenant shall execute
any reasonable instrument confirming said subordination and recognizing
and consenting to said condominium regime, provided that Tenant's rights
and obligations hereunder shall not be adversely affected thereby.
26. Holdover. If the Tenant remains in the Leased Premises beyond the expiration
or earlier termination of the Lease Term such holding over shall not be deemed
to create any tenancy, but the Tenant shall be a Tenant-at-Sufferance only and
shall pay rent to Landlord at the times and manner determined by Landlord at a
daily rate in an amount equal to two times the daily rate of the Rent and other
sums payable under this Lease as of the last day of the Lease Term.
27. Notices. Any notice or demand by Tenant to Landlord shall be served by hand
delivery, recognized overnight courier service, or registered or certified mail
addressed to the Landlord at the address above indicated, and until otherwise
directed in writing by the Landlord, and any notice or demand by Landlord to
Tenant shall be served by any of the same means addressed to Tenant at the
Leased Premises with a courtesy copy to Hale and Dorr LLP, 60 State Street,
Boston, MA 02109, Attn: Paul Jakobowski, Esq. (provided that the failure to
provide such copy shall not affect the effectiveness, enforceability or the
service of such notice) until otherwise directed in writing by Tenant. Any such
notice shall be deemed to have been given when it is received or on the date
that delivery is referred during normal business hours.
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28. Rules and Regulations. Tenant will faithfully observe and comply with the
Rules and Regulations annexed hereto as Exhibit B and such other and further
reasonable Rules and Regulations as Landlord hereafter at any time or from time
to time may make and may communicate in writing to Tenant, which in the judgment
of Landlord shall be necessary for the reputation, safety, care or appearance of
the Building, or the preservation of good order therein, or the operation or
maintenance of the Building, or any equipment relating thereto, or the comfort
of Tenant or others in the Building. If this Lease shall conflict with any such
Rules and Regulations, the provisions of this Lease shall control. Landlord
shall not have any duty or obligation to enforce the Rules and Regulations or
the terms, covenants or conditions in any other lease as against any other
tenant and Landlord shall not be liable to Tenant for violation of the same by
other tenants, their servants, employees, agents, visitors, invitees or
licensees.
29. Quiet Enjoyment. The Tenant shall upon paying the Rent reserved herewith and
performing all of the terms, covenants and condition on Tenant's part to be
observed and performed, peaceably and quietly have and hold the Leased Premises
without hindrance or molestation by any person or persons lawfully claiming by,
through or under Landlord, subject, however, to the terms of this lease.
30. Disputes; Landlord's Reasonableness; Arbitration. Notwithstanding any other
provisions hereof to the contrary, Tenant's sole remedy in any dispute with
respect to the reasonableness of any failure or refusal of Landlord to grant its
consent or approval to any request for such consent or approval pursuant to any
of the provisions of this Lease with respect to which Landlord has covenanted
not unreasonably to withhold such consent or approval, shall be an action for
specific performance. If the determination of any such proceedings shall be
adverse to Landlord, Landlord shall be deemed to have granted the requested
consent or approval, but that shall be Tenant's sole remedy in such event and
Landlord shall not be liable to Tenant for any damages or for a breach of
Landlord's covenant not unreasonably to withhold such consent or approval, or
otherwise. Any dispute which Landlord and Tenant shall agree to submit to
arbitration shall be finally determined by arbitration in accordance with the
rules and regulations then obtaining of the American Arbitration Association or
its successor. Any such determination shall be final and binding upon the
parties, whether or not a judgment shall be entered in any court. In making a
determination, the arbitrators shall not subtract from, add to, or otherwise
modify any of the provisions of this Lease.
Landlord and Tenant may, at their own expense, be represented by counsel and
employ expert witnesses in any such arbitration.
31. Seisin. In the event of a sale or other disposition of the Building and/or
Property by Landlord, Landlord shall be entirely freed and relieved from the
performance and observance thereafter of all covenants and obligations of
Landlord hereunder, provided that the Landlord's successor shall thereupon
assume and agree thereafter to perform and observe, any and all of such
covenants and obligations of Landlord.
32. Binding Agreement. This Lease shall bind and inure to the benefit of the
parties hereto and their respective heirs, representatives, successors or
assigns. This Lease contains the entire agreement of the parties and many not be
modified except by an instrument in writing.
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33. Notice of Lease. Tenant agrees that it will not record this Lease. Landlord
and Tenant shall, upon request of either, execute and deliver a notice of this
Lease in such recordable form as may be permitted by applicable statute.
34. Landlord's Right to Cure. If Tenant shall default in the observance or
performance of any term, covenant or condition on its part to be observed or
performed under this Lease, Landlord, without being under any obligation to do
so and without waiving such default, may remedy such default for the account and
at the expense of Tenant, immediately and without notice in case of emergency,
or in any other case, if Tenant, shall fail to remedy such default with all
reasonable diligence within the time set forth under Section 24 and after
Landlord shall be notified Tenant of such default. If Landlord makes any
expenditures or incurs any obligations of the payment of money in connection
therewith, including, but not limited to, reasonable attorneys fees, such sums
paid or obligations incurred, with interest at the Lease Interest Rate, shall be
paid to Landlord by Tenant as Rent hereunder.
35. Hazardous Materials. Tenant agrees to properly handle, store, use and
dispose of all hazardous material, as may be defined by applicable law. Without
limiting the foregoing, Tenant shall not dispose of such material on or into any
property of Landlord, any sewage or drainage system, or any trash receptacle
provided by Landlord. Prior to storing, handling, using, or disposing of any
hazardous material on the Leased Premises or the Property of Landlord, Tenant
shall notify Landlord of such activity and provide all reasonable evidence that
such material shall be dealt with in accordance with the terms of this Lease.
Tenant shall indemnify and hold Landlord harmless from all claims, including
costs and attorneys' fees arising from Tenant's possession of such materials.
This provision shall survive termination of this Lease.
36. First Offer for Basement Space.
(a) Provided Tenant shall not be in default hereunder, then, if after the
initial leasing of the basement of the Building, all or a portion of the
basement becomes available for leasing and Tenant has notified Landlord
that it has a need for additional space, then Landlord shall give notice
of such availability to Tenant (the "Offer Notice") and Tenant shall have
the option, exercisable only by notice given to Landlord within fifteen
(15) days from the receipt of the Offer Notice and subject to the
provisions hereof, to lease and add to the Leased Premises the space which
is the subject of the proposal referred to in the Offer Notice, for a term
to commence on the date designated in such Notice and ending on the
Expiration Date (unless sooner terminated pursuant to this Lease or law),
in an "as-is" condition, at rent and other conditions as described in the
Offer Notice, and upon all the other then executory terms, covenants and
conditions contained in this Lease. The terms contained in the Offer
Notice shall be determined in good faith by the Landlord to reflect the
fair market value for the premises described therein. Tenant may only
exercise such option on all of the space so offered (the "Applicable Added
Space").
(b) No space shall be deemed to be "available for leasing" or otherwise
subject to the provisions of this Section if the tenant of such space or
any assignee or subtenant thereof enters into any agreement with Landlord
relating to such space. It is understood and agreed that time
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is of the essence with respect to the exercise of any option set forth in
this Section.
(c) The lease term applicable to any space as to which Tenant can exercise
the option under this Section shall be for at least three (3) years.
Accordingly, the option set forth in this Section shall not be exercisable
if the proposed term applicable to any such space commences on a date
which is less than three (3) years prior to the Expiration Date then in
effect.
(d) With Tenant's notice, Tenant's shall provide Landlord with a complete
description of its proposed operation in the Applicable Added Space, and
if Landlord determines that such operation is not compatible and
consistent with: (i) the Use of the Leased Premises; (ii) Landlord's
operation of the Building; and (iii) other uses in the Building and the
tenant mix therein, it may revoke Tenants option and render it null and
void.
(e) On the effective commencement date of the term applicable to the
Applicable Added Space, this Lease shall be deemed modified as follows:
(i) The Leased Premises shall include the Applicable Added Space
(together with all appurtenances, fixtures, improvements, additions
and other property attached thereto or installed therein at the
commencement of the term applicable to the Applicable Added Space or
at any time during said term, other than Tenant's Personal Property)
for all purposes of this Lease;
(ii) The Base Rent shall be increased by the base rent set forth in
the proposal referred to in the Applicable Offer Notice with respect
to the Applicable Added Space.
(iii) Additional Rent shall include all other rent and charges
proposed in the Offer Notice.
(f) Upon request of Landlord, Tenant shall execute and deliver to Landlord
an instrument, in reasonably satisfactory form and suitable for recording,
stating that Tenant has not exercised an option which became available to
it pursuant to this Section to lease any Applicable Added Space, if that
be the case, or stating that Tenant has exercised such option, if that be
the case, and setting forth all of the modifications to the Lease
resulting from the application of the provisions of this Section,
including, but not limited to, the effective commencement date of the term
applicable to the Applicable Added Space. Neither Landlord's failure to
request that Tenant execute such instrument nor Tenant's failure to comply
with the provisions of this paragraph shall, however, vitiate the
provisions of this Section.
37. General Provisions.
(a) Except as provided in Section 30, the various rights and remedies
contained in this Lease and reserved to each of the parties shall not be
exclusive of any other right or remedy of such party, but shall be
construed as cumulative and shall be in addition to every other remedy now
or hereafter existing at law, in equity, or by statute. No delay or
omission of the right to exercise any power by either party shall impair
any such right or power or shall be construed
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as a waiver of any default or as acquiescence in any default. One or more
waivers of any covenant, term or condition of this Lease by either party
shall not be construed by the other party as a waiver of a subsequent
breach of the same covenants, term or condition. The consent or approval
of either party to or of any act by the other party of a nature requiring
consent or approval shall not be deemed to waive or render unnecessary
consent to or approval of any subsequent similar act.
(b) Payments to Landlord under this Lease are rental for the use of the
Leased Premises, and nothing herein contained shall be deemed or construed
to make Landlord a partner or associate of Tenant in the conduct of any
business, nor as rendering Landlord liable for any debts, liabilities or
obligations incurred by Tenant in the conduct of any business it being
expressly agreed that the relationship between the parties is, and shall
at all times remain, that of Landlord and Tenant.
(c) All amounts payable by Tenant to Landlord under any provision of this
Lease, other than the Base Rent, shall be deemed to be additional rental
for the use of the Leased Premises, and Landlord shall have the same
remedies for the nonpayment of such amounts as for non-payment of other
rents.
(d) Where the words "Landlord" and "Tenant" are used in this Lease they
shall include Landlord and Tenant and shall apply to persons, both men and
women, associations, partnerships and corporations, and in reading this
Lease the necessary grammatical changes required to make the provisions
hereof mean and apply to them shall be made in the same manner as if
written into the Lease.
(e) Tenant hereby declares that in entering into this Lease, Tenant relied
solely upon the statements contained in this Lease and Landlord and Tenant
both fully understand that no agents or representatives of either Landlord
or Tenant, respectively, have authority to in any manner change, add to or
detract from the terms of this Lease.
(f) The invalidity of one or more of the provisions of this Lease shall
not affect the remaining portions of this Lease; and, if any one or more
of the provisions of this Lease should be declared invalid by final order,
decree or judgment of a court of competent jurisdiction, this Lease shall
be construed as if such invalid provisions had not been included in this
Lease.
(g) Tenant hereby agrees for itself and each succeeding holder of the
Tenant's interest or any portion thereof under this Lease that any
judgment, decree or award obtained against the Landlord or any succeeding
owner of Landlord's interest which is in any manner related to this Lease,
the Leased Premises, or the Tenant's use and occupancy of the Leased
Premises or the Building of which the Leased Premises are a part, or the
land on which such Building is situated, whether at law or in equity,
shall be satisfied out of Landlord's Property to the extent then owned by
the Landlord and each such succeeding owner and further agrees to look
only to such assets and to no other assets of the Landlord or each
succeeding owner for satisfaction. Neither the Trustees executing this
Lease not any beneficiaries of such Trust nor any subsequent Landlord
shall have any personal liability hereunder.
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(h) Force Majeure: Whenever either party hereto is required to do or
complete any act, matter or thing, the time for doing or completion
thereof shall be extended by a period of time equal to the number of days
on or during which party is prevented from, or is unreasonably interfered
with, the doing or completion of such act, matter or thing because of
strikes, lock-outs, embargoes, unavailability of labor or materials, wars,
insurrections, rebellions, civil disorder, declaration of national
emergencies, acts of God, or other causes beyond such party's reasonably
control (financial inability excepted); provided, however, nothing
contained in this subsection shall excuse Tenant from the prompt payment
of any rental or other charge required of Tenant hereunder except as may
be expressly provided elsewhere in this Lease. Time is of the essence of
all forms and provisions of this Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Lease in triplicate,
the original as a sealed instrument, on the day and year first above written.
LANDLORD: TENANT:
1050 HINGHAM STREET REALTY TRUST BIOSPHERE, INC.
By:/s/ ILLEGIBLE By: /s/ John M. Carnuccio
- ----------------------------- ---------------------------------
Trustee and not individually
John M. Carnuccio, President & CEO
----------------------------------
Print Name and Title
Wpa:1050BioSpherelse5.doc
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EXHIBIT A1
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LEASE PLAN
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EXHIBIT A2
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SITE PLAN
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EXHIBIT B
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1050 HINGHAM STREET
RULES AND REGULATIONS
1. The regular business hours for the Building shall be from 8:00 a.m. to
6:00 p.m. Monday through Friday and from 9:00 a.m. to 1:00 p.m. Saturday,
except customary holidays, as designated by Landlord. Landlord reserves
the right to exclude from the office portions of the Building, at all
times other than during such regular business hours, all persons who do
not present a building pass signed by Landlord. Landlord will furnish
passes for persons for whom any tenant requests such passes. Tenant shall
be responsible for all persons for whom it requests such passes and shall
be liable to Landlord for all wrongful acts of such persons.
2. The parking areas, driveways, walkways, entrances, passages, courts,
elevators, vestibules, stairways, corridors or halls of the Building shall
not be obstructed or encumbered or used for any purpose other than ingress
and egress to and from the premises demised to any tenant or occupant. All
loitering is strictly prohibited.
3. No awnings, antennae or other projections shall be attached to the outside
walls, windows or roof of the Building without the prior consent of
Landlord. No curtains, blinds, shades or screens shall be attached or hung
in, or used in connections with, any window or door of the Leased Premises
without the prior consent of Landlord. Such awnings, projections,
curtains, blinds, shades, screens, or other fixtures must be of a quality,
type, design and color, and attached in a manner, approved by Landlord.
4. No sign, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted or affixed on any part of the outside or
inside (if visible from outside) of the Leased Premises or of the Building
without the prior consent of Landlord. Interior signs on doors and
directory tables, if any, shall be of a size, color and style approved by
Landlord.
5. The sashes, sash doors, skylights, windows, transoms and doors that
reflect or admit light and air into the atrium, halls, passageways or
other public places in the Building shall not be covered or obstructed,
nor shall any bottles, parcels, or other articles be placed in any window
sills.
6. No show cases or other articles shall be put in front of or affixed to any
part of the exterior of the Building, nor placed in the halls, corridors,
vestibules or other parts of the Building except as expressly permitted in
writing by Landlord.
7. All waste, rubbish and refuse shall be kept in proper receptacles upon the
Leased Premises and nothing shall be thrown or swept into or upon the
corridors, passageways, stairways or other parts of the Building. The
water and wash closets and other plumbing fixtures shall not be used for
any purposes other than those for which they were designed and
constructed, and no sweepings, rubbish, rags or other substances shall be
thrown therein nor shall water be wasted
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by improper use of faucets, sinks or toilets or otherwise. Tenant shall
not dispose of any hazardous or toxic materials or substances, as such
materials or substances may be defined in any applicable federal, state or
local statute, law, regulation, or ordinance, in or on the Leased
Premises, or the Building or any fixtures, plumbing or receptacles
therein. Tenant shall be responsible for any violation of this rule by
Tenant or Tenant's agents, clerks, invitees or employees.
8. Tenant shall not mark, paint, drill into, or in any way deface any part of
the Building or the Leased Premises. No boring, cutting or stringing of
wires shall be permitted, except with the prior consent of the Landlord,
and as Landlord may direct. Tenant shall not install any resilient tile or
similar floor covering in the Leased Premises except in manner approved by
Landlord.
9. No bicycles, vehicles or animals of any kind shall be brought into or kept
in or about the Leased Premises or the Building. Bicycles may be stored in
racks, if any, furnished for such purpose by Landlord in a common area of
the Property. No cooking shall be done or permitted in the Building by any
tenant without the approval of Landlord. Tenant shall not cause or permit
any unusual or objectionable odors to emanate from the Leased Premises.
10. Without the prior consent of Landlord, no space in the Building shall be
used for manufacturing except as specified herein, or for the sale of
merchandise, goods or property of any kind at auction, fire, bankruptcy,
going out of business or similar sale.
11. No additional locks, bolts or other closing or locking devices shall be
placed upon any of the doors, windows, transoms or other openings by
Tenant without written permission from the Landlord, and upon termination
of his leasehold, Tenant shall restore to the Landlord all keys to
offices, toilets or other rooms furnished to or otherwise procured by
Tenant. In the event of the loss of any keys furnished by Landlord, Tenant
shall pay to the Landlord the cost hereof.
12. All removals from the Building, or the carrying in or out of the Building
or the Leased Premises of any safes, freight, furniture, or bulky matter
of any description must take place at such time and in such manner as
Landlord or its agents may determine, from time to time. If any such
matter requires special handling, only a person holding a Master Rigger's
license or otherwise experienced and approved by all appropriate
authorities for such handling, shall be employed to perform such special
handling. Tenant shall not place, or permit to be placed, on any part of
the floor or floors of the Leased Premises a load exceeding the floor load
per square foot which such floor was designed to carry and which is
allowed by law. Landlord reserves the right to prescribe the weight and
position of safes and other heavy matter, which must be placed so as to
distribute the weight. Landlord reserves the right to inspect all freight
to be brought into the Building and to exclude from the Building all
freight which violates any of the Building Rules or the provisions of
Tenant's lease. Tenant shall pay for all damages caused by such moving.
13. Tenant shall not use or occupy, or permit any portion of the Leased
Premises to be used or occupied, as an office for a public stenographer or
typist, for a barber or manicure shop, or as an employment bureau. Tenant
shall not engage or pay any employees in the Building, except
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actually working for Tenant in the Building, nor advertise for laborers
giving any address at the Building.
14. Tenant, before closing and leaving the Leased Premises at any time, shall
see that all entrances are locked.
15. Tenant shall, at its expense, provide artificial light in the Leased
Premises for Landlord's agents, contractors, and employees while
performing janitorial or other cleaning services and making repairs or
alterations in said premises.
16. The Leased Premises shall not be used, or permitted to be used, for
lodging or sleeping, or for any immoral or illegal purpose. Canvassing,
soliciting and peddling in the Building are prohibited and Tenant shall
cooperate in seeking their prevention.
17. Tenant shall properly dispose of edible refuse in sealed containers and
encourage cleanliness among employees to prevent infestation of vermin. If
the Leased Premises become infested with vermin, Tenant, at its sole cost
and expense, shall cause Leased Premises to be exterminated from time to
time, to the satisfaction of the Landlord, and shall employ such
exterminators therefor as shall be approved by Landlord.
18. Tenant shall always conduct its operation in the Leased Premises under its
present trade name, unless Landlord shall otherwise consent in writing.
19. Tenant shall not use the walkway and parking areas adjacent to the
Building for business purposes without the prior written consent of the
Landlord.
20. Tenant shall receive and deliver goods and merchandise only in the manner,
at such times, and in such locations as may be reasonably designated by
Landlord. There shall not be used in any space, or in the common areas of
the Building any equipment which may damage or deface the Building, either
by Tenant or by jobbers or others under Tenant's control, in the delivery
of merchandise or otherwise.
21. Tenant shall comply with all reasonable requests of Landlord or its agents
as such requests pertain to safety and security in the Building.
22. The requirements of Tenant and any complaints of Tenant will be attended
to by notice to Landlord or upon application at the office of Landlord.
Employees of Landlord have no authority and shall perform no work or do
anything outside of the regular duties, unless under special instruction
of the Landlord.
23. In order that the good will and reputation of the Building may be
maintained, no newspaper, magazine or other kind of advertising shall be
issued by any Tenant wherein any office or other space in the Building is
given as an address unless Tenant reasonably determined in good faith that
such advertising could not have any adverse impact on the character of the
Building or its Landlords.
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24. No Tenant shall do, or permit or suffer anything to be done, on the Leased
Premises or in the Building which will interfere with the rights,
privileges and conveniences of any other tenant or which will conflict
with the provisions of any insurance policy covering the Building or any
part thereof or which will violate any law, ordinance or rule or
regulation of any governmental authority.
25. Landlord reserves the right to rescind, amend or waive any rule or
regulation at any time prescribed for the Building when, in its judgment,
it deems it necessary, desirable or proper for its best interest and for
the best interests of the tenants, and no alteration or waiver of any rule
or regulation in favor of one tenant shall operate as an alteration or
waiver in favor of any other tenant. Landlord shall not be responsible to
any tenant for the non-observance or violation by any other tenant of any
of the rules or regulations at any time prescribed for the Building.
Tenant shall conform to all other reasonable rules established by Landlord
and uniformly applied relative to the operation and use of the Building.
32
<PAGE>
EXHIBIT C
---------
1050 HINGHAM STREET
SPECIFICATIONS FOR CLEANING SERVICES
FREQUENCY - Five (5) nights per week, Monday through Friday, except holidays.
WORK AREA - 1050 Hingham Street Main lobby and floors 1, 2, and 3
I. GENERAL CLEANING SERVICES
Nightly
- Dust sweep flooring with specially treated mops to insure dust-free
floors.
- Wash flooring in building entrance foyers.
- Vacuum carpet areas and rugs.
- Empty and damp wipe all ashtrays.
- Empty and damp wipe ashtrays and receptacles in corridors.
- Clean cigarette urns and replace sand or water as necessary.
- Empty waste and remove to specific area.
- Dust office furniture and equipment.
- Clean and sanitize drinking fountains.
- Dust counter tops.
- Vacuum carpeted stairwells.
- Damp mop and spray buff floors in the lobby.
- Damp mop and spray buff resilient tile floors. (1/5th of entire area
to be completed each night.
- Vacuum carpeting in elevator.
- Sweep stairs.
- Clean entrance door glass.
- Keep service rooms in clean and orderly condition.
- Clean exposed surfaces in kitchen areas, provided that all utensils
and kitchen equipment shall be kept clean and removed from such
surfaces.
Weekly
- Dust window sills, ledges and baseboards.
- Remove finger marks from light switches, door, door frames.
- Spot-clean glass partition.
- Damp mop stairs.
Periodic Cleaning:
- Strip, seal and refinish all vat floors once per year.
II. LAVATORY CLEANING SERVICES (Nightly)
33
<PAGE>
- Sweep and wash flooring with approved germicidal detergent solution.
- Wash mirrors, powder shelves, bright work, etc. including
flushometers, piping and toilet seat hinges.
- Wash both sides of toilet seats, wash basins, bowls and urinals with
approved germicidal detergent solution.
- Dust partitions, tile walls, dispensers, doors and receptacles.
- Empty and clean towel and sanitary disposal receptacles.
- Remove wastepaper and refuse to a designated area in the premises.
- Fill toilet tissue, soap and towel dispensers with supplies as
furnished.
III. GENERAL CLEANING SERVICES
Periodic Cleaning:
- Dust venetian blinds.
- Accomplish high dusting every three months, which includes the
following:
- Dust pictures, frames, charts, graphics and similar wall hangings
not reached in nightly cleaning.
- Dust exterior of lighting fixtures.
- Dust overhead pipes, sprinklers, etc.
- Dust window frames.
- Dust vertical surfaces, such as partitions, ventilating louvers,
etc. not reached in nightly cleaning.
- Vacuum upholstered furniture every three months.
- Damp mop corridors and heavy traffic areas nightly.
IV. LAVATORY CLEANING SERVICES
Periodic Cleaning
- Machine scrub flooring with an approved germicidal detergent
solution quarterly.
- Wash partitions, tile walls and enamel surfaces with an approved
germicidal solution once a month.
- Dust exterior of lighting fixtures once a month.
- Accomplish high dusting once a month.
34
<PAGE>
EXHIBIT D
---------
CLARIFICATION OF LIGHT MANUFACTURING USE
Landlord has permitted Tenant to conduct limited research and development and
light manufacturing within the Leased Premises. It is the intention that these
activities be limited, and Tenant hereby provides the following description of
its research and development ("R&D") and limited manufacturing activities
included in the Use of the Leased Premises upon which Landlord's approval is
based.
Tenant is engaged in developing medical applications that incorporate the use of
its plastic particles called microspheres for an emerging category of procedures
called embolotherapy. At the present time, all production activities are
accomplished at its Paris, France facility.
The following describes Tenant's anticipated activities in the short,
intermediate and long-term future:
o Other than administrative, marketing sales and finance, the Leased
Premises will be used for only a portion of Tenant's research and
development ("R & D") activities and none of its manufacturing. These R &
D activities will involve bench top modeling and testing that incorporates
standard plastic and metal processing technologies. These are accomplished
using hand tools or small mechanized or powered tools that generally use
little power and the process generates little or no heat or noise and no
volatile, toxic or detectable fumes.
o Tenant plans to establish a separate manufacturing capability in the
Leased Premises. This will resemble closely the present manufacturing area
of the Paris facility. It will be limited to an area of approximately 500
square feet. This is a highly conditioned "clean room" environment but
contains little equipment or mechanized tooling. The operations are simple
chemical operations involving the use of several of the raw material and
processing components used to manufacture the present product.
o Tenant will engage in development of complementary products and
technologies that may include other "particle technologies" that
incorporate other materials or combinations of materials. This will
involve some light chemical, mechanical and/or thermal forming processes.
This will require an expansion of the manufacturing area to a total of
approximately 1,000 square feet.
o Almost all of the components used to produce Tenant's product are
inherently non-toxic or non-hazardous. All handling and disposal will be
done in accordance with all pertinent local, state or federal regulatory
standards in effect at the time.
o All operations conducted in the Leased Premises will be conducted using
equipment and materials which use little power and generate little or no
heat or noise and no volatile, toxic or detectable fumes.
35
<PAGE>
o In the event Tenant proposes to enter into a sublease or assignment of
this Lease, Landlord shall have the absolute right to withhold its consent
to any subtenant or assignee which proposes to conduct manufacturing and
research and development activities in the Leased Premises, unless such
assignee is a Successor conducting operations substantially identical to
those conducted by Tenant.
Such activities will be considered within the Use of the Leased Premises if they
otherwise comply with the terms of this lease, including without limitation the
following:
o All activities, processes, transportation and handling of materials and
waste are in strict conformance with all environmental, zoning, OSHA, and
other applicable laws, orders, and conditions, and Tenant provides
reasonably satisfactory proof of such conformance to Landlord promptly
upon request.
o None of such uses require utility, HVAC, floor loading or other physical
parameters materially beyond those customary in office uses and provided
in the Building.
o Activities associated with the use shall not be more intrusive, disruptive
or materially more demanding of the Property or the Building beyond the
Leased Premises including, without limitation, use of the loading dock and
other delivery areas.
o Such uses will be limited to areas within the Leased Premises reasonably
acceptable to Landlord, with recognition that the Building shall operate
as a first class office building, and such uses should be as inapparent as
possible outside the Leased Premises.
o Tenant's use shall not materially adversely impact other tenants, the
operation or facilities of the Property, or the compliance with any law,
order or condition.
36
<PAGE>
SCHEDULE A
LANDLORD'S INITIAL CONSTRUCTION
I. (1) Landlord and Tenant have agreed upon a schematic plan (the "Schematic
Plan") for construction of Landlord's Initial Construction a copy of which is
attached hereto as Exhibit A-1. Landlord shall cause Landlord's Architect to
complete and deliver to Tenant a plan ("Tenant's Plan") consistent with the
Schematic Plan, for the construction of the Leased Premises to prepare for
Tenant's occupancy. Tenant's Plan shall contain all details of Tenant's proposed
improvements to the Leased Premises which are required to permit such
construction by Landlord, including, without limitation, selections of wall
coverings, selection of paint colors, selection of carpeting, door keying
schedule, and the heat factor, if any, of all equipment intended to be used in,
and the human load factor proposed for, each room or other area. Tenant's Plan
shall also include as many requests for pricing of alternatives as Tenant wishes
to consider prior to authorizing Landlord to commence the work pursuant to
Paragraph III below. All of the improvements shown on Tenant's Plan as it is
finally approved by Landlord and Tenant are hereinafter referred to as
"Landlord's Initial Construction." Landlord shall allow Tenant and its agents
and employees access to the Leased Premises at all reasonable times from and
after the date hereof for the purpose of developing Tenant's Plan. Landlord
agrees to reasonably cooperate with Tenant and Tenant's agents, employees and
contractors during the development of Tenant's Plan. Tenant agrees that in order
to prepare Tenant's Plan, Landlord's Architect will need the full cooperation of
Tenant in making decisions with respect to such plan concerning colors, carpets
and other details described above. Tenant shall approve or request modifications
to Tenant's Plan within two (2) business days of receipt from Landlord's
Architect. Tenant agrees to act promptly and within the schedule set forth by
Landlord's Architect for the making of all decisions and approvals required.
(2) Landlord has contracted with Landlord's Architect for all aspects of
Tenant's Plan which constitute a Building Standard installation, and provided
Tenant uses Landlord's Architect for the preparation of Tenant's Plan, that
portion of the cost of preparation of Tenant's Plan related to a Building
Standard installation shall be paid by Landlord provided that Tenant agrees to
pay to Landlord's Architect promptly after receipt of statements therefore the
cost of completing any part of Tenant's Plan as is not covered by the foregoing
description. The foregoing is intended solely as a benefit to Tenant based upon
Landlord's contractual relationship with Landlord's Architect, and Tenant shall
have no obligation to utilize Landlord's Architect for the preparation of
Tenant's Plan.
(3) Tenant's Plan shall be subject to Landlord's approval, which Landlord
agrees not to unreasonably withhold or delay. In this connection, any
disapproval or withholding of approval of such Plan by Landlord shall not be
deemed unreasonable if the work designated on such Plan (i) is not in accordance
with the Building Standard or other standards adopted by Landlord consistent
with the terms and conditions of this Lease and timely communicated to Tenant
for construction in the Building, and with all applicable codes and governmental
regulations, including, without limitation, the energy conservation provisions
of the Massachusetts Building Code, (ii) will require the use of contractors of
a type other than those normally engaged by Landlord in the construction of the
Building without Landlord's prior approval, which shall not be unreasonably
withheld or delayed,
37
<PAGE>
(iii) will tend in Landlord's reasonable judgment to delay completion of
Landlord's Initial Construction (as shown on such Plan) beyond the specified
Commencement Date, (iv) is not practicable and consistent with existing physical
conditions in the Building and the plans for the Building which have been filed
with appropriate government authorities, (v) will materially impair Landlord's
ability to perform any of Landlord's obligations under the Lease in the
reasonable judgment of Landlord, (vi) will adversely affect any portion of the
Building other than the Leased Premises or (vii) will exceed the capacity of the
existing feeders or wiring installations serving the Leased Premises.
II. Upon Landlord's and Tenant's approval of Tenant's Plan in accordance with
Paragraph I above, Landlord will promptly negotiate a proposal from a contractor
acceptable to Landlord for Landlord's Initial Construction as shown on Tenant's
Plan including such alternative pricing for any items included in Tenant's Plan
which are beyond the scope of work agreed upon between Landlord and Tenant
("Alternates"). The prices for Alternates specified in Tenant's Plan submitted
by all contractors shall be submitted to Tenant for review forthwith after
receipt.
III. Tenant shall have two (2) business days in which to review such material
concerning Alternates and to approve some alternative combination of work and
the price therefor and to authorize Landlord to commence the work or to
disapprove such work and pricing. The price submitted by the contractor for all
of Landlord's Initial Construction which is in addition to work agreed herein to
be paid for by Landlord (the "Extra Work"), including the price for any
alternative combination of work selected by Tenant pursuant to the preceding
sentence, is hereinafter referred to as "Landlord's Extra Work Price". Any
failure by Tenant to authorize Landlord to perform any element of Landlord's
Initial Construction including any alternative selected as aforesaid within two
(2) business days of submission to Tenant of the material referred to above
shall be deemed a Tenant Delay within the meaning of subparagraph C of Paragraph
V of this Schedule A.
IV. Landlord agrees to construct so much of Landlord's Initial Construction as
constitutes a Building Standard installation as per Schedule A-2 (using
quantities of Building Standard materials necessary to meet the requirements of
Tenant's Plan) at Landlord's sole cost and expense. In addition, Landlord shall
provide glass walls for two conference rooms.
In the event the cost of design and construction of Landlord's Initial
Construction (not including Extra Work) exceeds $140,346, Tenant shall pay to
Landlord the excess cost up to a maximum sum of $31,188 to be defined as
"Tenant's Construction Contribution." Landlord shall be responsible for any
costs in excess of $171,534.00 (not including Extra Work and costs resulting
from Tenant Delays or revisions to Tenant's Plan).
Landlord will also construct Alternates selected by Tenant, the cost of which
shall be borne by Tenant (Extra Work Price). Landlord shall bill all or a
portion of the Extra Work Price and Tenant's Construction Contribution to Tenant
as work progresses. Tenant shall pay all amounts due within ten (10) days.
38
<PAGE>
V. Completion of Landlord's Initial Construction.
A. Landlord's Initial Construction shall be constructed in a good and
workmanlike manner with reasonable diligence and in accordance with
applicable laws and codes and Tenant's Plan and related
specifications, and shall constitute a single non-recurring
obligation on the part of Landlord. In the event this Lease is
renewed or extended, for a further term by agreement or by operation
of law, or if Tenant shall exercise any option to lease or add
additional rentable area to the Leased Premises, Landlord's
obligation to perform Landlord's Initial Construction shall not
apply to any such renewal, extension or expansion.
B. In accordance with Section 3 of the Lease, unless it occurs prior to
the Specified Commencement Date, the date on which Substantial
Completion of Landlord's Initial Construction in the Initial
Occupancy Area occurs shall constitute the Commencement Date.
"Substantial Completion" of Landlord's Initial Construction or words
of similar import shall mean completion of Landlord's Initial
Construction exclusive of punch list items, i.e., details of
construction, mechanical adjustment and decoration, the completion
of which will not materially interfere with Tenant's use and
occupancy of the Leased Premises for its normal business purposes
("Punch List Items"), including issuance of a certificate of
occupancy which allows Tenant to occupy the Leased Premises
provided, however, that if such Substantial Completion has been
delayed on account of a Tenant Delay (defined below), then
Substantial Completion shall be deemed to have occurred on the date
on which Landlord reasonably determined Substantial Completion would
have occurred but for such Tenant Delay. At any reasonable time,
after such Substantial Completion following reasonable advance
notice to Tenant, Landlord may enter the Leased Premises to complete
such Punch List Items. Landlord shall use reasonable diligence to
complete such Punch List Items within 60 days thereafter unless such
item remains incomplete due to lack of availability or for other
reasons beyond Landlord's control and :Landlord is diligently
pursuing the resolution of such item, and entry by Landlord, its
agents, servants, employees or contractors for such purpose shall
not constitute an actual or constructive eviction, in whole or in
part, or entitle Tenant to any abatement or diminution of rent, or
relieve Tenant from and of its obligations under this Lease, or
impose any liability upon Landlord or its agents by reason of
inconvenience or annoyance to Tenant, or injury to or interruption
of Tenant's business, or otherwise.
C. In the event Substantial Completion of Landlord's Initial
Construction shall be delayed by reason of Tenant's delays in
supplying information, or timely submitting any other plans or
specifications, or in supplying information, or in approving plans
or specifications or estimates, or in giving authorizations
including, without limitation, authorization to proceed with the
work, or by reason of any changes by Tenant in any designations
previously made by Tenant pursuant to this Schedule, or by reason of
any other acts or omissions of Tenant, any such cause shall together
with other acts referred to in subparagraph (d) of this Paragraph be
referred to as "Tenant Delays".
39
<PAGE>
D. Landlord and Tenant shall cooperate to facilitate the installation
of cabling, furniture and equipment during the period during which
Landlord's Initial Construction is in process. Provided that Tenant
and its employees, agents and contractors do not unreasonably
interfere with Landlord's Initial Construction, Landlord shall allow
Tenant access to the Leased Premises for such installations. Prior
to Tenant's entry into the Leased Premises as permitted hereunder,
Tenant shall submit a schedule to Landlord (and Landlord's
contractor, if so requested by Landlord), for their reasonable
approval, which schedule shall detail the timing and purpose of
Tenant's entry. Tenant shall hold the Landlord harmless from and
indemnify and protect and defend Landlord against any loss or damage
to the Project or Leased Premises and against injury to any person
caused by Tenant's actions as a result of such entry, to the extent
such loss or damage is not covered by insurance carried or required
to be carried under this Lease.
VI. Alterations.
No Alterations (as opposed to Landlord's Initial Construction) or
installations of equipment or otherwise, whether or not constituting an
Alteration, shall be made or performed by or on behalf of Tenant in the
Leased Premises prior to the Commencement Date without the prior written
approval of Landlord, which approval Landlord agrees not to unreasonably
withhold or delay provided either (i) such work does not impose any
additional burden on Landlord or Landlord's Contractor and does not
materially interfere with or delay completion of Landlord's Initial
Construction, in the reasonable judgment of Landlord, or (ii) Tenant
agrees to reimburse Landlord for any reasonable cost of such additional
burden and to treat any resulting delay in Substantial Completion of
Landlord's Initial Construction as a Tenant Delay. Any such sums billed to
Tenant in connection with Alterations for services provided by Landlord
shall be payable by Tenant to Landlord, whether or not the Lease Term
shall have commenced, within ten (10) days next following the rendition of
a statement therefore by Landlord to Tenant.
VII. Estoppel.
After the Commencement Date, and within ten (10) days next following the
request of Landlord, Tenant shall deliver to Landlord a written statement
executed and acknowledged by Tenant, in form reasonably satisfactory to
the holder of any mortgage of the Property, stating that (i) this Lease is
then in full force and effect and has not been modified (or, if modified,
setting forth the specific nature of all modifications), (ii) Tenant has
accepted the Leased Premises as constructed (iii) the Lease Term has
commenced, and (iv) the rent payable under this Lease is being paid by
Tenant on a current basis with no offsets or counterclaims, or if such is
not the case, stating the correct facts and any reasons therefore if
applicable.
40
<PAGE>
SCHEDULE B
----------
1050 HINGHAM STREET
BUILDING STANDARD
Partitions:
New partitions within office space shall consist of 2 "" metal studs with 5/8"
drywall on both sides. Partitions shall extend six inches above ceiling.
On multi-tenant floors, demising partitions between tenants shall be constructed
as above but shall go to underside of floor above.
Doors and Frames:
3'0" x 7'0" solid core stain grade oak veneer doors with knock-down hollow metal
frames.
Door hardware: 1 " pair butts and one building standard lever handle latch set
with brushed steel finish per door.
Ceilings:
Suspended 2' x 4' texture patterned mineral fiber "second look" acoustical
ceiling tile with exposed recessed grid.
Lighting:
Standard lighting is 2' x 4' fluorescent fixtures with parabolic reflectors.
Switches:
Single pole rocker-type light switches are provided for the purpose of
controlling light fixtures.
Convenience Outlets:
The Landlord will provide Building Standard 120 volt duplex convenience outlets
in partitions.
Telephone Outlets:
The Landlord will provide Building Standard telephone outlets. Outlets shall
include pull string and plaster ring, ready to receive Teflon coated wire.
Devices, plates, wiring and instrument by Tenant.
Wiring:
The Landlord will provide a 120/208 volt tenant panel with 100 amp. main.
Flooring:
The Landlord shall provide a selection of carpet and vinyl tile for Tenant's
consideration. A 4" vinyl base will be utilized on all partitions.
Painting:
The Landlord shall provide painting for all partitions, columns and perimeter
walls within the Tenant Space. Such painting shall consist of one (1)
roller-applied primer coat and one (1) roller
41
<PAGE>
applied finish coat of latex eggshell. Paint colors shall be selected from the
Devoe standard range of colors. No color breaks, dados or special striping or
design shall be provided by Landlord under this Section. The Landlord shall
provide painting for all door frames within the Tenant Space. Such painting
shall consist of two (2) coats of semi-gloss alkyd enamel. Paint colors shall be
selected from the Devoe standard range of colors.
The Landlord shall provide finishing for building standard doors. Such finishing
shall consist of staining and sealing to match the building standard finish.
The Landlord reserves the right to approve the color of all soffits at the
exterior windows of the building, in accordance with samples approved by
Landlord and Landlord's Architect, at their sole discretion.
Sprinklers:
Landlord will provide semi-recessed chrome sprinkler heads as required by
Massachusetts State Building Codes.
Window Treatment:
The Landlord will provide Building Standard horizontal mini-blinds for all
exterior windows.
42
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF BIOSPHERE MEDICAL, INC.
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY JURISDICTION OF ORGANIZATION
- ------------------ ----------------------------
<S> <C>
Biosphere Medical, S.A. France
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report included in this Form 10-K, into the Company's
previously filed Registration Statement File Nos. 33-79398, 33-79396,
33-94792, 33-94770, 333-05621, 333-28955, 333-28957, 333-58023, 333-58021 and
333-83639.
/s/ Arthur Andersen LLP
Boston, Massachusetts
March 24, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 5,368,000
<SECURITIES> 0
<RECEIVABLES> 646,000
<ALLOWANCES> 0
<INVENTORY> 389,000
<CURRENT-ASSETS> 6,453,000
<PP&E> 406,000
<DEPRECIATION> 84,000
<TOTAL-ASSETS> 7,496,000
<CURRENT-LIABILITIES> 1,963,000
<BONDS> 0
0
0
<COMMON> 84,000
<OTHER-SE> 4,504,000
<TOTAL-LIABILITY-AND-EQUITY> 7,496,000
<SALES> 2,263,000
<TOTAL-REVENUES> 2,266,000
<CGS> 1,404,000
<TOTAL-COSTS> 6,376,000
<OTHER-EXPENSES> 115,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134,000
<INCOME-PRETAX> (3,994,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,994,000)
<DISCONTINUED> (539,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,533,000)
<EPS-BASIC> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
