FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1998
..................
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ................ to ....................
Commission File Number 0-23776
...................................
HemaSure Inc.
..........................................................
(Exact name of registrant as specified in its charter)
Delaware 04-3216862
............................................. ...............................
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization ) Identification Number)
140 Locke Drive, Marlborough, Massachusetts 01752
............................................................
(Address of principal executive offices)
(Zip Code)
(508) 490-9500
............................................................
(Registrant's telephone number, including area code)
Not Applicable
............................................................
(Former name, former address and former fiscal year,
if changed since last report)
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
----- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 9,042,850
-------------------------------------- ---------
Class Outstanding at November 6, 1998
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HemaSure Inc.
INDEX
Page
----
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997 3
Consolidated Statements of Operations for the Three
and Nine Month Periods Ended September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Periods
Ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II Other Information 13
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
HemaSure Inc.
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) September 30, December 31,
1998 1997
------------------- --------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,239 $ 1,274
Marketable securities - 6882
Accounts receivable - 436
Inventories 309 158
Deferred financing costs 600
Prepaid expenses 384 347
----------------- ------------------
3,532 9,097
Property and equipment, net 1,504 1,478
Deferred financing costs - long term 521
Other assets 32 32
----------------- ------------------
Total assets $ 5,589 $ 10,607
================= =================
LIABILITIES AND STOCKHOLDERS (DEFICIT)
Current liabilities:
Accounts payable $ 1,128 $ 876
Accrued expenses 1,448 1,846
Note payable - current portion 38 37
Capital lease obligations - current portion 273 267
----------------- ------------------
Total current liabilities 2,887 3,026
Capital lease obligations 99 289
Note payable 3,053 72
Convertible subordinated note payable - 8,687
Total liabilities 6,039 12,074
Stockholders' (deficit)
Common stock 90 82
Additional paid-in capital 70,771 60,878
Unearned compensation - (89)
Unrealized holding loss of available for sale marketable securities - (1)
Accumulated deficit (71,311) (62,337)
----------------- ------------------
Total stockholders' (deficit) (450) (1,467)
----------------- ------------------
Total liabilities and stockholders' (deficit) $ 5,589 $ 10,607
================= ==================
</TABLE>
The accompanying notes are an integral
part of the financial statements.
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HemaSure, Inc.
Consolidated Statements of Operations
For The Three and Nine Month Periods Ended
September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three-month periods Nine-month periods
(In thousands, except per share amounts) ended September 30, ended September 30,
---------------------------- -------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ - $ 522 $ 25 $ 1,590
Costs and expenses:
Cost of products sold - 626 657 2,505
Research & development 855 938 2,866 2,699
Legal expense related to patents 857 72 2,313 272
Selling, general and administrative 905 765 3,168 3,084
Restructuring charge - - - 1,215
-------------- ------------- ---------------- ---------------
Total costs and expenses 2,617 2,401 9,004 9,775
-------------- ------------- ---------------- ---------------
Loss from operations (2,617) (1,879) (8,979) (8,185)
Interest income 13 117 133 458
Interest expense (78) (374) (128) (1,042)
Other income (expense) - 2,499 - 2,498
-------------- ------------- ---------------- ---------------
Net (loss) income $ (2,682) $ 363 $ (8,974) $ (6,271)
============== ============= =============== ==============
Net (loss) income per share - basic and diluted $ (0.30) $ 0.04 $ (1.00) $ (0.77)
============== ============= ================ ===============
Weighted average number of shares of common stock 9,043 8,128 9,014 8,122
outstanding - basic and diluted
</TABLE>
The accompanying notes are an integral
part of the financial statements.
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HemaSure Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) Nine-month periods
ended September 30,
---------------------------------------
1998 1997
------------------ -------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8,974) $ (6,271)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 446 568
Accretion of marketable securities discount 20 7
Loss on disposal of equipment 5 -
Changes in operating assets and liabilities:
Net assets of discontinued business - 350
Accounts receivable 436 33
Inventories (151) (411)
Prepaid expenses (37) 179
Accounts payable and accrued expenses (146) (499)
------------------ -------------------
Net cash used in operating activities (8,401) (6,044)
------------------ -------------------
Cash flows from investing activities:
Purchase of available-for-sale marketable securities (20,255) (77,642)
Maturities of available-for-sale marketable securities 27,117 82,217
Unrealized holding loss of available-for-sale marketable securities 1 2
Additions to property and equipment (338) (130)
Decrease in other assets - (13)
------------------ -------------------
Net cash provided from investing activities 6,525 4,434
------------------ -------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 43 52
Borrowing from notes payable arrangements 3,000 140
Repayments of notes payable (18) (21)
Repayments of capital lease obligations (184) (174)
------------------ -------------------
Net cash provided from (used for) financing activities 2,841 (3)
------------------ -------------------
Net increase (decrease) in cash and cash equivalents 965 (1,613)
Cash and cash equivalents at beginning of period 1,274 5,527
------------------ -------------------
Cash and cash equivalents at end of period $ 2,239 $ 3,914
================== ===================
</TABLE>
The accompanying notes are an integral
part of the financial statements.
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HemaSure Inc.
Notes To Consolidated Financial Statements
1. Basis of Presentation
The accompanying financial statements are unaudited and have been prepared
on a basis substantially consistent with the audited financial statements.
Certain information and footnote disclosures normally included in the
Company's annual statements have been condensed or omitted. The condensed
interim financial statements, in the opinion of management, reflect all
adjustments (including normal recurring accruals) necessary for a fair
statement of the results for the interim periods ended September 30, 1998
and 1997.
The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the fiscal year.
These interim financial statements should be read in conjunction with the
audited financial statements for the year ended December 31, 1997, which
are contained in the Company's Annual Report on Form 10-K (File No.
0-23776), filed with the Securities and Exchange Commission on March 31,
1998.
2. Inventories
Inventories consist of the following:
September 30, 1998 December 31, 1997
------------------ -----------------
Raw Materials $ 164 $ -
Work in progress - -
Finished goods 145 158
---- ----
$ 309 $ 158
===== =====
3. Property and Equipment
Property and equipment consists of the following:
September 30, 1998 December 31, 1997
------------------ -----------------
Property and equipment $ 2,870 $ 3,176
Less accumulated depreciation and
amortization (1,766) (1,771)
-------- -------
1,104 1,405
Construction in progress 400 73
------- --
$ 1,504 $ 1,478
======= =======
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4. Convertible subordinated note payable
In January 1997, the Company entered into a Restructuring Agreement of the
debt related to its acquisition of Novo Nordisk's plasma products unit. The
amount included in the balance sheet at December 31, 1997 includes the
effect of the Restructuring Agreement net of a $3,000,000 contingency
amount to reflect the most probable result of the Company's decision to
exit the plasma business. On January 6, 1998, $8,687,000 of debt, which the
Company believes was the entire amount outstanding as of the date of
conversion, was converted into Common Stock at a conversion price of $10.50
per share, or 827,375 shares, pursuant to the terms of the note. The holder
of the note has contested the conversion of the note, including the
forgiveness of the $3,000,000 amount.
5. Notes Payable
In September 1998, the Company completed a $5 million revolving line of
credit arrangement with a commercial bank. As of September 30, 1998,
$3,000,000 was outstanding under the line. The remaining $2 million will be
available to borrow only if the Company achieves certain operational
corporate milestones (of which there can be no assurance), including
clearance of its 510(K) Pre-Market Notification Application currently with
the U.S. Food and Drug Administration (the "FDA"). The revolving line of
credit, which expires in August 2000, will be used to help finance the
Company's working capital requirements and for general corporate purposes.
Amounts borrowed under the line bear interest at the bank's prime lending
rate plus 1/2% payable quarterly in arrears. The bank has a first lien on
all assets of the Company including its intellectual property.
Sepracor, the Company's largest shareholder has guaranteed to repay amounts
borrowed under the line of credit. In exchange for the guarantee, the
Company granted to Sepracor warrants to purchase up to 1,700,000 shares of
the Company's common stock at a price of $0.69 per share, of which
1,000,000 is exercisable upon issuance and 700,000 warrants will be
exercisable in the event the Company draws down in excess of $3,000,000
under the line of credit. The warrants will expire in the year 2003 and
have certain registration rights associated with them. HemaSure has placed
a value of $1,200,000 on the 1,000,000 warrants as of the date of the final
agreement and will record a charge of $50,000 per month over the term of
the line of credit. Should the Company borrow in excess of $3,000,000 and
issue the additional 700,000 warrants, it will value those warrants using
the same methods and record a monthly charge from the date of issuance to
the end of the term of the line of credit agreement.
6. Net loss per share--basic and diluted
The net loss per share is based on the weighted average number of shares of
common stock outstanding during each period. Common equivalent shares are
not included in the per share calculation where the effect of their
inclusion would be antidilutive.
7. Litigation
The Company is a defendant in two lawsuits brought by Pall Corporation
("Pall"). In complaints filed in February 1996 and November 1996, Pall
alleged that HemaSure's manufacture, use and/or sale of the LeukoNet
product infringes upon three patents held by Pall.
On October 14, 1996 in connection with the first action concerning U.S.
Patent No. 5,451,321, ( the "321 patent") the Company filed for summary
judgment of noninfringement. Pall filed a
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cross motion for summary judgment of infringement at the same time.
In October 1997 the Eastern District of New York granted in part Pall's
summary judgment motion relating to the '321 patent. The Company has agreed
to terminate the manufacture, use, sale and offer for sale of the filter
subject to the court's order. In April 1998, the Eastern District of New
York granted HemaSure's request to appeal the October 1997 decision. The
appeal of the October 1997 decision is currently pending before the U.S.
Court of Appeals for the Federal Circuit.
With respect to the second action concerning U.S. Patent No. 4,952,572 (the
"572 patent"), the Company has answered the complaint stating that it does
not infringe any claim of the asserted patents and has filed for summary
judgment of noninfringement. Pall filed a cross motion for summary judgment
of infringement at the same time. Further, the Company has counterclaimed
for declaratory judgment of invalidity, noninfringement and
unenforceability of the '572 patent.
The Company believes, based on advice of its patent counsel, that a
properly informed court should conclude the manufacture, use and/or sale by
the Company or its customers of the LeukoNet product did not infringe any
valid enforceable claim of the three Pall patents. However, there can be no
assurance that the Company will prevail in the pending litigations, and an
adverse outcome in a patent infringement action would have a material
adverse effect on the Company's future business and operations.
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Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Overview
HemaSure was established in December 1993 as a wholly-owned subsidiary of
Sepracor Inc. ("Sepracor"). Prior to that date, its business was conducted as
part of Sepracor's bioprocessing division. Effective as of January 1, 1994, in
exchange for 3,000,000 shares of Common Stock, Sepracor transferred to HemaSure
its technology relating to the manufacture, use and sale of medical devices.
The Company is utilizing its proprietary filtration technologies to develop
products to increase the safety of donated blood and to improve certain blood
transfusion procedures. The Company's products are designed for use in blood
centers and hospital blood banks worldwide. From inception through fiscal 1995,
HemaSure has sold non-blood related filter products primarily to Sepracor. In
February 1998, the Company determined to discontinue manufacturing its LeukoNet
System and focus on the completion of development and market introduction of its
next-generation red cell filtration product, the r\LS red blood cell
leukoreduction system. All of the Company's planned blood-related products are
in the research and development state, and certain of these products may require
preclinical and clinical testing prior to submission of any regulatory
application for commercial use. The Company's success will depend on development
and commercial acceptance of these blood-related products and its ability to
raise capital through strategic partnerships, public or private equity and/or
debt financing.
The Company is subject to risks common to companies in the medical technology
industry, including, but not limited to, development by the Company or its
competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology and compliance with FDA regulations, as
well as risks associated with the potential inability to raise capital.
Three and nine months ended September 30, 1998 and 1997
The Company did not record any revenues for the quarter ended September 30, 1998
compared to revenues of $522,000 in the same period in 1997 due to the Company's
determination to discontinue the manufacture of its LeukoNet System. Revenues
were $25,000 for the first nine months of 1998 compared to $1,590,000 for the
first nine months of 1997. Revenues for all periods presented represent sales of
the Company's LeukoNet system.
Total cost of products sold exceeded total product sales in all periods due to
the high costs associated with low-volume production.
Research and development expenses were $855,000 in the second quarter of 1998,
compared to $938,000 in the second quarter of 1997, and were $2,866,000 in the
nine months ended September 30, 1998 compared to $2,699,000 in the nine months
ended September 30, 1997. The decrease in the comparative three month period is
primarily attributable to the near completion of development of the Company's
next-generation red cell filtration system, the r\LS system. The increase in the
comparative nine month periods is primarily attributable to costs associated
with the development of the Company's r\LS system.
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Legal expenses related to patents were $857,000 in the second quarter of 1998
compared to $72,000 in the second quarter of 1997, and were $2,313,000 in the
nine months ended September 30, 1998 compared to $272,000 in the nine months
ended September 30, 1997. The increase in both the three and nine month periods
is due to costs associated with defending the Company's patent position in its
outstanding litigation with Pall Corp.
Selling, general and administrative expenses were $905,000 in the three months
ended September 30, 1998 compared to $765,000 in the three months ended
September 30, 1997, and were $3,168,000 in the first nine months of 1998,
compared to $3,084,000 in the first nine months of 1997. The increase in both
the three and nine month periods is due primarily to increases in sales and
marketing costs associated with getting prepared to market and sell the
Company's r\LS system. Sales and marketing costs may continue to increase in
future periods from current levels as the Company continues its efforts to
expand sales of its blood filtration products.
In the nine month period ended September 30, 1997, the Company recorded a one
time charge of $1,215,000 for severance and related charges in connection with
executive management departures pursuant to HemaSure's decision to focus on its
core blood filtration business.
Interest income for both the three and nine months ended September 30, 1998
decreased compared to the three and nine months ended September 30, 1997 due to
lower average cash and marketable securities balances available for investment.
Interest expense for the three and nine month periods ended September 30, 1998,
decreased compared to the same periods in 1997 related to a convertible
subordinated note payable which is not in existence in 1998 and a lower average
capital lease obligation balance.
Liquidity and Capital Resources
The net increase in cash and cash equivalents for the nine months ended
September 30, 1998 was $965,000. This increase is attributable primarily to net
cash provided from investing activities of $6,525,000 and net cash provided from
financing activities of $2,841,000, offset in part by net cash used in operating
activities of $8,401,000.
Net cash provided from investing activities relates to available-for-sale
marketable securities investing activities of $6,862,000 offset in part by
additions to property and equipment of $338,000. Net cash provided from
financing activities is primarily attributable to borrowings under the Company's
line of credit arrangement of $3,000,000 offset in part by repayments of capital
lease obligations of $184,000. Net cash used in operating activities is
primarily attributable to the net loss of $8,974,000 and a reduction in
inventories of $151,000 offset in part by depreciation and amortization of
$446,000 and the reduction of accounts receivable of $436,000.
In September 1998, the Company completed a $5 million revolving line of credit
arrangement with a commercial bank. As of September 30, 1998, $3 million was
outstanding under the line. The remaining $2 million will be available to borrow
only if the Company achieves certain corporate milestones (of which there can be
no assurance), including clearance of its 510(K) Pre-Market Notification
Application currently with the FDA. The revolving line of credit, which expires
in August 2000, will be used to help finance the Company's working capital
requirements and for general corporate purposes. Amounts borrowed under the line
bear interest at the banks prime lending rate plus 1/2% payable quarterly in
arrears. The bank has a first lien on all assets of the Company including its
intellectual property.
Sepracor, the Company's largest shareholder has guaranteed to repay amounts
borrowed under the line
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of credit. In exchange for the guarantee, the Company granted to Sepracor
warrants to purchase up to 1,700,000 shares of the Company's common stock at a
price of $0.69 per share, of which 1,000,000 is exercisable upon issuance and
700,000 warrants will be exercisable in the event the Company draws down in
excess of $3 million under the line of credit. The warrants will expire in the
year 2003 and have certain registration rights associated with them. HemaSure
has placed a value of $1,200,000 on the 1,000,000 warrants as of the date of the
final agreement and will record a charge of $33,000 per month over the term of
the line of credit. Should the Company borrow in excess of $3,000,000 and issue
the additional 700,000 warrants, it will value those warrants using the same
methods and record a monthly charge from the date of issuance to the end of the
term of the line of credit agreement.
In January 1997, the Company entered into a Restructuring Agreement of the debt
related to its acquisition of Novo Nordisk's plasma products unit. The amount
included in the balance sheet at December 31, 1997 includes the effect of the
Restructuring Agreement net of a $3,000,000 contingency amount to reflect the
most probable result of the Company's decision to exit the plasma business. On
January 6, 1998, $8,687,000 of debt, which the Company believes was the entire
amount outstanding as of the date of conversion, was converted into Common Stock
at a conversion price of $10.50 per share, or 827,375 shares, pursuant to the
terms of the note. The holder of the note has contested the conversion of the
note, including the forgiveness of the $3,000,000 amount.
The Company believes based on its current operating plan, that its available
cash and marketable securities balances will be sufficient to fund the Company's
operations through 1998. If and when the remaining $2,000,000 becomes available
to the Company under its line of credit (of which there can be no assurance),
the Company expects that such funds will be sufficient to fund the Company's
operations for approximately two months from the date of funding. The Company
expects to continue to evaluate the need for additional capital over the
remainder of 1998 in order to continue to fund working capital and general
corporate financing requirements. Possible sources of such additional capital
could include strategic partnerships, public or private equity and/or debt
financing. No assurance can be given, however, that the Company will be able to
obtain additional financing on terms acceptable to the Company, if at all.
Should the Company fail to obtain any such financing, or to obtain such
financing on terms favorable to the Company, the Company may be unable to
continue or complete the development of its proposed products and/or market such
products successfully, or to continue its current operations as presently
conducted, if at all, beyond 1998. The Company's cash requirements may vary
materially from those now planned because of factors such as successful
development of products, results of product testing, approval process at the FDA
and similar foreign agencies, commercial acceptance of its products, patent
developments and the introduction of competitive products.
Readiness for Year 2000
The Year 2000 presents potential concerns for business and consumer computing.
The consequences of this issue may include systems failures and business process
interruption. It may also include additional business and competitive
differentiation. Aside from the well-known calculation problems with the use of
2-digit date formats as the year changes from 1999 to 2000, the Year 2000 is a
special case leap year and in many organizations using older technology, dates
were used for special programmatic functions.
The Year 2000 issue may affect HemaSure's internal systems, including
information technology (IT) and non-IT systems. HemaSure's management has formed
a committee which is presently engaged in an ongoing assessment of the readiness
of its systems for handling the Year 2000. Although the assessment is still
underway, management currently believes that it will be successful in
identifying and resolving any potential deficiencies in its IT and non-IT system
with respect to the Year 2000 issue by June 1999 and that all material systems
will be compliant by the Year 2000 and that the cost to address
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the issues is not material. Nevertheless, HemaSure expects to assess its need to
create contingency plans during 1999 for certain internal systems in the event
management determines that such contingency plans may become warranted.
All organizations dealing with the Year 2000 must address the effect this issue
will have on their third-party supply chain. HemaSure plans to also undertake
steps to identify whether its vendors have sufficiently identified and are
taking steps to address the Year 2000 issue. Management is presently formulating
a survey and plan for working with key third-parties to understand their ability
to continue providing services and products through the change to 2000. HemaSure
will work directly with its key vendors, distributors, and resellers, and
coordinate its action with respect to the Year 2000 issue with them if
necessary, to avoid any business interruptions in 2000. For these key
third-parties, contingency plans may be required.
HemaSure's management believes the impact of the Year 2000 will not cause any
material disruptions in HemaSure's operations. However, the impact of such
potential disruptions is difficult to discern and nonetheless remains a risk to
be considered in evaluating the financial prospects of HemaSure.
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PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a defendant in two lawsuits brought by Pall Corporation
("Pall"). In complaints filed in February 1996 and November 1996, Pall
alleged that HemaSure's manufacture, use and/or sale of the LeukoNet
product infringes upon three patents held by Pall.
On October 14, 1996 in connection with the first action concerning
U.S. Patent No. 5,451,321 (the "'321 patent") the Company filed for
summary judgment of noninfringement. Pall filed a cross motion for
summary judgment of infringement at the same time.
In October 1997 the Eastern District of New York granted in part
Pall's summary judgment motion relating to the '321 patent. The
Company has agreed to terminate the manufacture, use, sale and offer
for sale of the filter subject to the court's order. In April 1998,
the Eastern District of New York granted HemaSure's request to appeal
the October 1997 decision. The appeal of the October 1997 decision is
currently pending before the U.S. Court of Appeals for the Federal
Circuit.
With respect to the second action concerning U.S. Patent No. 4,952,572
(the "'572 patent"), the Company has answered the complaint stating
that it does not infringe any claim of the asserted patents and has
filed for summary judgment of noninfringement. Pall filed a cross
motion for summary judgment of infringement at the same time. Further,
the Company has counterclaimed for declaratory judgment of invalidity,
noninfringement and unenforceability of the '572 patent.
The Company believes, based on advice of its patent counsel, that a
properly informed court should conclude the manufacture, use and/or
sale by the Company or its customers of the LeukoNet product did not
infringe any valid enforceable claim of the three Pall patents.
However, there can be no assurance that the Company will prevail in
the pending litigations, and an adverse outcome in a patent
infringement action would have a material adverse effect on the
Company's future business and operations.
Items 2 - 5. None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
2.1** Heads of Agreement, dated as of January 31, 1996,
between the Company and Novo Nordisk A/S.
3.1* Certificate of Incorporation of the Company.
3.2* By-laws of the Company.
4.1* Specimen Certificate for shares of Common Stock, $.01
par value, of the Company.
4.2*** Registration Rights Agreement, dated January 23, 1997,
by and among the Company and Novo Nordisk A/S.
4.3 Registration Rights Agreement, dated as of September 15,
1998, between the Company and Sepracor.
4.4 Warrant Agreement, dated as of September 15, 1998,
between the
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Company and Sepracor.
4.5 Warrant Certificate.
10.1 Revolving Credit and Security Agreement, dated as of
September 15, 1998, between the Company and Fleet
National Bank.
10.2 Intellectual Property Security Agreement, dated as of
September 15, 1998, between the Company and Fleet
National Bank.
10.3 Promissory Note, dated as of September 15, 1998, made by
the Company in favor of Fleet National Bank.
10.4 Exclusive Distribution Agreement, dated as of August 14,
1998, between the Company and COBE BCT, Inc.
10.5 Amended and Restated Master Strategic Alliance Agreement
between the Company and the American Red Cross.
27.1 Financial Data Schedule
-----------
* Incorporated herein by reference to the Company's
Registration Statement on Form S-1, as amended (File No.
33-75930).
** Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1995.
*** Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1996.
b) Reports on Form 8-K - None
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SIGNATURES
Pursuant to requirements 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.
HemaSure Inc.
Date: November 16, 1998 /s/ John F. McGuire
---------------------
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 16, 1998 /s/ James B. Murphy
----------------------
Sr. Vice President Finance and Administration
(Principal Financial Officer)
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INDEX TO EXHIBITS
-----------------
Exhibit
2.1** Heads of Agreement, dated as of January 31, 1996,
between the Company and Novo Nordisk A/S.
3.1* Certificate of Incorporation of the Company.
3.2* By-laws of the Company.
4.1* Specimen Certificate for shares of Common Stock, $.01
par value, of the Company.
4.2*** Registration Rights Agreement, dated January 23, 1997,
by and among the Company and Novo Nordisk A/S.
4.3 Registration Rights Agreement, dated as of September 15,
1998, between the Company and Sepracor.
4.4 Warrant Agreement, dated as of September 15, 1998,
between the Company and Sepracor.
4.5 Warrant Certificate.
10.1 Revolving Credit and Security Agreement, dated as of
September 15, 1998, between the Company and Fleet
National Bank.
10.2 Intellectual Property Security Agreement, dated as of
September 15, 1998, between the Company and Fleet
National Bank
10.3 Promissory Note, dated as of September 15, 1998, made by
the Company in favor of Fleet National Bank.
10.4 Exclusive Distribution Agreement, dated as of August 14,
1998, between the Company and COBE BCT, Inc.
10.5 Amended and Restated Master Strategic Alliance Agreement
between the Company and the American Red Cross.
27.1 Financial Data Schedule
---------
* Incorporated herein by reference to the Company's
Registration Statement on Form S-1, as amended (File No.
33-75930).
** Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1995.
*** Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1996.
776336.3
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of September 15,
1998, by and between Sepracor Inc., a Delaware corporation ("Sepracor"), and
HemaSure Inc., a Delaware corporation (the "Company").
PRELIMINARY STATEMENT
WHEREAS, pursuant to a Warrant Agreement, dated September 15, 1998, by and
between the parties hereto (the "Warrant Agreement"), the Company issued to
Sepracor warrants to purchase one million seven hundred thousand (1,700,000)
shares (the "Shares") of common stock, par value $0.01 per share (the "Common
Stock"), of the Company; and
WHEREAS, the Company and Sepracor desire to provide for certain
arrangements with respect to the registration of the Shares under the Securities
Act of 1933, as amended.
NOW THEREFORE, in consideration of these premises, and the respective
promises and covenants contained herein, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1 Certain Definitions. For purposes of this Agreement,
capitalized terms used herein and not defined elsewhere herein shall have the
following meanings:
"Act" means the United States Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission issued
under the Act, as they each may, from time to time, be in effect.
"Commission" means the United States Securities and Exchange Commission, or
any other Federal agency at the time administering the Act.
"Common Stock" means the shares of common stock, par value $0.01 per share,
of the Company.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission issued under the Exchange Act, as they each may, from time to time,
be in effect.
"Indemnified Party" has the meaning described in Section 2.4(c) below.
728544.4
<PAGE>
"Indemnifying Party" has the meaning described in Section 2.4(c) below.
"Registration Statement" means a registration statement filed by the
Company with the Commission for a public offering and sale of its equity
securities (other than a registration statement on Form S-8 or Form S-4, or
their successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Registration Expenses" means all expenses incurred by the Company in
complying with Section 2.1 and Section 2.2, including, without limitation, all
registration and filing fees, exchange listing fees, printing expenses, fees and
disbursements of counsel for the Company, state Blue Sky fees and expenses, and
the expense of any special audits incident to or required by any such
registration, but excluding underwriting discounts on the Registrable Shares,
selling commissions on the Registrable Shares, transfer taxes and the fees and
expenses of any selling Stockholders', including such selling Stockholders' own
counsel, which shall be borne by the participating Stockholders in proportion to
the number of Registrable Shares offered by each.
"Registrable Shares" means (i) the Shares, and (ii) any other shares of
Common Stock issued in respect thereof (because of stock splits, stock
dividends, reclassifications, recapitalizations, or similar events); provided,
that shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares (i) when they have been sold, transferred or otherwise
disposed of or exchanged pursuant to a registration statement under the Act,
(ii) when such shares are eligible for resale pursuant to Rule 144 (k) (or its
successor) or in single transaction pursuant to Rule 144(e) (or its successor)
under the Act, or (iii) upon any sale, transfer or other disposition in any
manner to any person or entity which, by virtue of Section 2.10 of this
Agreement, is not entitled to the rights provided by this Agreement.
"Stockholders" means Sepracor and any person or entities to whom the rights
granted under this Agreement are validly transferred by Sepracor, and their
permitted successors or assigns pursuant to Section 2.10 hereof.
ARTICLE 2.
REGISTRATION RIGHTS
Section 2.1 Required Registrations.
(a) Commencing any time after September 15, 1999, a Stockholder or
Stockholders may request, in writing (which request shall state the number of
Registrable Shares to be so registered, the intended method of distribution and
a certification as to the market value of such shares as described below ), that
the Company effect the registration of Registrable Shares owned by such
Stockholder or Stockholders having an aggregate offering price of at least
$1,500,000 (based on the last reported sale price for the Common Stock on the
business day preceding the date of such written request, as reported by the OTC
Bulletin Board or any other exchange or market on which the Common Stock is then
listed or included for quotation). Upon receipt of any such request, the Company
shall within 10 days give written notice of such proposed registration to all
Stockholders. Such Stockholders shall have the right, by giving written notice
to the Company within 30 days after the Company provides its notice, to elect
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728544.4
<PAGE>
to have included in such registration such of their Registrable Shares as such
Stockholders may request in suchnotice of election; provided that if the
underwriter (if any) managing the offering determines that, because of marketing
factors, all of the Registrable Shares requested to be registered by all
Stockholders may not be included in the offering, then all Stockholders who have
requested registration shall participate in the registration pro rata based upon
the number of Registrable Shares which they have requested to be so registered,
provided, however, that the number of Registrable Shares shall not be reduced
unless all securities that are not Registrable Shares are first excluded from
the underwriting. Thereupon, the Company shall file a Registration Statement
under the Act, to the extent necessary to permit the sale or other disposition
of the subject Registrable Shares in accordance with the intended method of
distribution specified in the written registration request.
(b) The Company shall not be required to effect more than one
registration pursuant to paragraph (a) above. In addition, the Company shall not
be required to effect any registration within six months after the effective
date of any other Registration Statement registering shares to be sold by the
Company.
(c) If at any time any request to register Registrable Shares pursuant
to this Section 2 is received by the Company, the Company is engaged in, or the
Board of Directors of the Company has resolved to initiate within 30 days of the
time of the request for a registration as provided in this Section 2, a
registered public offering as to which the Stockholders are entitled to include
Registrable Shares pursuant to Section 2.2, or is engaged in any activity other
than such a public offering which, in the good faith determination of the
Company's Board of Directors, would be materially adversely affected by the
requested registration, then the Company may at its option direct that such
request be delayed for a period not in excess of 120 days from (i) the earlier
of (1) the effective date of such offering and (2) the 60th day after the filing
of such offering, or (ii) the date of commencement of such other material
activity, as the case may be, such right to delay a request to be exercised by
the Company not more than once in any consecutive 12-month period.
Section 2.2 Incidental Registration.
(a) Subject to Section 2.2(c) below, whenever the Company proposes to
file a Registration Statement at any time and from time to time (including, to
the extent the Company is so permitted, a registration effected by the Company
for stockholders other than the Stockholder (a "Registration"), it will, prior
to such filing, give written notice to all Stockholders of its intention to do
so and, upon the written request of a Stockholder or Stockholders given within
10 days after the Company provides such notice (which request shall state the
number of Registrable Shares to be registered and the intended method of
distribution of such Registrable Shares), the Company shall, subject to Section
2.2(b) below, cause all Registrable Shares which the Company has been requested
by such Stockholder or Stockholders to be included in the Registration; provided
that the Company shall have the right to postpone or withdraw any registration
effected pursuant to this Section 2.2 without obligation or liability to any
Stockholder.
(b) In connection with any Registration under this Section 2.2
involving an underwritten offering, the Company shall not be required to include
any Registrable Shares in such Registration unless the holders thereof accept
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it. If in the opinion of the managing underwriter
employed by the Company for the distribution of equity securities it shall
determine, in its sole discretion, that the registration of all, or part of, the
Registrable Shares which the holders have requested to be included would
interfere with the
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728544.4
<PAGE>
successful marketing of the proposed public offering, then the Company shall be
required to include in the Registration only that number of Registrable Shares,
if any, which the managing underwriter believes may be sold without interfering
with the successful marketing of the proposed public offering. If the number of
Registrable Shares to be included in Registration in accordance with the
foregoing is less than the total number of shares which the holders of
Registrable Shares have requested to be included, then the holders of
Registrable Shares who have requested registration and other holders of
securities entitled to include them in such Registration shall participate in
the underwritten offering pro rata based upon their total ownership of shares of
Common Stock of the Company. If any holder would thus be entitled to include
more shares than such holder requested to be registered, the excess shall be
allocated among other requesting holders pro rata based upon their total
ownership of shares of Common Stock of the Company.
(c) The Company shall not be required to effect more than two (2)
registrations pursuant to paragraph (a) above.
Section 2.3 Registration Procedures.
(a) If and whenever the Company is required by the provisions of this
Agreement to effect the registration of any of the Registrable Shares under the
Act, the Company shall:
(i) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective for such period of time (not
exceeding three months) as may be necessary to effect the sale or other
disposition of all Registrable Shares covered by such Registration
Statement or until the Registrable Shares covered thereby cease to be
Registrable Shares, whichever is sooner;
(ii) as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to
keep the Registration Statement effective for the period described in
Section 2.3(a)(i) above;
(iii) as expeditiously as possible furnish to each selling Stockholder
such reasonable numbers of copies of the prospectus, including a
preliminary prospectus, and such other documents as each selling
Stockholder may reasonably request in order to facilitate the public sale
or other disposition of the Registrable Shares owned by such selling
Stockholder;
(iv) as expeditiously as possible register or qualify the Registrable
Shares covered by the Registration Statement under the securities or Blue
Sky laws of such states as the selling Stockholder shall reasonably
request; provided, however, that (x) the Company shall not for any purpose
be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or execute a general consent to
service of process in any jurisdiction and (y) if the Company is offering
securities for its own account, it need not register or qualify under the
securities or Blue Sky laws of any jurisdiction in which the managing
underwriter has no intention of offering or selling securities for the
account of the Company (except that the Company will use its best efforts
to register or qualify Registrable Securities in such additional
jurisdiction as any Stockholder may request subject to the limitation of
clause (x) and at such Stockholder's expense);
-4-
728544.4
<PAGE>
(v) if the distribution is to be made by means of an underwritten
public offering and subject to receiving reasonable assurances of
confidentiality, make available for inspection by the underwriters and its
counsel or other advisors, such financial and other information and books
and records of the Company, and cause the officers, directors, employees,
counsel and independent certified public accountants of the Company to
respond to such inquiries as shall be reasonably necessary, in the judgment
of such underwriters' counsel, to conduct a reasonable investigation within
the meaning of Section 11 of the Act; and
(vi) use best efforts to make available to its security holders, as
soon as reasonably practicable, an earnings statement covering a period of
at least twelve months which shall satisfy the provisions of Section 11(a)
of the Act and Rule 158 thereunder.
(b) Each selling Stockholder of Registrable Shares agrees that, upon
receipt of any notice from the Company of (i) any request by the Commission for
amendments or supplements to a Registration Statement or related prospectus
covering any of such selling Stockholder's Registrable Shares, (ii) the issuance
by the Commission of any stop order suspending the effectiveness of a
Registration Statement covering any of such selling Stockholder's Registrable
Shares or the initiation of any proceedings for that purpose, (iii) the receipt
by the Company of any notification with respect to the suspension of the
qualification of any Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (iv) the happening
of any event that requires the making of any changes in the Registration
Statement covering any of such selling Stockholder's Registrable Shares so that
it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or that any related prospectus will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading, and (v) the Company's reasonable
determination that a post-effective amendment to a Registration Statement
covering any of such selling Stockholder's Registrable Shares or a supplement to
any related prospectus is required under the Act; such selling Stockholder will
forthwith discontinue disposition of such Registrable Shares until it is advised
in writing by the Company that the use of the applicable prospectus (as amended
or supplemented, as the case may be) and disposition of the Registrable Shares
covered thereby pursuant thereto may be resumed provided, however, (x) that such
selling Stockholder shall not resume its disposition of Registrable Shares
pursuant to such Registration Statement or related prospectus unless it has
received notice from the Company that such Registration Statement or amendment
has become effective under the Act and has received a copy or copies of the
related prospectus (as then amended or supplemented, as the case may be) unless
the Registrable Shares are then listed on a national securities exchange and the
Company has advised such selling Stockholder that the Company has delivered
copies of the related prospectus, as then amended or supplemented, in
transactions effected upon such exchange, subject to any subsequent receipt by
such selling Stockholder from the Company of notice of any of the events
contemplated by Stock clauses (i) through (iv) of this paragraph, and, (y) if so
directed by the Company, such holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Stockholder's possession, of the prospectus covering such Registrable Shares
current at the time of receipt of such notice.
Section 2.4 Allocation of Expenses. The Company will pay all Registration
Expenses of all Registrations under this Agreement.
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728544.4
<PAGE>
Section 2.5 Indemnification.
(a) In the event of any Registration of any of the Registrable Shares under
the Act pursuant to this Agreement, the Company will indemnify and hold harmless
the seller of such Registrable Shares, and each other person, if any, who
controls such seller within the meaning of the Act or the Exchange Act against
any losses, claims, damages or liabilities, joint or several, to which such
seller or controlling person may become subject under the Act, the Exchange Act,
state securities or Blue Sky laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement of any material fact contained in any Registration
Statement under which such Registrable Shares were registered under the Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arise out of or are based upon the omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and, subject to Section 2.5(c) below, the Company will reimburse such seller and
each such controlling person for any legal or any other expenses reasonably
incurred by such seller or controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
untrue statement or omission made in such Registration Statement, preliminary
prospectus or final prospectus, or any such amendment or supplement, in
conformity with information furnished to the Company, in writing, by or on
behalf of such seller or controlling person for use in the preparation thereof
or inclusion therein.
The indemnity provisions in this Section 2.5(a) are subject to the
condition that, insofar as they related to any untrue statement or omission made
in a preliminary prospectus or prospectus but eliminated or remedied in a final
prospectus or an amended or supplemented prospectus on file with the Commission
at the time the Registration Statement becomes effective or any amended or
supplemented prospectus filed with the Commission pursuant to Rule 424 or any
successor provision under the Act (the "Final Prospectus"), such indemnity
provisions shall not inure to the benefit of any selling Stockholder of
Registrable Shares (x) if such selling Stockholder is not selling Registrable
Shares through an underwriter, if the Company has previously delivered copies of
such Final Prospectus to such selling Stockholder of Registrable Shares or, if
Registrable Shares are then listed on a national securities exchange, if the
Company has previously delivered copies of such Final Prospectus to such
national securities exchange in accordance with Rule 153 or any successor rule
under the Act, or (y) if such selling Stockholder is selling Registrable Shares
through an underwriter or underwriters, the Company has previously delivered
copies of such Final Prospectus to such underwriter or underwriters.
(b) In the event of any registration of any of the Registrable Shares under
the Act pursuant to this Agreement, each seller of Registrable Shares, severally
and not jointly, will indemnify and hold harmless the Company, each of its
directors and officers and each underwriter (if any), and each person, if any,
who controls the Company or any such underwriter within the meaning of the Act
or the Exchange Act, against any losses, claims, damages or liabilities, joint
or several, to which the Company, such directors and officers, underwriter or
controlling person may become subject under the Act, Exchange Act, state
securities or Blue Sky laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement of a material fact contained in any Registration
Statement under which such Registrable Shares were registered under the Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission to state a material
-6-
728544.4
<PAGE>
fact required to be stated therein or necessary to make the statement therein
not misleading, if the statement or omission was made in conformity with
information furnished in writing to the Company by or on behalf of such seller,
specifically for use in connection with the preparation of or inclusion in such
Registration Statement, prospectus, amendment or supplement; and shall reimburse
the Company, its directors and officers, and each such controlling person for
any legal or other expenses reasonably incurred by any of them in connection
with investigation or defending any such loss, claim, damage, liability or
action, provided, however, in no event shall Sepracor's indemnification
obligations hereunder exceed the gross proceeds (less any underwriting discounts
and commissions) from the sale of Registrable Shares by Sepracor. This indemnity
shall remain in full force and effect for the applicable statute of limitation
period regardless of any investigation made by or on behalf of the Company or
such controlling person and shall survive the transfer of shares.
(c) Each party entitled to indemnification under this Section 2.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any loss, claim, action, damage or liability as to which
indemnity may be sought, and shall permit the Indemnified Party to assume the
defense of any such claim or any litigation resulting therefrom; provided, that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnified Party of its obligations under this Section 2.5, except to the
extent that such failure to give notice prejudices the Indemnifying Party or
such Indemnifying Party is damaged by such delay. The Indemnified Party may
participate in such defense at such party's expense; provided, however, that the
Indemnifying Party shall pay such expense (but in no event shall the
Indemnifying Party be obligated to pay the fees and expenses of more than one
counsel for the Indemnified Party or Parties) if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential conflict of interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party.
(d) If the indemnification provided for in this Section 2.5 is finally
determined by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein or contribution is required under the Act in circumstances
for which indemnification is provided under this Section 2, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage, or expense (i) in such proportion
as is in appropriate to reflect the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits received by the Indemnifying Party on the one hand and the
Indemnified Party on the other but also the relative fault of the Indemnifying
Party and the Indemnified Party as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact related to information supplied by the
Indemnifying Party or by the Indemnified
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728544.4
<PAGE>
Party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission; provided, however,
that, in any such case, (A) no Stockholder will be required to contribute any
amount in excess of the gross proceeds of all Registrable Shares sold by it
pursuant to such Registration Statement, and (B) no person or entity guilty of
fraudulent misrepresentation, within the meaning of Section 11(f) of the Act,
shall be entitled to contribution from any person or entity who is not guilty of
such fraudulent misrepresentation.
(e) The obligations under this Section 2.5 shall survive the completion of
any offering of Registrable Shares in a registration statement.
Section 2.6 Indemnification with Respect to Underwritten Offering. (a) In
the event that Registrable Shares are sold pursuant to a Registration Statement
in an underwritten offering pursuant to Section 2.2, the Company agrees to enter
into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of the Company and
customary covenants and agreements to be performed by the Company, including
without limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering.
(b) No Stockholder may participate in any underwritten registration
pursuant to Section 2 hereunder unless such Stockholder (i) agrees to sell the
Registrable Shares which it proposes to sell in such underwritten registration
on the basis provided in any underwriting arrangements approved by the persons
entitled hereunder to approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, reasonable and customary indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements and provides such other information and documentation
as the Company or the underwriters may reasonably request in connection with
such underwritten registration.
Section 2.7 Information by Holder. Each holder of Registrable Shares
included in any Registration shall furnish to the Company such information
regarding such holder and the distribution proposed by such holder as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Article 2.
Section 2.8 "Stand-Off" Agreement. Each Stockholder, if requested by the
Company and an underwriter of Common Stock or other securities of the Company,
shall agree not to sell or otherwise transfer or dispose of any Registrable
Shares or other securities of the Company held by such Stockholder for a
specified period of time (not to exceed 180 days) following the effective date
of a Registration Statement; provided, that all officers and directors of the
Company enter into similar agreements. Such agreement shall be in writing in a
form satisfactory to the Company and such underwriter. The Company may impose
stop-transfer instructions with respect to the Registrable Shares or other
securities subject to the foregoing restriction until the end of the stand-off
period.
Section 2.9 Termination. [Intentionally Omitted].
Section 2.10 Transfer of Rights.
(a) The rights and obligations of Sepracor under this Agreement may be
transferred by Sepracor to another person or entity that is then a stockholder
of the Company, to any affiliate of the Company, to
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728544.4
<PAGE>
Sepracor or to any person or entity acquiring at least 10,000 Registrable Shares
(as adjusted for stock splits, stock dividends, recapitalization or similar
events).
(b) Any transferee (other than a stockholder who is already a party to an
agreement in form and substance similar to this Agreement) to whom rights under
this Agreement are transferred shall, as a condition to such transfer, deliver
to the Company a written instrument by which such transferee identifies itself,
gives the Company notice of the transfer of such rights, indicates the
Registrable Shares owned by it and agrees to be bound by the obligations imposed
upon Sepracor under this Agreement.
(c) A transferee to whom rights are transferred pursuant to this Section
2.10 may not again transfer such rights to any other person or entity, other
than as provided in this Section 2.10.
Section 2.11 Exchange Act Registration; Rule 144 Reporting. The Company
covenants and agrees that until such time as Sepracor no longer holds any
Registrable Shares (or such Registrable Shares otherwise cease to be Registrable
Shares) it will:
(a) use its best efforts to make and keep public information available, as
those terms are understood and defined in Rule 144 under the Act, even if the
Company subsequently ceases to be subject to such reporting requirements; and
(b) file with the Commission in a timely manner all reports and documents
required of the Company under the Act and the Exchange Act.
ARTICLE 3.
MISCELLANEOUS
Section 3.1 Notices. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing delivered to the parties at the addresses set forth
below (or such other address as may be provided by one party in a notice to the
other):
If to Sepracor:
Sepracor Inc.
111 Locke Drive
Marlborough, MA 01752
Facsimile: (508) 357-7495
Attention: Robert F. Scumaci, Senior Vice President
Finance and Administration
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728544.4
<PAGE>
with a copy to:
Hale & Dorr
60 State Street
Boston, MA 02109
Facsimile: (617) 526-5000
Attention: John Chory, Esq.
If to the Company:
HemaSure Inc.
140 Locke Drive
Marlborough, MA 01752
Facsimile: (508) 485-6045
Attention: John F. McGuire, President and
Chief Executive Officer
with a copy to:
Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, New York 10022
Facsimile: (212) 856-7816
Attention: Luke P. Iovine, III, Esq.
Notice delivered in accordance with the foregoing shall be effective (i) when
delivered, if delivered personally or by facsimile transmission, (ii) two days
after being delivered in the United States (properly addressed and all fees
paid) for overnight delivery service to a courier (such as Federal Express)
which regularly provides such service and regularly obtains executed receipts
evidencing delivery or (iii) five days after being deposited (properly addressed
and stamped for first-class delivery) in a daily serviced United States mail
box.
Section 3.2 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and permitted
assigns of the parties hereto.
Section 3.3 Headings. Article and Section headings used in this Agreement
are for convenience of reference only and shall not constitute a part of this
Agreement for any purpose or affect the construction of this Agreement.
Section 3.4 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be an original and all of which counterparts, taken together, shall constitute
one and the same Agreement. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
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<PAGE>
Section 3.5 Governing Law. This Agreement shall be deemed to have been made
in the State of New York and the validity of this Agreement, the construction,
interpretation and enforcement thereof, and the rights of the parties thereto
shall be determined under, governed by, and construed in accordance with the
internal laws of the State of New York, without regard to principles of
conflicts of law.
Section 3.6 Survival of Agreements, Representations and Warranties. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement.
Section 3.7 Arbitration. Any dispute or controversy arising under, out of,
in connection with, or in relation to this Agreement shall be determined and
settled by arbitration in New York by a panel of three members in accordance
with the commercial rules of the American Arbitration Association. Any award
rendered therein shall be final and binding upon the parties and their legal
representatives and judgment may be entered in any court having jurisdiction
thereof.
Section 3.8 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least 51% of the Registrable Shares; provided, that this Agreement may be
amended with the consent of the holders of less than all Registrable Shares (but
not less than 51% of such shares) only in a manner which affects all Registrable
Shares in the same fashion. No waivers of or exceptions to any term, condition
or provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
-11-
728544.4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
HEMASURE INC.
By: /s/ James B. Murphy
-------------------
Name: James B. Murphy
Title: Senior VP Finance and Administration
SEPRACOR INC.
By: /s/ Robert Scumaci
-------------------
Name: Robert Scumaci
Title: Senior VP Finance and Administration
-12-
728544.4
Exhibit 4.4
- --------------------------------------------------------------------------------
-------------
HEMASURE INC.
AND
SEPRACOR INC.
-------------
WARRANT AGREEMENT
Dated as of September 15, 1998
- --------------------------------------------------------------------------------
728537.3
<PAGE>
WARRANT AGREEMENT, dated as of September 15, 1998 (the "Agreement"),
between HEMASURE INC., a Delaware corporation ("HemaSure"), and SEPRACOR INC., a
Delaware corporation (the "Holder").
W I T N E S S E T H:
WHEREAS, HemaSure and the Holder are parties to a Revolving Credit
Arrangement (the "RCA") pursuant to which the Holder has guaranteed the payment
by the Company of all unpaid balances outstanding under the RCA at the end of
the term of the RCA; and
WHEREAS, in consideration of the Holder's guarantee under the RCA,
HemaSure agreed to issue to the Holder 1,700,000 warrants (individually a
"Warrant," and collectively, the "Warrants"), to purchase up to an aggregate of
1,700,000 shares of common stock, $.01 par value per share, of HemaSure ("Common
Stock"), upon the terms and conditions as set forth below.
NOW, THEREFORE, in consideration of these premises, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Grant. The Holder is hereby granted the right to purchase (i)
1,000,000 shares of Common Stock, at an exercise price of $0.69 per share (the
"Exercise Price") of Common Stock, at any time prior to 5:00 p.m., New York City
time on September 14, 2003, and (ii) 700,000 shares of Common Stock, at the
Exercise Price, at any time following the date, if any, that the Company's
indebtedness for principal amounts borrowed under the RCA exceeds $3,000,000, in
each case, subject to the terms and conditions of this Agreement.
2. Warrant Certificate. The warrant certificate (the "Warrant
Certificate") to be delivered pursuant to this Agreement shall be in the form
set forth in Exhibit A attached hereto, and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrants. The Warrants are exercisable at the aggregate
Exercise Price for the number of Warrants so exercised at any time prior to 5:00
p.m. New York City time on September 14, 2003, subject to adjustment as provided
in Section 7 hereof. Payment of such Exercise Price shall be made, at the option
of the Holder specified in its notice of exercise, (i) by wire transfer or by
certified or official bank check payable to the order of the Company in
immediately available funds in lawful money of the United States of America; or
(ii) by reducing the number of shares of Common Stock issuable to the Holder by
a number of shares of Common Stock that have a value equal to the Exercise Price
which otherwise would have been paid. For the purpose of any exercise pursuant
to the previous sentence, the value of a share of Common Stock shall be the last
reported sale price of the Common Stock on the OTC Bulletin Board, or any other
interdealer quotation system on which the Common Stock is included for
quotation, or, if none, the fair market value of such shares as reasonably
determined by the Board of Directors of the Company. Upon surrender of a Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price for the shares of Common Stock
purchased, if applicable, at HemaSure's principal offices located at 140 Locke
Drive, Marlborough, MA 01752, the Holder shall be entitled to receive a
certificate or certificates for the shares of Common
-1-
728537.3
<PAGE>
Stock so purchased. The purchase rights represented by the Warrant Certificate
are exercisable at the option of the Holder thereof, in whole or in part (but
not as to fractional shares of the Common Stock underlying the Warrants), but in
no event for less than 25,000 shares at any one time. In the case of the
purchase of less than all the shares of Common Stock purchasable under any
Warrant Certificate, HemaSure shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the shares of Common Stock purchasable thereunder.
4. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock or other securities,
properties or rights underlying such Warrants shall be made forthwith (and in
any event within ten (10) business days thereafter) without charge to the Holder
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall be issued in the name of, or in
such names as may be directed by, the Holder thereof; provided, however, that
HemaSure shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder, and HemaSure shall not be required to issue
or deliver such certificates unless or until the person or persons requesting
the issuance thereof shall have paid to HemaSure the amount of such tax or shall
have established to the satisfaction of HemaSure that such tax has been paid.
The Warrant Certificate and the certificates representing the Shares
shall be executed on behalf of HemaSure by the manual or facsimile signature of
the then present Chairman or Vice Chairman of the Board of Directors or
President or Chief Executive Officer or Vice President of HemaSure under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the then present Secretary or Assistant Secretary of HemaSure. The
Warrant Certificate shall be dated the date of execution by HemaSure upon
initial issuance, division, exchange, substitution or transfer.
5. Restriction on Transfer of Warrants. The Holder of the Warrant
Certificate, by its acceptance thereof, covenants and agrees:
(i) that the Warrants and the shares of Common Stock issuable on
exercise of the Warrants (the "Shares") are being acquired as an
investment and not with a view to the distribution thereof;
(ii) that it understands that neither the Warrants nor the Shares
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on an exemption therefrom for
transactions not involving any public offering, and that neither the
Warrants nor the Shares have been approved or disapproved by the
United States Securities and Exchange Commission (the "Commission") or
by any other Federal or state agency;
(iii) it understands that neither the Warrants nor the Shares can
be sold, transferred or assigned unless registered by HemaSure
pursuant to the Securities Act and any applicable state securities
laws, or unless an exemption therefrom is available, and, accordingly,
it may not be possible for the undersigned to liquidate its investment
in the Warrants and the Shares, and it agrees not to sell, assign or
otherwise transfer or dispose of the Warrants or the Shares unless
such Warrants or Shares, as applicable, have been so registered or an
exemption from registration is available;
-2-
728537.3
<PAGE>
(iv) the Holder hereby acknowledges that all documents, records
and books pertaining to HemaSure's business have been made available
to the Holder and the Holder's attorney and/or accountant and/or
representative. The Holder has had an opportunity to ask questions and
receive answers from HemaSure concerning the business and assets of
HemaSure and all such questions have been answered to the full
satisfaction of the Holder; and
(v) it is an accredited investor, as that term is defined in
Regulation D under the Securities Act.
6. Securities Act of 1933; Legends. Upon exercise, in part or in
whole, of the Warrants, certificates representing the Shares underlying the
Warrant and any of the other securities issuable upon exercise of the Warrant
(the "Warrant Shares") shall bear the following legend only if such Warrant
Shares are not then registered pursuant to an effective registration statement
under the Act:
The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Act"), and may not be offered or sold
except pursuant to (i) an effective registration
statement under the Act, (ii) to the extent applicable,
Rule 144 under the Act (or any similar rule under such
Act relating to the disposition of securities), or
(iii) an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to the issuer, that
an exemption from registration under such Act is
available.
7. Subdivision and Combination. In case HemaSure shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination, and the number of shares subject to the
Warrant shall be proportionally increased or decreased, as the case may be.
8. Merger or Consolidation. In case of any consolidation of HemaSure
with, or merger of HemaSure with, or merger of HemaSure into, another
corporation (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the corporation
formed by such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement having terms as nearly substantively equivalent
as practical to the terms hereof, providing that the Holder of each Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such warrant, the kind
and amount of shares of stock and other securities and property receivable upon
such consolidation or merger, by the Holder of the number of shares of Common
Stock of HemaSure for which such warrant might have been exercised immediately
prior to such consolidation, merger, sale or transfer. The above provision of
this subsection shall similarly apply to successive consolidations or mergers.
9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
Holder at the principal executive office of HemaSure, for a new Warrant
Certificate of like tenor and date representing in the aggregate the right to
purchase the same number of Warrant Shares in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
Upon receipt by HemaSure of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of an
-3-
728537.3
<PAGE>
indemnity agreement reasonably satisfactory to it, and upon surrender and
cancellation of the Warrants, if mutilated, HemaSure will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. HemaSure shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
11. Reservation of Securities. HemaSure shall at all times reserve and
keep available out of its authorized shares of Common Stock, solely for the
purpose of issuance upon the exercise of the Warrants, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable upon
the exercise thereof.
12. Notices to the Holder. Nothing contained in this Agreement shall
be construed as conferring upon the Holder the right to vote or to consent or to
receive notice as a stockholder in respect of any meetings of stockholders for
the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of HemaSure. If, however, at any time prior to the
expiration of the Warrants and their exercise, any of the following events shall
occur:
(a) HemaSure shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained
earnings, as indicated by the accounting treatment of such dividend or
distribution on the books of HemaSure;
(b) HemaSure shall offer to all of the holders of its Common
Stock any additional shares of capital stock of HemaSure or securities
convertible into or exchangeable for shares of capital stock of
HemaSure, or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of HemaSure (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety
shall be proposed;
then, in any one or more of said events, HemaSure shall give written notice of
such event at least fifteen (15) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
-4-
728537.3
<PAGE>
(a) If to the Holder, to the address of the Holder as shown on
the books of HemaSure; or
(b) If to HemaSure, to the address set forth in Section 3 hereof
or to such other address as HemaSure may designate by notice to the
Holder.
14. [Intentionally Omitted].
15. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of HemaSure, the Holder and their
respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate in its entirety at
5:00 p.m., New York City time, on September 14, 2003.
17. Governing Law; Submission to Jurisdiction.
(a) This Agreement and each Warrant Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of Delaware and for
all purposes shall be construed in accordance with the laws of said State
without giving effect to the rules of said State governing the conflicts of
laws.
(b) HemaSure and the Holder hereby agree that any action, proceeding
or claim against it arising out of, or relating in any way to, this Agreement
shall be brought and enforced in the courts of the State of Delaware or of the
United States of America for the District of Delaware, and irrevocably submits
to such jurisdiction, which jurisdiction shall be exclusive. HemaSure and the
Holder hereby irrevocably waive any objection to such exclusive jurisdiction or
inconvenient forum. Any such process or summons to be served upon HemaSure and
the Holder (at the option of the party bringing such action, proceeding or
claim) may be served by transmitting a copy thereof, by registered or certified
mail, return receipt requested, postage prepaid, addressed to it at the address
set forth in Section 15 hereof. Such mailing shall be deemed personal service
and shall be legal and binding upon the party so served in any action,
proceeding or claim. HemaSure and the Holder agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
18. Entire Agreement; Modification. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and may not be modified or amended except by a writing duly signed by the
party against whom enforcement of the modification or amendment is sought.
19. Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
-5-
728537.3
<PAGE>
21. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than HemaSure or the Holder
any legal or equitable right, remedy or claim under this Agreement.
22. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument. Photocopies or facsimiles of executed copies of this Agreement
may be treated as originals.
[signature page follows]
-6-
728537.3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
HEMASURE INC.
By: /s/James B. Murphy
------------------
Name: James B. Murphy
Title: Senior VP Finance and
Administration
SEPRACOR INC.
By: /s/Robert Scumaci
------------------
Name: Robert Scumaci
Title: Senior VP Finance and
Administration
-7-
728537.3
Exhibit 4.5
THE SECURITIES EVIDENCED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"),
OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (II) TO THE
EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (III) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
VOID AFTER 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER 14, 2003
HEMASURE INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
1,000,000 WARRANTS
THIS WARRANT CERTIFIES that SEPRACOR INC., a Delaware corporation
("Holder"), or registered assigns, is the owner of 1,000,000 Common Stock
Purchase Warrants (the "Warrants"), each of which entitles the registered holder
thereof (the "Warrant Holder") to purchase one (1) fully paid and non-assessable
share of common stock, par value $.01 per share ("Common Stock"), of HemaSure
Inc., a Delaware corporation (the "Company"), at any time after September 14,
1999 and before 5:00 P.M., New York City time on September 14, 2003, at a price
of $0.69 per share of Common Stock (subject to the adjustments hereinafter
referred to), by surrendering this Warrant Certificate, with the form of
election to purchase attached hereto duly executed, at the corporate office of
the Company, and by paying in full for each share of Common Stock as to which
Warrants represented hereby are exercised, and upon compliance with and subject
to the conditions set forth in the Warrant Agreement, dated as of September 15,
1998, between the Company and Holder (the "Warrant Agreement").
Upon any exercise of Warrants evidenced hereby, the form of election to
purchase attached hereto must be properly completed and executed. In the event
that upon any exercise of Warrants evidenced hereby the number of Warrants
exercised shall be less than the total number of Warrants evidenced hereby,
there shall be issued to the holder hereof a new Warrant Certificate, in all
respects similar to this Warrant Certificate, evidencing the number of Warrants
not exercised. The purchase price per share of Common Stock, as adjusted from
time to time, is herein called the "Warrant Price" and the Warrant Price
multiplied by the number of shares of Common Stock purchased simultaneously is
herein called the "Purchase Price." The Purchase Price payable upon exercise of
Warrants shall be paid, at the option of the Holder specified in its notice of
exercise, (1) by wire transfer or by certified or official bank check payable to
the order of the Company in immediately available funds in lawful money of the
United States of America; or (ii) by reducing the number of shares of Common
Stock issuable to the Holder by a number of shares of Common Stock that have a
value equal to the Exercise Price which otherwise would have been paid. For the
purpose of any exercise pursuant to the previous sentence, the value of a share
of Common Stock shall be the last reported sale price of the Common Stock on the
OTC Bulletin Board, or any other interdealer quotation system on which the
Common Stock is included for quotation, or, if none, the fair market value of
such shares as reasonably determined by the Board of Directors of the Company.
728538.3
<PAGE>
No fraction of a share of Common Stock will be issued upon the exercise
of any Warrant. In any transaction in which Warrants are exercised, the
registered holder shall be entitled to purchase as many full shares as are
included in the product of the number of Warrants being exercised in the
transaction times the number of shares (including fractions of a share)
purchasable upon exercise of one Warrant.
This Warrant Certificate is issued under and the Warrants evidenced
hereby are subject to, the terms and provisions contained in the Warrant
Agreement, to all the terms and provisions of which the holder of this Warrant
Certificate, by acceptance hereof, assents. Reference is hereby made to the
Warrant Agreement for a more complete statement of the rights and limitations of
rights of the registered holder hereof and the rights and obligations of the
Company thereunder. Copies of the Warrant Agreement are on file at the office of
the Company.
This Warrant Certificate and similar Warrant Certificates when
surrendered at the corporate office of the Company by the registered holder
hereof in person or by attorney duly authorized in writing may be exchanged, in
the manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate the number of
Warrants evidenced by the Warrant Certificates so surrendered.
Upon due presentation for registration of transfer of this Warrant
Certificate at the corporate office of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate the number of
Warrants evidenced by this Warrant Certificate shall be issued to a transferee
in exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
Prior to due presentment for registration of transfer of this Warrant
Certificate, the Company may deem and treat the registered holder hereof as the
absolute owner of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone other than the Company) for the
purpose of any exercise hereof and for notices and for all other purposes, and
the Company shall not be affected by any notice to the contrary.
728538.3
-2-
<PAGE>
No Warrant may be exercised after 5:00 P.M., New York City time, on
September 14, 2003, and to the extent not exercised by such time, all Warrants
evidenced hereby shall become void.
WITNESS the corporate seal of the Company and the signatures of its
duly authorized officer.
HEMASURE INC.
(Seal)
By: /s/ James B. Murphy
------------------------------------
Senior VP Finance and Administration
728538.3
-3-
<PAGE>
PURCHASE FORM
(To be completed and executed upon exercise of Warrant)
To HEMASURE INC.
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the within Warrant Certificate for, and to
purchase thereunder, _______ shares of Common Stock, as provided for therein,
and [tenders herewith payment of the purchase price in full in the form of [cash
or a certified or official bank check in the amount of $ ] or [an election to
purchase such shares of Common Stock pursuant to the net issuance provisions of
Section 3, clause (ii), of the Warrant Agreement.]
Please issue a certificate or certificates for such shares of
Common Stock in the name of, and pay any cash for any fractional share to:
Name: _______________________________________________________________________
Address: ______________________________________________________________________
Social Security or Tax I.D. Number: ___________________________________________
(Please Print)
Signature _________________________________
NOTE: The above signature
should correspond exactly with
the name on the face of this
Warrant Certificate or with the
name of assignee appearing in
the assignment form below.
And, if said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder less any fraction of a share paid in cash.
Dated: , .
728538.3
-4-
Exhibit 10.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REVOLVING CREDIT AND SECURITY AGREEMENT
BETWEEN
FLEET NATIONAL BANK
AND
HEMASURE INC.
-----------------------------------
Dated as of September 15, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
777794.1
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS....................................................1
1.1 Definitions............................................1
1.2 Accounting Terms.......................................6
1.3 The Company............................................7
SECTION 2 DESCRIPTION OF CREDIT..........................................7
2.1 The Revolving Loans....................................7
2.2 Facility Fee...........................................8
2.3 Reduction of Revolving Credit Commitment Amount........8
2.4 The Note...............................................8
2.5 Capital Requirements...................................8
2.6 Payments and Prepayments of the Revolving Loans........9
2.7 Method of Payment......................................9
2.8 Overdue Payments.......................................9
2.9 Holidays..............................................10
2.10 Interest..............................................10
SECTION 3 CONDITIONS OF LOANS...........................................10
3.1 Conditions Precedent to Initial Revolving Loan........10
3.2 Conditions Precedent to all Revolving Loans...........12
SECTION 4 REPRESENTATIONS AND WARRANTIES................................12
4.1 Organization and Qualification........................12
4.2 Corporate Authority...................................13
4.3 Valid Obligations.....................................13
4.4 Consents or Approvals.................................13
4.5 Title to Properties; Absence of Encumbrances..........13
4.6 Financial Statements..................................13
4.7 Changes...............................................14
4.8 Defaults..............................................14
4.9 Taxes.................................................14
4.10 Material Agreements...................................14
4.11 Material Licenses.....................................14
4.12 Litigation............................................14
4.13 Use of Proceeds.......................................14
4.14 Existing Indebtedness.................................15
4.15 Existing Investments..................................15
4.16 Subsidiaries..........................................15
4.17 Investment Company Act................................15
777794.1
<PAGE>
4.18 Compliance with ERISA.................................15
4.19 FDA Compliance, Etc...................................15
4.20 Environmental Matters.................................16
SECTION 5 AFFIRMATIVE COVENANTS.........................................17
5.1 Financial Statements and other Reporting Requirements.17
5.2 Conduct of Business...................................19
5.3 Maintenance and Insurance.............................19
5.4 Taxes.................................................20
5.5 Inspection by the Bank................................20
5.6 Maintenance of Books and Records......................20
5.7 Maintenance of Accounts...............................20
5.8 New Accounts and Investments..........................20
5.9 Year 2000 Compliance..................................21
5.10 Further Assurances....................................21
SECTION 6 NEGATIVE COVENANTS............................................21
6.1 Indebtedness..........................................21
6.2 Contingent Liabilities................................22
6.3 Sale and Leaseback....................................22
6.4 Encumbrances..........................................22
6.5 Lines of Business.....................................23
6.6 Merger; Consolidation; Sale or Lease of Assets........23
6.7 Additional Stock Issuance.............................23
6.8 Restricted Payments...................................23
6.9 Transactions with Affiliates..........................24
6.10 Investments...........................................24
6.11 ERISA.................................................24
6.12 Observance of Subordination Provisions, etc...........24
6.13 Loans to Subsidiaries.................................24
SECTION 7 SECURITY......................................................24
7.1 Security Interest.....................................24
7.2 Location of Records and Collateral; Name Change.......25
7.3 Status of Collateral..................................25
SECTION 8 DEFAULTS......................................................26
8.1 Events of Default.....................................26
8.2 Remedies..............................................28
SECTION 9 MISCELLANEOUS.................................................30
9.1 Notices...............................................30
9.2 Expenses..............................................31
9.3 Set-Off...............................................31
777794.1
<PAGE>
9.4 Term of Agreement.....................................31
9.5 No Waivers............................................31
9.6 Governing Law.........................................32
9.7 Amendments............................................32
9.8 Binding Effect of Agreement...........................32
9.9 Counterparts..........................................32
9.10 Partial Invalidity....................................32
9.11 Captions..............................................32
9.12 WAIVER OF JURY TRIAL..................................32
9.13 Entire Agreement......................................33
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REVOLVING CREDIT AND SECURITY AGREEMENT
Dated as of September 15, 1998
THIS REVOLVING CREDIT AND SECURITY AGREEMENT is made as of September 15,
1998, by and between HEMASURE INC. (the "Company"), a Delaware corporation
having its chief executive office at 140 Locke Drive, Marlborough, Massachusetts
01752 and FLEET NATIONAL BANK, formerly known as Fleet National Bank of
Connecticut, N.A. successor by merger to Fleet National Bank of Massachusetts,
N.A. (the "Bank"), a national banking association, having its head office at
Fleet Center, One Federal Street, Boston, Massachusetts 02109.
SECTION 1
DEFINITIONS
1.1 Definitions.
All capitalized terms used in this Agreement (as defined below) or in the
Note (as defined below) 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:
Affiliate. As applied to any Person, a spouse or relative of such Person,
any member, director, executive or officer of such Person, any corporation,
association, firm or other entity of which such Person is a member, director,
executive or officer, and any other Person directly or indirectly controlling,
controlled by or under direct or indirect common control with such Person.
Agreement. This Agreement, as the same may be supplemented or amended from
time to time.
Bank. See Preamble.
BioSepra. BioSepra Inc., a Delaware corporation and a Subsidiary of
Sepracor.
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.
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 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
777794.1
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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.
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.
Company. See Preamble.
Controlled Group. All trades or businesses (whether or not incorporated)
under common control that, together with the Company, are treated as a single
employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.
Cross License Agreement. The Cross License Agreement dated as of January 1,
1994 between BioSepra and the Company as originally executed and delivered.
Default. Any event or condition that, with the giving of notice or lapse of
time, or both, would constitute an Event of Default.
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 Company 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.
777794.1
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FDA. See Section 4.19.
GAAP. Generally accepted accounting principles as defined by the United
States Financial Accounting Standards Board, as from time to time in effect.
Guarantees. As applied to the Company and its Subsidiaries, all guarantees,
endorsements or other contingent or surety obligations with respect to
obligations of others whether or not reflected on the balance sheet of the
Company and its 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
to enter into a contract for any of the foregoing, for the purpose of payment of
obligations of any other person or entity.
Guarantor. Sepracor as guarantor under the Guaranty Agreement.
Guaranty Agreement. That certain Guaranty Agreement dated as of the date
hereof executed by the Guarantor guaranteeing the obligations of the Company to
the Bank.
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 Company; or (iv) which contains
gasoline, diesel fuel or other petroleum products, asbestos or polychlorinated
biphenyls ("PCB's").
Indebtedness. As applied to the Company and its Subsidiaries, (i) 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 Company and
its 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 Company or
any of its Subsidiaries 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 balance sheet of the Company
and its Subsidiaries, (v) all Guarantees, and (vi)
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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 Company or
any of its Subsidiaries.
Intellectual Property. See Section 7.1.
Intellectual Property Security Agreement. The Intellectual Property
Security Agreement dated the date hereof between the Company and the Bank
whereby the Company has granted to the Bank a security interest in its
Intellectual Property.
Inventory. Goods, merchandise and other personal property, now owned or
hereafter acquired by the Company, which are held for sale or lease or are
furnished or to be furnished under a contract of service or are raw materials,
work in process or materials used or consumed or to be used or consumed in the
Company's business.
Investment. As applied to the Company 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, any other investment in any other person or entity, and the making
of any commitment or acquisition of any option to make an Investment.
Loan Account. The account on the books of the Bank in which will be
recorded Revolving Loans made by the Bank to the Company 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 8.2.
Managerial Expense. All salaries, costs, fees and other expenses directly
or indirectly paid or payable by the Company to any shareholder or to any
Affiliate of the Company for management services, except the direct salaries and
expenses of executive personnel, the expenses of directors and fees and expenses
among and between the Company and its Affiliates in the ordinary course of
business and consistent with past practices.
Material Licenses. See Section 4.11.
Note. A promissory note of the Company, substantially in the form of
Exhibit A hereto, evidencing the obligations of the Company to the Bank to repay
the Revolving Loans.
Notice of Borrowing. See Section 2.1(b).
Obligations. Any and all obligations of the Company to the Bank hereunder
and under the Note of every kind and description, direct or indirect, absolute
or contingent, primary or
777794.1
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<PAGE>
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.
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 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 Company or any
member of the Controlled Group for employees of the Company 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 Company 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.
Qualified Investments. As applied to the Company and its Subsidiaries,
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-one or A-1 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 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 of the
Company now or hereafter outstanding and (b) any redemption, purchase or other
acquisition, direct or indirect, of any shares of any class of stock of the
Company 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), (c) any Managerial Expense, and (d)
777794.1
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any payment of principal of, premium, if any, or interest on, or otherwise in
respect of any Subordinated Indebtedness.
Revolving Credit Commitment Amount. Five Million Dollars ($5,000,000) or
any lesser amount, including zero, resulting from a termination or reduction of
such amount in accordance with Section 2.3 or Section 8.2.
Revolving Credit Period. The period beginning on the date hereof and
extending through and including the Revolving Credit Termination Date or such
earlier date on which the commitment to make Revolving Loans is terminated or
the Revolving Credit Commitment Amount is reduced to zero in accordance with the
terms of this Agreement.
Revolving Credit Termination Date. August 31, 2000.
Revolving Loans. See Section 2.1.(a).
Sepracor. Sepracor Inc., a Delaware corporation and an Affiliate of the
Company,
Sepracor Credit Agreement. That certain Revolving Credit and Security
Agreement dated as of December 31, 1996 between Sepracor and the Bank, as it may
be amended, restated or modified from time to time.
Subordinated Indebtedness. (a) the existing Indebtedness of the Company
which is designated as "Subordinated Indebtedness" in Schedule 6.1 attached
hereto, and (b) any other Indebtedness of the Company consented to in writing by
the Bank which 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 Note and to the Company's other obligations to the Bank
hereunder by provisions reasonably satisfactory in form and substance to the
Bank and its counsel.
Subsidiary. Except for HemaSure A/S, any corporation, association, limited
liability company, joint stock company, business trust or other similar
organization of which 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 is held or controlled by the Company or its Subsidiaries; or any
other such organization the management of which is directly or indirectly
controlled by the Company or a Subsidiary of the Company through the exercise of
voting power or otherwise; or any joint venture, whether incorporated or not, in
which the Company has, at least, a 50% ownership interest.
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.
777794.1
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1.3 The Company. All references herein to the Company and not to the
Company and its Subsidiaries shall refer only to the Company. All references to
the Company and its Subsidiaries shall refer to the Company and its Subsidiaries
on a consolidated basis.
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
Company made herein, the Bank agrees to make loans ("Revolving Loans") to the
Company pursuant to Notices of Borrowing as delivered by the Company to the Bank
from time to time, from and after the date hereof and prior to the Revolving
Credit Termination Date; provided, that (1) the aggregate principal amount of
Revolving Loans outstanding at any time shall not exceed the Revolving Credit
Commitment Amount at such time; and (2) at the time the Company requests a
Revolving Loan and after giving effect to the making thereof there has not
occurred and is not continuing any Default or Event of Default. The Company
agrees that it shall be an Event of Default if at any time the debit balance of
the Loan Account shall exceed the Revolving Credit Commitment Amount unless the
Company 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 the excess.
(b) If the Company determines to request a Revolving Loan, the Company
shall deliver a written notice (a "Notice of Borrowing"), substantially in the
form of Exhibit C annexed hereto with the blanks therein appropriately
completed, to the Bank not later than 12:00 noon (Boston Time) on the date of
the proposed borrowing; provided that at any time when the aggregate principal
amount of Revolving Loans (including the principal amount of any Revolving Loan
requested in any Notice of Borrowing delivered to the Bank) equals or exceeds
$3,000,000 thereafter, but only for so long as such aggregate principal amount
equals or exceeds $3,000,000, no Notice of Borrowing will be effective unless it
is acknowledged by Sepracor as well as the Company. No Notice of Borrowing shall
be revocable by the Company or Sepracor.
(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
Company 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 Company under this
Agreement. The debit balance of the Loan Account shall reflect the amount of the
Company's Obligations to the Bank from time to time by reason of the Revolving
Loans and other appropriate charges permitted hereunder. Periodically, but no
less frequently than monthly, 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 the Company's receipt of such
777794.1
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<PAGE>
statement notice to the contrary is received by the Bank from the Company,
absent manifest error, shall be considered correct and accepted by the Company
and conclusively binding upon it.
(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 Company's demand deposit
account with the Bank.
2.2 Facility Fee. The Company shall pay to the Bank on the date hereof a
facility fee of $25,000 (the "Facility Fee").
2.3 Reduction of Revolving Credit Commitment Amount. The Company may from
time to time by written notice delivered to the Bank by the Company at least
five Business Days prior to the date of the requested reduction, reduce by
integral multiples of Ten Thousand Dollars ($10,000) any unborrowed portion of
the Revolving Credit Commitment Amount. No reduction of the Revolving Credit
Commitment Amount shall be subject to reinstatement.
2.4 The Note.
(a) The Revolving Loans shall be evidenced by the Note which is
payable to the order of the Bank and have a final maturity of the Revolving
Credit Termination Date. The Note 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 by the
Company to, enter on the schedule forming a part of the 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 Company 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 Company to attach to
and make a part of the 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 subsection (b) shall in any way affect any Revolving Loan or the rights or
obligations of the Bank or the Company with respect thereto.
2.5 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), 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
777794.1
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<PAGE>
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 Bank shall provide to the Company a
written notice setting forth in reasonable detail the nature and amount of such
fees and the Company 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 Company's request,
the Bank shall demonstrate the basis of such determination.
2.6 Payments and Prepayments of the Revolving Loans. On at least one (1)
Business Day prior written notice to the Bank with respect to any Revolving
Loans, the Company may, at its option, prepay the Revolving Loans and the Note
in whole at any time or in part from time to time without penalty or 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 Credit Commitment Amount or impair the Company's
right to borrow as set forth in Section 2.1. On the Revolving Credit Maturity
Date, the Company shall repay all outstanding Revolving Loans and the Note,
together with all unpaid interest thereon and all fees and other amounts due
hereunder with respect to the Revolving Loans.
2.7 Method of Payment. All payments and prepayments of principal and all
payments of interest shall be made by the Company to the Bank at One Federal
Street, Boston, Massachusetts 02109 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 the Company
hereby authorizes the Bank to, debit the amount of any payment not made by such
time to the demand deposit account of the Company with the Bank.
2.8 Overdue Payments.
(a) Upon the occurrence and during the continuance of an Event of
Default, interest on the outstanding principal amount of the Note 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 interest hereunder is not made in full within 10
days of the date when due, the Company will pay to the Bank a late fee equal to
five percent (5%) 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 8.2, if an Event of Default has
occurred.
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2.9 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.
2.10 Interest. The 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 for the Revolving Loans shall be computed at the Prime
Rate plus one-half of one percent (1/2%).
(b) Interest on the Note shall be payable monthly in arrears on the
first Business Day of each month, commencing on October 1, 1998 and at maturity
(whether by acceleration or otherwise). The rate of interest payable on any
portion of the outstanding principal balance of any Revolving Loan shall take
effect simultaneously with the corresponding change in the Prime Rate.
SECTION 3
CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Revolving Loan. The obligation of the
Bank to make its initial Revolving Loan 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 Company;
(b) the Note, duly executed by the Company;
(c) the Intellectual Property Security Agreement duly executed by the
Company in form and substance satisfactory to the Bank and its counsel;
(d) the Guaranty Agreement duly executed by the Guarantor in form and
substance satisfactory to the Bank and its counsel;
(e) a certificate of the Secretary or an Assistant Secretary of the
Company with respect to resolutions of the Board of Directors authorizing the
execution and delivery of this Agreement, the Intellectual Property Security
Agreement, the 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;
(f) a certificate signed by a principal officer of the Company,
certifying that the conditions of Section 3.2.(b) have been fulfilled;
777794.1
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(g) the certificate of incorporation of the Company 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 Company 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 Company in such state
and listing all documents on file in the office of said Secretary of State;
(j) UCC-1 Financing Statements duly executed by the Company and
recorded in the appropriate filing offices for all locations of the Company as
set forth in the Perfection Certificate as executed by the Company and delivered
to the Bank, substantially in the form of Exhibit B attached hereto with all
blanks appropriately completed;
(k) Lien searches against the Company in all appropriate state filing
offices and in the United States Patent and Trademark Office and the United
States Copyright Office;
(l) UCC-3 Termination Statements and other appropriate lien discharge
documentation terminating all liens except those consisting of Permitted
Encumbrances.
(m) Landlord Waiver as to the real property leased by the Company
located at 140 Locke Drive, Marlborough, Massachusetts duly executed by the
lessor of such property;
(n) an insurance binder demonstrating compliance with Section 5.3;
(o) a certificate signed by a principal officer of the Company,
certifying that there has been no material adverse change in the condition
(financial or otherwise), operations, properties, assets, liabilities or
earnings of the Company since the date of its most recent financial statement;
(p) the Facility Fee;
(q) an opinion addressed to it from Battle Fowler, counsel to the
Company, in form and substance satisfactory to the Bank and its counsel;
(r) an opinion addressed to it from Hale and Dorr LLP, counsel to
Sepracor, 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 necessary or appropriate.
777794.1
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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 the 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.(e) 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 delivery of each Notice of Borrowing shall be deemed to be a
representation and warranty by the Company 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, the Company represents and warrants to the Bank that:
4.1 Organization and Qualification. Each of the Company and its
Subsidiaries (a) is a corporation or stock company 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 of the Company and its
Subsidiaries, taken as a whole.
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<PAGE>
4.2 Corporate Authority. The execution, delivery and performance of this
Agreement and the Note and the transactions contemplated hereby are within the
corporate power and authority of the Company and the execution, delivery and
performance of the Note are within the corporate power and authority of the
Company and have been authorized by all necessary corporate proceedings, and do
not and will not (a) require any consent or approval of the shareholders of the
Company, (b) contravene any provision of the charter documents or by-laws of the
Company or any law, rule or regulation applicable to the Company, (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 the Company, or (d) result in or require the imposition of any
Encumbrance on any of the properties, assets or rights of the Company.
4.3 Valid Obligations. This Agreement and the Note are the legal, valid and
binding obligations of the Company, 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 and the Note 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 Company and
its Subsidiaries has good and valid 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 would
materially adversely affect such properties, assets or rights, taken as a whole.
4.6 Financial Statements. The Company has furnished the Bank its
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of December 31, 1997, and the related consolidated and
consolidating statements of income, changes in shareholders' equity and cash
flow for the fiscal year then ended, and related footnotes, audited and
certified by Coopers & Lybrand L.L.P. The Company has also furnished the
foregoing unaudited financial statements to the Bank for the six-month period
ending June 30, 1998. All such financial statements were prepared in accordance
with GAAP applied on a consistent basis throughout the periods specified and
present fairly the financial position of the Company and its Subsidiaries as of
such date and the results of the operations of the Company and its Subsidiaries
for such
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period. 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 six-month
period ending June 30, 1998 referred to in Section 4.6, there have been no
changes in the assets, liabilities, financial condition, business or prospects
of the Company 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 Company 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 Company and each Subsidiary have been fully
paid. The Company 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. Schedule 4.10 hereto accurately and completely
lists all material leases, management, shareholder, 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 Company and its Subsidiaries.
4.11 Material Licenses. 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 Company 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 the Company's or any Subsidiary's officers, threatened, against the
Company or any Subsidiary that, if adversely determined, could result in a
material judgment not fully covered by insurance (subject to deductibles and
co-insurance requirements, however), could result in a forfeiture of all or any
substantial part of the property of the Company or its Subsidiaries, or could
otherwise have a material adverse effect on the assets, business or prospects of
the Company or any Subsidiary.
4.13 Use of Proceeds.
(a) The Company 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, (ii) for the purpose of purchasing or carrying any margin
stock within the meaning of Regulations U and X (12 CFR 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.
777794.1
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(b) The proceeds of the Revolving Loans shall be used exclusively for
refinancing of existing debt and capital expenditures and other working capital
and general corporate purposes of the Company.
4.14 Existing Indebtedness. Schedule 6.1 hereto accurately and completely
lists all existing Indebtedness of the Company and its 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 Company
and its Subsidiaries as of the date hereof.
4.16 Subsidiaries. As of the date hereof, all the Subsidiaries of the
Company are listed in Schedule 4.16 hereto. The Company or a Subsidiary of the
Company 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.
The Company's wholly-owned Danish subsidiary, HemaSure A/S, has
discontinued operations and is currently in receivership in Denmark. There are
no claims pending or, to the knowledge of the Company's officers, threatened,
against the Company related to Hemasure A/S except for a claim by the former
receiver of the estate of HemaSure A/S in the amount of $4,000,000 which the
Company believes is without merit. The current receiver of the estate of
HemaSure A/S has made no such claim, but has reserved the right to consider such
claim.
4.17 Investment Company Act. Neither the Company nor any of its
Subsidiaries is subject to regulation under the Investment Company Act of 1940,
as amended.
4.18 Compliance with ERISA. The Company 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
Company and its 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 Company and its Subsidiaries. The Company and its Subsidiaries are
777794.1
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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 Company and its 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 Company and its Subsidiaries. The
Company and its Subsidiaries are in compliance with the terms and conditions of
all such permits, licenses and authorizations, and are also in compliance with
all 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 Company
and its 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, to the
best of the Company's knowledge, threatened by any governmental or other entity
with respect to any alleged failure by the Company or any of its Subsidiaries to
have any permit, license or authorization required in connection with the
conduct of its business or with respect to any Environmental Laws.
(c) To the best of the Company's knowledge no material oral or written
notification of a release of a Hazardous Material has been filed by or on behalf
of the Company or any of its Subsidiaries and no property now or previously
owned, leased or used by the Company or any of its Subsidiaries 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 the Company or any of its Subsidiaries and no governmental actions
have been taken or, to the best of the Company's knowledge, are in process which
could subject any of such properties to such liens or encumbrances or, as a
result of which the Company or any of its Subsidiaries 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 the Company nor any of its Subsidiaries nor, to the best
knowledge of the Company, any previous owner, tenant, occupant or user of any
property owned, leased or used by the Company or any of its Subsidiaries has (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,
777794.1
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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 common in day-to-day operations of such property
and, in such case, in compliance with, all Environmental Laws; nor to the best
knowledge of the Company have any Hazardous Materials migrated from other
properties upon, about or beneath such property, nor, to the best knowledge of
the Company, are any Hazardous Materials presently contained, 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 or any Revolving
Loan or other Obligation hereunder remains outstanding, the Company covenants as
follows:
5.1 Financial Statements and other Reporting Requirements. The Company
shall furnish to the Bank:
(a) as soon as available to the Company and its Subsidiaries, but in
any event within 90 days after the end of each of its fiscal years, the
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of, and a related statement of income, changes in
shareholders' equity and cash flow for, such year, audited and certified by
PricewaterhouseCoopers LLP (or other independent nationally recognized certified
public accountants reasonably acceptable to the Bank) in the case of such
consolidated statements, and certified by the chief financial officer in the
case of such consolidating statements; and, concurrently with such financial
statements 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 Company, but in any event within 45
days after the end of each fiscal quarter, a consolidated and consolidating
balance sheet as of the end of, and a related consolidated and consolidating
statement of income for, the period then ended, certified by the principal
financial officer of the Company but subject, however, to normal, recurring
year-end adjustments;
(c) as soon as available to the Company, but in any event concurrently
with the delivery of each financial statement pursuant to Section 5.1(a), a copy
of each so-called management letter submitted to the Company or any of its
Subsidiaries by independent certified
777794.1
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public accountants in connection with each annual audit of the books of the
Company and its Subsidiaries by such accountants or in connection with any
interim audit thereof pertaining to any phase of the business of the Company or
any such Subsidiary;
(d) as soon as available to the Company and its Subsidiaries, but in
any event within 90 days after the end of each fiscal year, projections for the
Company 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;
(e) promptly after the receipt thereof by the Company, copies of any
reports submitted to the Company by independent public accountants in connection
with any interim review of the accounts of the Company made by such accountants;
(f) if and when the Company 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) promptly 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 Company or any of its Subsidiaries or HemaSure A/S of
which it has notice, the outcome of which would have a materially adverse effect
on the assets, business or prospects of the Company or the Company 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 Company or
any of its Subsidiaries or HemaSure A/S 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;
(j) promptly after the same become publicly available, copies of all
registration statements, regular periodic reports and press releases filed by
the Company or any of its Subsidiaries with the Securities and Exchange
Commission or any governmental authority
777794.1
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<PAGE>
succeeding to any or all of the functions of said commission, or with any
national securities exchange;
(k) promptly upon receipt thereof, copies of any reports or other
written information pertaining to the compliance by the Company with the
provisions of Section 5.9 submitted to the Company or any of its Subsidiaries by
any consultant or similar contractor; and
(l) from time to time, such other financial data and information about
the Company or its Subsidiaries or HemaSure A/S as the Bank may reasonably
request.
5.2 Conduct of Business. Each of the Company and its Subsidiaries shall:
(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) maintain its business as a developer of blood filtration and
separation devices.
5.3 Maintenance and Insurance. Each of the Company and its 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
Company will maintain or cause to be maintained on all insurable properties now
or hereafter owned by the Company 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 Company to the extent customary with respect to companies
conducting similar businesses and, upon request, will furnish to the Bank
satisfactory evidence of the same. Each insurance policy, to the extent
applicable, pertaining to any of the Collateral shall: (i) name the Bank as an
insured pursuant to a so-called "standard mortgagee clause"; (ii) provide that
no action of the Company, or any tenant or subtenant shall void such policy as
to the Bank; and (iii) provide that the Bank shall be notified of any proposed
cancellation of such policy at least thirty (30) days in advance of such
proposed cancellation. Copies of all such policies shall be delivered to the
Bank upon request. In the event of a casualty loss, the Company may apply the
proceeds of any insurance to the restoration or replacement of the property or
asset which was the subject of such loss, provided that (A) the Company shall
have demonstrated to the reasonable satisfaction of the Bank that such property
or asset will be restored to substantially its previous condition or will be
replaced by a substantially identical property or asset, and (B) the Bank shall
have received, if requested
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by it, a favorable opinion from counsel for the Company satisfactory in scope
and form to the Bank, as to the Bank's having a prior security interest in and
valid first lien on such restored or replaced property or asset.
5.4 Taxes. The Company shall pay or cause to be paid all taxes, assessments
or governmental charges on or against it or any of its Subsidiaries or its 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. The Company 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 the Company
and its Subsidiaries, (ii) examine and make copies of and take abstracts from
the books and records of the Company and its Subsidiaries, (iii) discuss the
affairs, finances and accounts of the Company and its Subsidiaries with their
appropriate officers, employees and accountants, and (iv) to arrange for
verification of Accounts Receivable, under reasonable procedures, directly with
account debtors or by other methods; and shall do, make, execute and deliver all
such additional and further acts, things, deeds, assurances, and instruments as
the Bank may reasonably require more completely to vest in and assure to the
Bank its rights hereunder or in any Collateral and to carry into effect the
provisions and intent of this Agreement. 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 subsections
5.1(a), (b), (c), (d) or (i) 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 the Company and its Subsidiaries,
(ii) to prospective transferees or purchasers of an interest in the Revolving
Loans if they agree to be bound by the confidentiality obligations of this
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 of the Company 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 Company will maintain its principal
depository and operating accounts with the Bank and shall maintain in such
accounts sufficient funds to make all principal and interest payments when due.
777794.1
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5.8 New Accounts and Investments. The Company will notify the Bank in
writing of any additions or changes in the ownership, location or relevant
account numbers of any depository and operating accounts with a balance equal or
greater than $100,000 and marketable securities owned by the Company and its
Subsidiaries.
5.9 Year 2000 Compliance. Not later than March 31, 1999, the Company shall
have accomplished all actions necessary to assure that its computer-based
systems are able to effectively process data, including dates, on and after
January 1, 2000. The Company shall promptly notify the Bank in writing (i) in
the event of any potential "Year 2000 Problem" (as hereinafter defined) and (ii)
in the event that the Company believes that the requirement specified in the
first sentence of this Section 5.9 has not been met or is not likely to be met
by March 31, 1999. Such written notice shall specify and describe in detail the
nature of the Year 2000 Problem, or reason for actual or anticipated failure to
satisfy the requirements set forth in this Section 5.9, as the case may be,
including a description of the equipment or systems involved, the event causing
such Year 2000 Problem or actual or anticipated failure and the Company's plan
to address such Year 2000 Problem or actual or anticipated failure. For purposes
of this Section 5.9, the term "Year 2000 Problem" means any significant risk
that computer hardware or software used in the Company's business or operations
will not in the case of any dates or time periods occurring after December 31,
1999 function at least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000, and such significant risk would have a
material adverse effect on the Company's business and operations.
5.10 Further Assurances. At any time and from time to time the Company
shall, and shall cause each of its 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 or any Revolving
Loan or other Obligation hereunder remains outstanding, the Company covenants as
follows:
6.1 Indebtedness. Neither the Company 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 Company or any of its Subsidiaries to the Bank
or any of its Affiliates;
(b) Indebtedness existing as of the date hereof and disclosed in
Schedule 6.1 hereto and any refinancing of such indebtedness in amounts not
exceeding the principal amount
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thereof and on terms which are substantially the same as the terms of the
refinanced indebtedness;
(c) Indebtedness of the Company in the principal amount outstanding at
any time not in excess of $1,000,000, to Sepracor;
(d) Indebtedness secured by Permitted Encumbrances; and
(e) Indebtedness in respect of Capital Leases and purchase money
financing for tangible property used in the Company's business in the aggregate
principal amount outstanding at any time not in excess of $1,000,000.
6.2 Contingent Liabilities. Neither the Company nor any of its Subsidiaries
shall create, incur, assume or remain liable with respect to any Guarantees
other than the following:
(a) Guarantees in favor of the Bank or any of its affiliates; and
(b) Guarantees existing on the date hereof and disclosed in Schedule
6.2 hereto or in the financial statements referred to in Section 4.6.
6.3 Sale and Leaseback. Neither the Company 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 Company or any such Subsidiary intends to use for
substantially the same purpose as the property being sold or transferred.
6.4 Encumbrances. Neither the Company 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;
(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(e); provided that such Encumbrances shall not
attach to property and assets of the Company or any Subsidiary not purchased
with the proceeds of such purchase money obligations;
777794.1
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(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 Company nor any Subsidiary will engage
in any line of business if as a result thereof the business of the Company 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 Company nor
any of its Subsidiaries shall 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 the Company may merge or consolidate
into or with the Company if no Default or Event of Default has occurred and is
continuing or would result from such merger and if the Company is the surviving
company.
6.7 Additional Stock Issuance. The Company shall not permit any of its
Subsidiaries to issue any additional shares of its capital stock or other equity
securities, any options therefor or any securities convertible thereto other
than to the Company. Neither the Company nor any of its Subsidiaries shall sell,
transfer or otherwise dispose of any of the capital stock or other equity
securities of a Subsidiary, except (i) to the Company or any of its wholly-owned
Subsidiaries or (ii) in connection with a transaction permitted by this Section
6.7 and by Section 6.6.
6.8 Restricted Payments. The Company will not, and will not permit any
Subsidiary to, declare, order, pay or make any Restricted Payment or set aside
any sum or property therefor at any time; provided so long as no Default or
Event of Default has occurred or is continuing or will be caused thereby,
nothing herein shall be deemed to prohibit the making of (a) distributions of
shares of the Company's capital stock as stock splits or stock dividends, (b)
any cash dividend or distribution by any Subsidiary to the Company and (c) any
other Restricted Payments for which Company shall have received the prior
written consent of the Bank.
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
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good faith by the Company, or the net book value thereof on the books of the
Company as at such time.
6.9 Transactions with Affiliates. The Company will not, and will not permit
any Subsidiary to, directly or indirectly, enter into any lease or other
transaction with any shareholder of or with any Affiliate of the Company or such
shareholder, on terms that are less favorable to the Company 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 Company
may (1) enter into and perform the Cross License Agreement, (2) 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 (3) engage in transactions expressly
permitted by Sections 6.1, 6.6 and 6.7.
6.10 Investments. Neither the Company nor any of its Subsidiaries shall
make or maintain any investments other than (i) existing investments in
Subsidiaries and HemaSure A/S and (ii) Qualified Investments. Neither the
Company nor any of its Subsidiaries shall make any investments or advance any
funds to or in respect of HemaSure A/S.
6.11 ERISA. Neither the Company 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 Company or any of its
Subsidiaries pursuant to Section 4068 of ERISA.
6.12 Observance of Subordination Provisions, etc. The Company 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 Company (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 Loans to Subsidiaries. Neither the Company nor any Subsidiary shall
make any loan to any Subsidiary or HemaSure A/S.
SECTION 7
SECURITY
7.1 Security Interest. As security for the payment and performance of all
Obligations (including, without limitation, the Company's Obligations
hereunder), the Bank shall have and
777794.1
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<PAGE>
the Company hereby grants to the Bank a continuing security interest in all
property of the Company of every kind and description, tangible or intangible,
whether now or hereafter existing, whether now owned or hereafter acquired, and
wherever located, including but not limited to the following (collectively, the
"Collateral"): all furniture, and similar property of the Company; all Accounts
of the Company; all contract rights of the Company; all other rights of the
Company, including, without limitation, amounts due from affiliates, tax
refunds, and insurance proceeds; all interest of the Company in goods or
services as to which an Account Receivable shall have arisen; all files, records
(including, without limitation, computer programs, tapes and related electronic
data processing software) and writings of the Company or in which it has an
interest in any way relating to the foregoing property; all goods, instruments,
documents of title, policies and certificates of insurance, securities, chattel
paper, deposits, cash or other property owned by the Company or in which it has
an interest which are now or may hereafter be in the possession of the Bank or
as to which the Bank may now or hereafter control possession by documents of
title or otherwise; all general intangibles of the Company (including, without
limitation, all patents, trademarks, trade names, service marks, copyrights and
applications for any of the foregoing; all rights to use patents, trademarks,
trade names, service marks, and copyrights of any person and all trade secrets,
know how and other intellectual property rights (collectively "Intellectual
Property"); and any rights of the Company to retrieval from third parties of
electronically processed and recorded information pertaining to any of the types
of collateral referred to in this Section 7.1); any other property of the
Company, real or personal, tangible or intangible, in which the Bank now has or
hereafter acquires a security interest or which is now or may hereafter be in
the possession of the Bank; any sums at any time credited by or due from the
Bank to the Company, including deposits; and proceeds and products of all of the
foregoing; provided that the Bank shall not be deemed to have a security
interest in any technology license entered into by the Company and any third
party other than an Affiliate or Subsidiary of the Company prior to the date
hereof if the granting of such security interest by the Company would be a
violation of such technology license. The provisions of this Section 7.1
applicable to general intangibles consisting of Intellectual Property are
supplemented by the provisions of the Intellectual Property Security Agreement
and any conflict between the provisions of this Agreement as applicable to such
general intangibles and the Intellectual Property Security Agreement shall be
resolved in favor of such Agreement.
7.2 Location of Records and Collateral; Name Change. The Company shall give
the Bank written notice of each location at which Collateral is or will be kept
and of each office of the Company at which the records pertaining to its
Accounts Receivable and contract rights are kept. Except as such notice is
given, all Collateral is and shall be kept, and all records of the Company
pertaining to Accounts and contract rights are and shall be kept at the
Company's chief executive offices at 140 Locke Drive, Marlborough, Massachusetts
01752 or at the Bank. The Company shall give the Bank thirty (30) days prior
written notice of any change in the name or corporate form of the Company or any
change in the name under which the Company's business is transacted.
777794.1
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<PAGE>
7.3 Status of Collateral. As of the date hereof, the Company has good and
marketable title to all of its properties, assets and rights of every name and
nature now purported to be owned by it, including, without limitation, the
Collateral, free from all liens, charges and encumbrances whatsoever, except as
disclosed on Schedule 6.4 hereof. At the time the Company pledges, sells,
assigns or transfers to the Bank any instrument, document of title, security,
chattel paper or other property (including Inventory, contract rights and
Accounts) or any proceeds or products thereof, or any interest therein, the
Company shall be the lawful owner thereof and shall have good right to pledge,
sell, assign or transfer the same; none of such property shall have been
pledged, sold, assigned or transferred to any person other than the Bank or in
any way encumbered, except as disclosed in Schedule 6.4 of this Agreement; and
the Company shall defend the same against the claims and demands of all persons.
SECTION 8
DEFAULTS
8.1 Events of Default. There shall be an Event of Default hereunder if any
of the following events occurs:
(a) the Company 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 Company shall fail to pay within five (5) days after receipt
of notice from the Bank any fees or expenses payable hereunder or under the
Note; or
(c) the Company shall fail to perform any term, covenant or agreement
contained in Sections 5 (except Section 5.3) or 6 or shall fail to perform any
term, covenant or agreement contained in the Intellectual Property Security
Agreement; or
(d) the Company shall fail to perform any term, covenant or agreement
(other than those referred to above in this Section 8.1) contained in this
Agreement and such default shall continue for thirty (30) days; or
(e) any representation or warranty of the Company made in this
Agreement or in the Note, or by the Company in the Intellectual Property
Security Agreement, or by the Company 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 Company or one of its Subsidiaries in excess of
$250,000 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
777794.1
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<PAGE>
to become due prior to its stated maturity upon delivery of required notice and
shall not have been waived pursuant thereto, if any; or
(g) Sepracor shall fail to perform any material provisions of the
Guaranty Agreement or the occurrence of an Event of Default under the Sepracor
Credit Agreement; or
(h) the Company 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 $250,000 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
(i) the Company or any of its Subsidiaries 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
(j) a proceeding or case shall be commenced, without the application
or consent of the Company or any of its Subsidiaries 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 for relief shall be entered in
an involuntary case under the Federal Bankruptcy Code, against the Company or
such Subsidiary; or action under the laws of the jurisdiction of incorporation
or organization of the Company or any of its Subsidiaries similar to any of the
foregoing shall be taken with respect to the Company or such Subsidiary and
shall continue unstayed and in effect for any period of 60 days; or
(k) a judgment or order for the payment of money shall be entered
against the Company or any of its Subsidiaries by any court, or a warrant of
attachment or execution or similar process shall be issued or levied against
property of the Company or such Subsidiary, that in the aggregate exceeds
$250,000 in value and such judgment, order, warrant or process shall continue
undischarged or unstayed for 30 days; or
777794.1
27
<PAGE>
(l) the Company or any member of the Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess of $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 Company, 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 Company 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
(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 Company; or
(n) any Person or Persons acting in concert (other than Sepracor),
together with Affiliates thereof, shall in the aggregate, directly or
indirectly, control or own (beneficially or otherwise) more than 50% (by number
of shares) of the issued and outstanding stock of the Company, or
(o) the Company shall have failed to give the Bank adequate notice
pursuant to Section 5.9 and adequate written assurance that the Company will not
be materially and adversely affected by any actual or potential Year 2000
Problem; or
(p) the occurrence of any event related to HemaSure A/S which has a
material adverse effect on the operations or assets of the Company or its
Subsidiaries.
8.2 Remedies. Upon the occurrence of an Event of Default described in
Sections 8.1(i) and 8.1(j), 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 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 in the same manner as though the Company had exercised its right
to prepayment pursuant to Section 2.6 of this Agreement, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived; and
777794.1
28
<PAGE>
(c) the Bank may exercise any and all rights it has under this
Agreement, the Note 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 Note 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 Note, the Intellectual Property Security Agreement, the Guaranty Agreement,
the other 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.
(e) Without limiting the rights of the Company set forth in this
Section 8.2 above, upon the occurrence of any Event of Default and at any time
thereafter (such Event of Default not having been cured), the Bank shall have
the right to take immediate possession of the Collateral, and for that purpose
the Bank may, so far as the Company can give authority therefor, enter upon any
premises on which the Collateral may be situated and remove the same therefrom.
The Company waives demand and notice with respect to and assents to any
repossession of the Collateral. The Bank may dispose of the Collateral in any
order and in any manner it chooses and may refrain from the sale of any real
property, held as the Collateral, until the sale of personal property. Except
for the Collateral which is perishable or threatens to decline speedily in value
or which is of a type customarily sold on a recognized market, the Bank shall
give to the Company at least ten (10) days' prior written notice of the time and
place of any public sale of the Collateral or of the time after which any
private sale or any other intended disposition is to be made. The residue of any
proceeds of collection or sale, after satisfying all Obligations in such order
of preference as the Bank may determine and making proper allowance for interest
on Obligations not then due, shall be credited to any deposit account which the
Company may maintain with the Bank, or, if there is no such account, held
pending instructions from the Company. The Company shall remain liable for any
deficiency.
(f) The Bank may at any time in its sole discretion (after an Event of
Default has occurred) transfer any securities or other property constituting the
Collateral into its own name or that of its nominee and receive the income
thereon and hold the same as security for Obligations or apply it on principal
or interest due on Obligations. Insofar as the Collateral shall consist of
Accounts or instruments, the Bank may, upon the occurrence of an Event of
Default, without notice to or demand on the Company, demand and collect such
Collateral as the Bank
777794.1
29
<PAGE>
may determine. For the purpose of realizing the Bank's rights therein, the Bank
may receive, open and dispose of mail addressed to the Company and endorse
notes, checks, drafts, money orders, documents of title or other evidences of
payment, shipment or storage or any form of Collateral on behalf of and in the
name of the Company. The powers conferred on the Bank by this Section are solely
to protect the interest of the Bank and shall not impose any duties on the Bank
to exercise any powers.
(g) In addition to all other rights and remedies provided hereunder or
by law, the Bank shall have in any jurisdiction where enforcement of this
Agreement is sought the rights and remedies of a secured party under the Uniform
Commercial Code of Massachusetts.
SECTION 9
MISCELLANEOUS
9.1 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
postage prepaid, or when sent by telex, answerback received, or electronic
facsimile transmission, or when delivered to the telegraph company or overnight
courier, addressed to such party at its address indicated below:
If to the Company, at
Hemasure Inc.
140 Locke Drive
Marlborough, Massachusetts 01752
Attention: James B. Murphy
Senior Vice President Finance and Administration
Fax No.: 508-485-6045
with a copy to:
Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, NY 10022
Attention: Luke P. Iovine, III, Esq.
Fax No.: 212-856-7816
If to the Bank, at
Fleet National Bank
One Federal Street
Boston, Massachusetts 02109
Attention: Kimberly A. Martone
777794.1
30
<PAGE>
Vice President
Fax No.: 617-346-0151
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108
Attention: George Ticknor, Esquire
Fax No.: 617-227-4420
or at any other address specified by such party in writing.
9.2 Expenses. The Company will pay on demand all reasonable expenses of the
Bank in connection with the preparation, waiver or amendment of this Agreement,
the Note or other documents executed in connection therewith, or the
administration, default or collection of the Revolving Loans or other
Obligations or administration, default, collection 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 or any Collateral therefor, and the amount of
all such expenses shall, until paid, bear interest at the rate applicable to
principal hereunder (including any default rate).
9.3 Set-Off. Regardless of the adequacy of any Collateral or 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 Company may, at any time and from time to time after the occurrence of an
Event of Default hereunder, without notice to the Company 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 Company 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
Company hereby grants the Bank a continuing security interest in such deposits,
balances or other sums for the payment and performance of all such obligations.
9.4 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.
9.5 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
777794.1
31
<PAGE>
privilege. The rights and remedies herein and in the Note provided are
cumulative and not exclusive of any rights or remedies otherwise provided by
agreement or law.
9.6 Governing Law. This Agreement and the Note 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).
9.7 Amendments. Neither this Agreement nor the Note 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 Company.
9.8 Binding Effect of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Company and the Bank and their respective successors
and assigns; provided that the Company may not assign or transfer its rights or
obligations hereunder. The Bank may sell, transfer or grant participations in
the Note to any foreign bank only with the prior written consent of the Company.
The Company agrees that any permitted transferee or participant shall be
entitled to the benefits of Sections 2.8, 2.9, 5.5 and 9.3 to the same extent as
if such transferee or participant were the Bank hereunder; provided that
notwithstanding any such transfer or participation, the Company may, for all
purposes of this Agreement, treat the Bank as the person entitled to exercise
all rights hereunder and under the Note and to receive all payments with respect
thereto.
9.9 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.
9.10 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.
9.11 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.
9.12 WAIVER OF JURY TRIAL. THE BANK AND THE COMPANY 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, ANY COLLATERAL 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 COMPANY, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER
THE BANK NOR THE COMPANY HAS
777794.1
32
<PAGE>
AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
9.13 Entire Agreement. This Agreement, the Note 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.
777794.1
33
<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.
HEMASURE INC.
By: /s/ James B. Murphy
----------------------------
Name: James B. Murphy
Title: Senior Vice President
FLEET NATIONAL BANK
By: /s/ Kimberly A. Martone
----------------------------
Name: Kimberly A. Martone
Title: Vice President
777794.1
34
<PAGE>
SCHEDULE 4.10
MATERIAL AGREEMENTS
[To be furnished by the Company]
777794.1
<PAGE>
SCHEDULE 4.11
MATERIAL LICENSES
[To be furnished by the Company]
777794.1
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SCHEDULE 4.12
LITIGATION
[To be furnished by the Company]
777794.1
<PAGE>
SCHEDULE 4.15
EXISTING INVESTMENTS
[To be furnished by the Company]
777794.1
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SCHEDULE 4.16
SUBSIDIARIES
[To be furnished by the Company]
777794.1
<PAGE>
SCHEDULE 6.1
EXISTING INDEBTEDNESS
[To be furnished by the Company]
777794.1
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SCHEDULE 6.2
EXISTING GUARANTIES
[To be furnished by the Company]
777794.1
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SCHEDULE 6.4
EXISTING ENCUMBRANCES
[To be furnished by the Company]
777794.1
Exhibit 10.2
-----------------------------------------------------------------------
-----------------------------------------------------------------------
INTELLECTUAL PROPERTY
SECURITY AGREEMENT
BETWEEN
HEMASURE INC.
AND
FLEET NATIONAL BANK
------------------------------------
Dated as of September 15, 1998
777771.1
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Pledge........................................................1
Section 2. Secured Obligations...........................................3
Section 3. No Release....................................................3
Section 4. Use and Pledge of Pledged Collateral..........................3
Section 5. Supplements; Further Assurances...............................3
Section 6. Representations and Warranties of Pledgor.....................4
Section 7. Covenants.....................................................5
Section 8. Transfers and Other Liens.....................................8
Section 9. Remedies upon Default.........................................8
Section 10. Application of Proceeds.......................................9
Section 11. Expenses.....................................................10
Section 12. No Waiver; Cumulative Remedies...............................10
Section 13. The Bank May Perform; the Bank Appointed Attorney-in-Fact....11
Section 14. Indemnity....................................................11
Section 15. Litigation...................................................13
Section 16. Modifications in Writing.....................................13
Section 17. Termination; Release.........................................14
Section 18. Reinstatement................................................14
Section 19. Notices......................................................14
Section 20. Continuing Security Interest; Assignment.....................14
Section 21. GOVERNING LAW; TERMS.........................................15
Section 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS...............15
Section 23. Severability of Provisions...................................16
Section 24. Execution in Counterparts....................................16
Section 25. Headings.....................................................16
Section 26. Obligations Absolute.........................................16
Section 27. Waiver of Single Action......................................16
Section 28. Future Advances..............................................17
SCHEDULES
Schedule A Patents
Schedule B Trademarks & Service Marks
Schedule C Copyrights
Schedule D Liens
Schedule E Required Consents & Licenses
Schedule F Claims, Litigation, etc.
777771.1
<PAGE>
INTELLECTUAL PROPERTY SECURITY AGREEMENT
Dated as of September 15, 1998
THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "Agreement") is made as
of September 15, 1998, by and between HEMASURE INC., a Delaware corporation
having its principal place of business at 140 Locke Drive, Marlborough,
Massachusetts 01752 ("Pledgor"), in favor of FLEET NATIONAL BANK, having an
office at One Federal Street, Boston, Massachusetts 02110 (the "Bank").
RECITALS
A. Pursuant to that certain Revolving Credit and Security Agreement dated
as of the date hereof (as amended or otherwise modified from time to time in
accordance with the terms thereof and in effect, the "Credit Agreement") by and
between Pledgor and the Bank, the Bank has agreed to make certain Revolving
Loans to Pledgor. Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Credit Agreement.
B. Pledgor is the owner of the Pledged Collateral (as hereinafter defined).
C. It is a condition precedent to the Bank's obligations to make the
Revolving Loans that Pledgor has agreed to execute and deliver the applicable
Loan Documents, including this Agreement.
D. This Agreement is given by Pledgor in favor of the Bank to secure the
payment and performance of all of the Secured Obligations (as defined in Section
2).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and the Bank hereby agree as follows:
Section 1. Pledge. Pledgor hereby pledges and grants to the Bank a
continuing first priority security interest in of Pledgor's all right, title and
interest, whether now existing or hereafter acquired, in and to the following
property (collectively, the "Pledged Collateral") to secure all of the Secured
Obligations:
(a) Patents issued or assigned to and all patent applications assigned
to Pledgor, including, without limitation, the patents and patent
applications listed on Schedule A hereto, along with any and all (1)
inventions and improvements described and claimed therein, (2) reissues,
divisions, continuing prosecution applications,
777771.1
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<PAGE>
continuations, extensions and continuations-in-part thereof, (3) income,
royalties, damages, claims and payments now and hereafter due and/or
payable under and with respect thereto, including, without limitation,
damages and payments for past or future infringements thereof, (4) rights
to sue for past, present and future infringements thereof, and (5) any
other rights corresponding thereto throughout the world (collectively,
"Patents");
(b) Trademarks (including service marks), federal and state trademark
registrations and applications (but excluding any intent to use
application) made by Pledgor, common law trademarks and trade names owned
by or assigned to Pledgor and all registrations and applications for the
foregoing, including, without limitation, the registrations and
applications and unregistered trademarks and service marks listed on
Schedule B hereto, along with any and all (1) renewals thereof, (2) income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including, without limitation, damages, claims and
payments for past or future infringements thereof, (3) rights to sue for
past, present and future infringements thereof, and (4) trademarks,
trademark registrations, and trade name applications for any thereof and
any other rights corresponding thereto throughout the world (collectively,
"Trademarks");
(c) Copyrights, whether statutory or common law, owned by or assigned
to Pledgor, including, without limitation, the registrations and
applications listed on Schedule C hereto, along with any and all (1)
renewals and extensions thereof, (2) income, royalties, damages, claims and
payments now and hereafter due and/or payable with respect thereto,
including, without limitation, damages and payments for past, present or
future infringements thereof, (3) rights to sue for past, present and
future infringements thereof, and (4) copyrights and any other rights
corresponding thereto throughout the world (collectively, "Copyrights");
(d) The entire goodwill of Pledgor's business and other general
intangibles (including know-how, trade secrets, customer lists, proprietary
information, inventions, methods, procedures and formulae) connected with
the use of and symbolized by Trademarks of Pledgor; and
(e) All Proceeds (as defined under the Uniform Commercial Code as in
effect in any relevant jurisdiction (the "UCC") or other relevant law) of
any of the foregoing, and in any event including, without limitation, any
and all (1) proceeds of any insurance, indemnity, warranty or guaranty
payable to the Bank or to Pledgor from time to time with respect to any of
the Pledged Collateral, (2) payments (in any form whatsoever) made or due
and payable to Pledgor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or
any part of the Pledged Collateral by any Governmental Authority (or any
person acting on behalf of a Governmental Authority), (3) instruments
representing amounts receivable in
777771.1
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respect of any Patents, Trademarks or Copyrights, (4) products of the
Pledged Collateral and (5) other amounts from time to time paid or payable
under or in connection with any of the Pledged Collateral;
provided that the Bank shall not be deemed to have a security interest in any
technology license entered into by Pledgor and any third party other than an
Affiliate or Subsidiary of Pledgor prior to the date hereof if the granting of
such security interest by Pledgor would be a violation of such technology
license.
Section 2. Secured Obligations. This Agreement secures, and the Pledged
Collateral is collateral security for, the prompt payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code)
of (1) all Obligations of Pledgor now existing or hereafter arising under or in
respect of the Credit Agreement (including, without limitation, Pledgor's
obligations to pay principal and interest and all other charges, fees, expenses,
commissions, reimbursements, indemnities and other payments related to or in
respect of the obligations contained in the Credit Agreement) and (2) without
duplication, all Obligations of Pledgor now or hereafter existing under or in
respect of this Agreement, including, without limitation, with respect to all
charges, fees, expenses, commissions, reimbursements, indemnities and other
payments, if any, related to or in respect of the obligations contained in this
Agreement (collectively, the "Secured Obligations").
Section 3. No Release. Nothing set forth in this Agreement shall relieve
Pledgor from the performance of any term, covenant, condition or agreement on
Pledgor's part to be performed or observed under or in respect of any of the
Pledged Collateral or from any liability to any Person under or in respect of
any of the Pledged Collateral or impose any obligation on the Bank to perform or
observe any such term, covenant, condition or agreement on Pledgor's part to be
so performed or observed or impose any liability on the Bank for any act or
omission on the part of Pledgor relating thereto or for any breach of any
representation or warranty on the part of Pledgor contained in this Agreement or
any other Loan Document or under or in respect of the Pledged Collateral or made
in connection herewith or therewith. The obligations of Pledgor contained in
this Section 3 shall survive the termination of this Agreement and the discharge
of Pledgor's other obligations hereunder and under the other Loan Documents.
Section 4. Use and Pledge of Pledged Collateral. Unless an Event of Default
has occurred and is continuing, the Bank shall from time to time execute and
deliver, upon written request of Pledgor, any and all instruments, certificates
or other documents, in the form so requested, necessary or appropriate in the
reasonable judgment of Pledgor to enable Pledgor to continue to exploit,
license, use, enjoy and protect the Pledged Collateral throughout the
777771.1
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world; provided, that any such usage complies with the applicable provisions of
the Credit Agreement.
Section 5. Supplements; Further Assurances. Pledgor (1) agrees that it will
join with the Bank in executing and, at its own expense, file and refile, or
permit the Bank to file and refile, such financing statements, continuation
statements and other documents (including, this Agreement), in such offices
(including, without limitation, the United States Patent and Trademark Office,
appropriate state trademark offices and the United States Copyright Office), as
the Bank may reasonably deem necessary or appropriate, wherever required or
permitted by law in order to perfect and preserve the rights and interests
granted to the Bank hereunder, and (2) hereby authorizes the Bank to file
financing statements and amendments, relative to all or any part thereof,
without the signature of Pledgor where permitted by law and agrees to do such
further acts and things, and to execute and deliver to the Bank such additional
assignments, agreements, powers and instruments, as the Bank may reasonably
require to carry into effect the purposes of this Agreement or better to assure
and confirm unto the Bank its respective rights, powers and remedies hereunder.
Pledgor shall, upon the reasonable request of the Bank, and hereby authorizes
the Bank to, take any and all such actions as may be deemed advisable by the
Bank to perfect and preserve the rights and interests granted to the Bank with
respect to the Pledged Collateral wherever located. All of the foregoing shall
be at the sole cost and expense of Pledgor.
Section 6. Representations and Warranties of Pledgor. Pledgor hereby
represents and warrants as follows:
(a) Pledgor is, and, as to Pledged Collateral acquired by it from time
to time after the date hereof, Pledgor will be, the sole and exclusive
owner or, as applicable, licensee of all Pledged Collateral. The pledge and
security interest created by this Agreement shall not at any time be
subject to any prior lien, pledge, security interest, encumbrance, license,
assignment, collateral assignment or charge of any kind, including, without
limitation, any filing or agreement to file a financing statement as debtor
under the UCC or any similar statute or any subordination arrangement in
favor of any party other than Pledgor (collectively, "Liens"), except for
those Liens set forth on Schedule D hereto (collectively, "Prior Liens")
and except as expressly permitted hereunder and under the Credit Agreement.
Pledgor further represents and warrants to the Bank that Schedules A, B and
C hereto, respectively, are true, correct and complete lists as of the date
hereof of all Patents, Trademarks and Copyrights owned by Pledgor and that
Schedules D, E and F hereto are true and correct with respect to the
matters set forth therein as of the date hereof.
(b) Pledgor has full corporate power and authority to pledge and grant
a security interest in the Pledged Collateral in accordance with the terms
of this Agreement and this Agreement constitutes the legal, valid and
binding obligation of Pledgor, enforceable against Pledgor in accordance
with its terms.
777771.1
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<PAGE>
(c) Except as set forth on Schedule E hereto and except for filings
with the Patent and Trademark Office and under the UCC, no authorization,
consent, approval, license, qualification or formal exemption from, nor any
filing, declaration or registration with, any court (other than in
connection with the exercise of judicial remedies), governmental agency or
regulatory authority, or with any securities exchange or any other Person
is required in connection with (1) the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement, or the execution, delivery or
performance by Pledgor of this Agreement, (2) the grant of a security
interest (including the priority thereof when the appropriate filings have
been made and accepted) in the Pledged Collateral by Pledgor in the manner
and for the purpose contemplated by this Agreement or (3) the exercise of
the rights and remedies of the Bank created hereby.
(d) Pledgor has made and will continue to make all necessary filings
and recordations from time to time and use appropriate statutory notice to
protect its interests in the Pledged Collateral, including, without
limitation, recordations of all its interests in the Patents and Trademarks
in the United States Patent and Trademark Office and in corresponding
offices throughout the world and its claims to Copyrights in the United
States Copyright Office, in each case as requested from time to time by
Collateral Agent and in a manner consistent with prudent business
practices.
(e) Pledgor owns or has rights to use all the Pledged Collateral and
all rights with respect to any of the foregoing used in, necessary for or
material to Pledgor's business as currently conducted and as contemplated
to be conducted pursuant to the Loan Documents. To Pledgor's best knowledge
after due inquiry, the use of such Pledged Collateral and all rights with
respect to the foregoing by Pledgor does not infringe on the rights of any
Person and, except as set forth on Schedule F attached hereto, no material
claim has been made and remains outstanding that Pledgor's use of the
Pledged Collateral does or may violate the rights of any third person.
(f) Upon filings and the acceptance thereof in the appropriate offices
under the UCC and in the United States Patent and Trademark Office and the
United States Copyright Office, this Agreement will create a valid and,
with respect to each U.S. Trademark, a duly perfected first priority lien
and security interest in the United States in the Pledged Collateral,
subject to no Liens other than Prior Liens. This Agreement has been duly
and validly executed and delivered by Pledgor, constitutes the legal, valid
and binding obligation of Pledgor and is enforceable against Pledgor in
accordance with its terms.
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<PAGE>
Section 7. Covenants.
(a) On a continuing basis, Pledgor will, at the expense of Pledgor,
subject to any prior licenses, Liens and restrictions make, execute,
acknowledge and deliver, and file and record in the proper filing and
recording offices, all such instruments or documents, including, without
limitation, appropriate financing and continuation statements and
collateral agreements, and take all such action (limited, as aforesaid, if
applicable) as may reasonably be deemed necessary or appropriate by the
Bank (1) to carry out the intent and purposes of this Agreement, (2) to
assure and confirm to the Bank the grant or perfection of a security
interest in the Pledged Collateral for the benefit of the Bank, and (3)
during the continuation of an Event of Default, to enable the Bank to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing,
Pledgor:
(A) will not enter into any agreement that would impair or
conflict with Pledgor's obligations hereunder;
(B) will, from time to time, upon the Bank's request, cause its
books and records to be marked with such legends or segregated in such
manner as the Bank may specify and take or cause to be taken such
other action and adopt such procedures as the Bank may specify to give
notice or to perfect the security interest in the Pledged Collateral
intended to be conveyed hereby;
(C) will, promptly following its becoming aware thereof, notify
the Bank of
(i) any materially adverse determination in any proceeding
in the United States Patent and Trademark Office or United States
Copyright Office with respect to any Patent, Trademark or
Copyright material to Pledgor's business; or
(ii) the institution of any proceeding or any materially
adverse determination in any federal, state, local or foreign
court or administrative bodies regarding Pledgor's claim of
ownership in or right to use any of the Pledged Collateral, its
right to register the Pledged Collateral, or its right to keep
and maintain such registration in full force and effect;
(D) will properly maintain and protect the Pledged Collateral to
the extent necessary or appropriate for the conduct of Pledgor's
business (as presently conducted and as contemplated by the Loan
Documents) and consistent with Pledgor's current practice in
accordance with applicable statutory requirements;
777771.1
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<PAGE>
(E) will not grant or permit to exist any Lien upon or with
respect to the Pledged Collateral or any portion thereof except Liens
in favor of the Bank and Liens permitted by Section 8 hereof, and will
not execute any security agreement or financing statement covering any
of the Pledged Collateral except in the name of the Bank or as
permitted under this Agreement;
(F) except in accordance with prudent business practices, will
not permit to lapse or become abandoned, settle or compromise any
pending or future litigation or administrative proceeding with respect
to the Pledged Collateral without the consent of the Bank, or contract
for sale or otherwise dispose of the Pledged Collateral or any portion
thereof except pursuant to Section 8 hereof;
(G) upon Pledgor obtaining knowledge thereof, will promptly
notify the Bank in writing of any event which may reasonably be
expected to affect the value or utility of the Pledged Collateral or
any portion thereof, the ability of Pledgor or the Bank to dispose of
the Pledged Collateral or any portion thereof or the rights and
remedies of the Bank in relation thereto including, without
limitation, a levy or threat of levy or any legal process against the
Pledged Collateral or any portion thereof;
(H) until the Bank exercises its rights to make collection, will
diligently keep adequate records respecting the Pledged Collateral;
(I) subject to the first sentence of this Section 7(a), hereby
authorizes the Bank, in its sole discretion, to file one or more
financing or continuation statements and amendments thereto, relative
to all or any part of the Pledged Collateral without the signature of
Pledgor where permitted by law;
(J) will furnish to the Bank from time to time statements and
amended schedules further identifying and describing the Pledged
Collateral and such other materials evidencing or reports pertaining
to the Pledged Collateral as the Bank may from time to time request,
all in reasonable detail;
(K) will pay when due any and all taxes, levies, maintenance
fees, charges, assessments, licenses fees and similar taxes or
impositions payable in respect of the Pledged Collateral; and
(L) will comply in all material respects with all laws, rules and
regulations applicable to the Pledged Collateral.
777771.1
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(b) If, before the Secured Obligations shall have been paid and
satisfied in full in cash or cash equivalents, Pledgor shall (1) obtain any
rights to any additional Pledged Collateral or (2) become entitled to the
benefit of any additional Pledged Collateral or any renewal or extension
thereof, including any reissue, division, continuation, or
continuation-in-part of any Patent, or any improvement on any Patent, the
provisions of this Agreement shall automatically apply thereto and any item
enumerated in clause 7(b)(1) or clause 7(b)(2) with respect to Pledgor
shall automatically constitute Pledged Collateral if such would have
constituted Pledged Collateral at the time of execution of this Agreement,
and be subject to the pledge, Lien and security interest created by this
Agreement without further action by any party. Pledgor shall promptly
provide to the Bank written notice of any of the foregoing. Pledgor shall,
at least once in each calendar quarter, provide written notice to the Bank
of all applications for Patents and all applications for registration of
Trademarks or Copyrights made during the preceding calendar quarter.
Pledgor agrees, promptly following the written request by the Bank, to
confirm the attachment of the lien and security interest created by this
Agreement to any rights described in clause 7(b)(1) or clause 7(b)(2) above
if such would have constituted Pledged Collateral at the time of execution
of this Agreement by execution of an instrument in form acceptable to the
Bank.
(c) Pledgor authorizes the Bank to modify this Agreement by amending
Schedules A, B and/or C annexed hereto to include any future Pledged
Collateral of Pledgor, including, without limitations any of the items
listed in Section 7(b).
(d) Pledgor shall, consistent with its current business practices,
file and prosecute diligently all applications for Patents, Trademarks or
Copyrights now or hereafter pending that would be useful or beneficial to
the businesses of Pledgor to which any such applications pertain, and to do
all acts necessary to preserve and maintain all rights in the Pledged
Collateral unless such Pledged Collateral has become obsolete to Pledgor's
business, as reasonably determined by Pledgor consistent with prudent
business practices. Any and all costs and expenses incurred in connection
with any such actions shall be borne by Pledgor. Except in accordance with
prudent business practices, Pledgor shall not abandon any right to file a
Patent, Trademark or Copyright application or any pending Patent, Trademark
or Copyright application or any Patent, Trademark or Copyright without the
consent of the Bank.
Section 8. Transfers and Other Liens. Pledgor will not (a) sell, convey,
assign or otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral except for licensing in the ordinary course of business and
such other transactions as may be permitted under the Credit Agreement or (b)
create or permit to exist any Lien upon or with respect to any of the Pledged
Collateral, except for Liens for taxes, assessments or government charges or
claims the payment of which is not at the time required and inchoate Liens
imposed by law
777771.1
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<PAGE>
(each of which shall, except to the extent otherwise required by law, be
subordinate to the lien created by this Agreement) and the lien granted to the
Bank under this Agreement.
Section 9. Remedies upon Default.
(a) If any Event of Default shall have occurred and be continuing, the
Bank may to the full extent permitted by law (1) exercise any and all
rights as beneficial and legal owner of the Pledged Collateral, including,
without limitation, perfecting assignment of any and all consensual rights
and powers with respect to the Pledged Collateral and (2) sell or assign or
grant a license to use, or cause to be sold or assigned or a license
granted to use any or all of the Pledged Collateral (in the case of
Trademarks, along with the goodwill associated therewith) or any part
thereof, in each case, free of all rights and claims of Pledgor therein and
thereto. In accordance with such rights, the Bank shall have the (A) right
to cause any or all of the Pledged Collateral to be transferred of record
into the name of the Bank or its nominee and (B) the right to impose (i)
such limitations and restrictions on the sale or assignment of the Pledged
Collateral as the Bank may deem to be necessary or appropriate to comply
with any law, rule or regulation (federal, state or local) having
applicability to the sale or assignment, and (ii) any necessary or
appropriate requirements for any required governmental approvals or
consents.
(b) Except as provided in this Section 9 and other express notice
provisions of the Loan Documents, Pledgor hereby expressly waives, to the
fullest extent permitted by applicable law, any and all notices,
advertisements, hearings or process of law in connection with the exercise
by the Bank of any of its rights and remedies hereunder.
(c) Pledgor agrees that, to the extent notice of sale shall be
required by law, ten (10) days' notice from the Bank of the time and place
of any public sale or of the time after which a private sale or other
intended disposition is to take place shall be commercially reasonable
notification of such matters. In addition to the rights and remedies
provided in this Agreement and in the other Loan Documents, the Bank shall
have all the rights and remedies of a secured party under the UCC.
(d) Except as otherwise provided herein, Pledgor hereby waives, to the
fullest extent permitted by applicable law, notice or judicial hearing in
connection with the Bank's taking possession or the Bank's disposition of
any of the Pledged Collateral, including, without limitation, any and all
prior notice and hearing for any prejudgment remedy or remedies and any
such right which Pledgor would otherwise have under law, and Pledgor hereby
further waives to the extent permitted by applicable law: (1) all damages
occasioned by such taking of possession; (2) all other requirements as to
the time, place and terms of sale or other requirements with respect to the
enforcement of the Bank's rights hereunder; and (3) all rights of
redemption, appraisal, valuation, stay,
777771.1
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<PAGE>
extension or moratorium now or hereafter in force under any applicable
law. Any sale of, or the grant of options to purchase, or any other
realization upon, any Pledged Collateral shall operate to divest all right,
title, interest, claim and demand, either at law or in equity, of Pledgor
therein and thereto, and shall be a perpetual bar both at law and in equity
against Pledgor and against any and all-Persons claiming or attempting to
claim the Pledged Collateral so sold, optioned or realized upon, or any
part thereof, from, through or under Pledgor.
Section 10. Application of Proceeds. The proceeds of any Pledged Collateral
obtained pursuant to the exercise of any remedy set forth in Section 9 shall be
applied, together with any other sums then held by the Bank pursuant to this
Agreement, promptly by the Bank:
First, to the payment of all costs and expenses, fees,
commissions and taxes of such sale, collection or other realization,
including, without limitation, reasonable reimbursement to the Bank
and its agents and counsel for all expenses, fees, liabilities and
advances made or incurred by them in connection therewith and all
expenses, liabilities and advances made or incurred by the Bank in
connection therewith, together with interest on each such amount at
the rate then in effect under the Credit Agreement;
Second, to the payment of all other costs and expenses of such
sale, collection or other realization, including, without limitation,
reasonable reimbursement to the Bank and their agents and counsel for
all expenses, fees, liabilities and advances made or incurred by them
in connection therewith and all costs, liabilities and indebtedness
made or incurred by the Bank in connection therewith together with
interest on each such amount at the highest rate then in effect under
the Credit Agreement;
Third, to the indefeasible payment in full in cash of the Secured
Obligations, ratably according to the unpaid amounts thereof, without
preference or priority of any kind among amounts so due and payable;
and
Fourth, to Pledgor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct, of any surplus then remaining
from such Proceeds.
Section 11. Expenses. Pledgor will pay on demand all expenses of the Bank
in connection with the preparation, waiver or amendment of this Agreement, the
Note or other documents executed in connection therewith, or the administration,
default or collection of the Revolving Loans or other Obligations or
administration, default, collection 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,
777771.1
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<PAGE>
and any fees or expenses associated with any travel or other costs relating to
any appraisals or examinations conducted in connection with the Obligations or
any Collateral therefor, and the amount of all such expenses shall, until paid,
bear interest at the rate applicable to principal hereunder (including any
default rate).
Section 12. No Waiver; Cumulative Remedies.
(a) No failure on the part of the Bank to exercise, no course of
dealing with respect to, and no delay on the part of the Bank in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power
or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein provided
are cumulative and are not exclusive of any remedies provided by law.
(b) In the event the Bank shall have instituted any proceeding to
enforce any right, power or remedy under this instrument by foreclosure,
sale, entry or otherwise, and such proceeding shall have been discontinued
or abandoned for any reason or shall have been determined adversely to the
Bank, then and in every such case, Pledgor and the Bank shall, to the
extent permitted by applicable law, be restored to their respective former
positions and rights hereunder with respect to the Pledged Collateral, and
all rights, remedies and powers of the Bank shall continue as if no such
proceeding had been instituted.
Section 13. The Bank May Perform; the Bank Appointed Attorney-in-Fact. If
Pledgor shall fail to do any act or thing that it has covenanted to do hereunder
or any warranty on the part of Pledgor contained herein shall be breached, the
Bank may (but shall not be obligated to) do the same or cause it to be done or
remedy any such breach, and may expend funds for such purpose. Any and all
amounts so expended by the Bank shall be paid by Pledgor promptly upon demand
therefor, with interest at the highest rate then in effect under the Credit
Agreement during the period from and including the date on which such funds were
so expended to the date of repayment. Pledgor's obligations under this Section
13 shall survive the termination of this Agreement and the discharge of
Pledgor's other obligations hereunder. Pledgor hereby appoints the Bank its
attorney-in-fact with an interest, with full authority in the place and stead of
Pledgor and in the name of Pledgor, or otherwise, from time to time in the
Bank's reasonable discretion to take any action and to execute any instruments
consistent with the terms of this Agreement and the other Loan Documents which
the Bank 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. Pledgor hereby ratifies all that such attorney shall lawfully do or
cause to be done by virtue hereof.
777771.1
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<PAGE>
Section 14. Indemnity.
(a) Indemnity. Pledgor agrees to indemnify, reimburse and hold the
Bank and its successors, assigns, employees, agents and servants
(collectively, "Indemnitees") harmless from and against any and all
liabilities, obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all reasonable costs and expenses
(including, without limitation, attorneys' fees and expenses and the
allocated costs of internal counsel) of whatsoever kind and nature imposed
on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement or the other Loan Documents or
in any other way connected with the administration of the transactions
contemplated hereby or the enforcement of any of the terms hereof, or the
preservation of any rights hereunder, or in any way relating to or arising
out of the manufacture, processing, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Pledged
Collateral (including, without limitation, latent or other defects, whether
or not discoverable, any claim for patent, trademark, trade secret or
copyright infringement), the violation of the laws of any country, state or
other governmental body or unit, any tort (including, without limitation,
claims arising or imposed under the doctrine of strict liability, or for or
on account of injury to or the death of any Person (including any
Indemnitee)), or property damage, or contract claim; provided that Pledgor
shall have no obligation to an Indemnitee hereunder to the extent it is
finally judicially determined that such indemnified liabilities arise
solely from the gross negligence or willful misconduct of that Indemnitee.
Upon written notice by any- Indemnitee of the assertion of such a
liability, obligation, damage, injury, penalty, claim, demand, action,
judgment or suit, Pledgor shall assume full responsibility for the defense
thereof. If any action, suit or proceeding arising from any of the
foregoing is brought against any Indemnitee, Pledgor shall, if requested by
such Indemnitee, resist and defend such action, suit or proceeding or cause
the same to be resisted and defended by counsel reasonably satisfactory to
such Indemnitee. Each Indemnitee shall, unless any other Indemnitee has
made the request described in the preceding sentence and such request has
been complied with, have the right to employ its own counsel (or internal
counsel) to investigate and control the defense of any matter covered by
the indemnity set forth in this Section 14 and the fees and expenses of
such counsel shall be paid by Pledgor; provided that, only to the extent
that no conflict exists between or among the Indemnitees as reasonably
determined by the Indemnitees, Pledgor shall not be obligated to pay the
fees and expenses of more than one counsel for all Indemnitees as a group
with respect to any such matter, action, suit or proceeding.
(b) Misrepresentations. Without limiting the application of subsection
15(a), Pledgor agrees to pay, indemnify and hold each Indemnitee harmless
from and against any loss, costs, damages and reasonable expenses which
such Indemnitee may suffer, expend or incur in consequence of or growing
out of any misrepresentation by Pledgor
777771.1
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<PAGE>
in this Agreement or any of the other Loan Documents or in any statement or
writing contemplated by or made or delivered pursuant to or in connection
with this Agreement or any of the other Loan Documents.
(c) Contribution. If and to the extent that the obligations of Pledgor
under this Section 14 are unenforceable for any reason, Pledgor hereby
agrees to make the maximum contribution to the payment and satisfaction of
such obligations that is permissible under applicable law.
(d) Survival. The obligations of Pledgor contained in this Section 14
shall survive the termination of this Agreement and the discharge of
Pledgor's other obligations hereunder and under the other Loan Documents.
(e) Reimbursement. Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Pledged Collateral.
Section 15. Litigation.
(a) Pledgor shall have the right to commence and prosecute in its own
name, as real party in interest, for its own benefit and at its own
expense, such applications for protection of Pledged Collateral, suits,
proceedings or other actions for infringement, counterfeiting, unfair
competition, dilution or other damage as are in its reasonable business
judgment necessary to protect the Pledged Collateral. Pledgor shall
promptly notify the Bank in writing as to the commencement and prosecution
of any such actions, or threat thereof relating to the Pledged Collateral
and shall provide to the Bank such information with respect thereto as may
be reasonably requested. The Bank shall provide all reasonable and
necessary cooperation in connection with any such suit, proceeding or
action, including, without limitation, joining as a necessary party.
(b) Upon the occurrence and during the continuation of an Event of
Default, the Bank shall have the right but shall in no way be obligated to
file applications for protection of the Pledged Collateral and/or bring
suit in the name of Pledgor, the Bank or the Bank to enforce the Pledged
Collateral and any license thereunder; in the event of such suit, Pledgor
shall, at the request of the Bank, do any and all lawful acts and execute
any and all documents required by the Bank in aid of such enforcement and
Pledgor shall promptly, upon demand, reimburse and indemnify the Bank, as
the case may be, for all costs and expenses incurred by the Bank in the
exercise of its rights under this Section 15. In the event that the Bank
shall elect not to bring suit to enforce the Pledged Collateral, Pledgor
agrees to use all measures, whether by action, suit, proceeding or
otherwise, to prevent the infringement, counterfeiting or other diminution
in value of any of the Pledged Collateral by others and for that purpose
agrees to diligently maintain any action, suit or proceeding against any
person so
777771.1
-13-
<PAGE>
infringing necessary to prevent such infringement as is in the reasonable
business judgment of Pledgor necessary to protect the Pledged Collateral
and the Bank shall provide, at Pledgor's expense, all necessary and
reasonable assistance to Pledgor to maintain such action.
Section 16. Modifications in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be in writing and signed by the Bank. Any amendment, modification or
supplement of or to any provision of this Agreement, any waiver of any provision
of this Agreement, and any consent to any departure by Pledgor from the terms of
any provision of this Agreement, shall be effective only in the specific
instance and for the specific purpose for which made or given. Except where
notice is specifically required by this Agreement or any other Loan Document, no
notice to or demand on Pledgor in any case shall entitle Pledgor to any other or
further notice or demand in similar or other circumstances.
Section 17. Termination; Release. When all the Secured Obligations (other
than Secured Obligations in the nature of continuing indemnitees or expense
reimbursement obligations not yet due and payable) have been paid in full and
have been terminated and the Revolving Loan Commitments of the Bank to make any
Loan under the Credit Agreement have expired, this Agreement shall terminate.
Upon termination of this Agreement or any release of Pledged Collateral in
accordance with the provisions of the Credit Agreement, the Bank shall, upon the
request and at the expense of Pledgor, forthwith assign, transfer and deliver to
Pledgor against receipt and without recourse to or warranty by the Bank, such of
the Pledged Collateral to be released (in the case of a release) as may be in
the possession of the Bank and as shall not have been sold or otherwise applied
pursuant to the terms hereof, on the order of and at the expense of Pledgor, and
proper instruments (including UCC termination statements on Form UCC-3 and
documents suitable for recordation in the United States Patent and Trademark
Office, the United States Copyright Office or similar domestic or foreign
authority) acknowledging the termination of this Agreement or the release of
such Pledged Collateral, as the case may be.
Section 18. Reinstatement. Notwithstanding the provisions of Section 17,
this Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any amount received by the Bank in respect of the Secured
Obligations is rescinded or must otherwise be restored or returned by the Bank
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
Pledgor or upon the appointment of any intervenor or conservator of, or trustee
or similar official for, Pledgor or any substantial part of its properties, or
otherwise, all as though such payments had not been made.
Section 19. Notices. Unless otherwise provided herein or in the Credit
Agreement (with respect to the Bank), any notice or other communication herein
required or permitted to be given shall be in writing and may be personally
served, telecopied, telexed or sent by
777771.1
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<PAGE>
United States mail, if to Pledgor, addressed to it at the address set forth in
the Credit Agreement, if to the Bank, addressed to it at the address set forth
on the signature page of this Agreement, or as to any party at such other
address as shall be designated by such party in a written notice to the other
party complying as to delivery with the terms of this Section 19. All such
notices and other communications shall be deemed to have been given when
delivered in person, or received by telecopy or telex; or four Business Days
after deposit in the United States mail, registered or certified, with postage
prepaid and properly addressed; provided that notices to the Bank shall not be
effective until received by the Bank.
Section 20. Continuing Security Interest; Assignment. This Agreement shall
create a continuing security interest in the Pledged Collateral and shall (a)
remain in full force and effect until the payment in full in cash of all Secured
Obligations, (b) be binding upon Pledgor, its successors and assigns, and (c)
inure, together with the rights and remedies of the Bank hereunder, to the
benefit of the Bank and its successors, transferees and assigns; no other
Persons (including, without limitation, any other creditor of Pledgor) shall
have any interest herein or any right or benefit with respect hereto. Without
limiting the generality of the foregoing clause 20(c), the Bank may assign or
otherwise transfer any indebtedness held by it secured by this Agreement to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to the Bank, herein or otherwise, subject
however, to the provisions of the Credit Agreement.
Section 21. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH
OF MASSACHUSETTS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER IN RESPECT OF ANY PARTICULAR INTELLECTUAL PROPERTY ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE COMMONWEALTH OF
MASSACHUSETTS.
Section 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
COMMONWEALTH OF MASSACHUSETTS AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT
PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY,
AND PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
777771.1
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<PAGE>
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. IN THE EVENT THAT PLEDGOR DESIGNATES AND APPOINTS ANY PERSON AS
ITS AGENT AND SUCH PERSON IRREVOCABLY AGREES IN WRITING TO SO SERVE AS PLEDGOR'S
AGENT TO RECEIVE ON PLEDGOR'S BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE IS HEREBY ACKNOWLEDGED BY PLEDGOR TO
BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO PLEDGOR AT ITS ADDRESS PROVIDED FOR
IN SECTION 19 HEREOF. IF ANY AGENT APPOINTED BY PLEDGOR REFUSES TO ACCEPT
SERVICE, PLEDGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE
SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE BANK TO BRING
PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION.
Section 23. Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 24. Execution in Counterparts. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
such counterparts together shall constitute one and the same agreement.
Section 25. Headings. The Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
Section 26. Obligations Absolute. To the extent permitted by applicable
law, all obligations of Pledgor hereunder shall be absolute and unconditional
irrespective of:
(a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition liquidation or the like of Pledgor or any other
Subsidiary of Pledgor;
(b) any lack of validity or enforceability of the Credit Agreement,
any other Loan Document, or any other agreement or instrument relating
thereto;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any other Loan Document, or any other agreement or instrument
relating thereto;
777771.1
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<PAGE>
(d) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Obligations; or
(e) any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Agreement or any other Loan
Document except as specifically set forth in a waiver granted pursuant to
the provisions of Section 16 hereof.
Section 27. Waiver of Single Action. Pledgor hereby waives to the greatest
extent permitted under law the right to a discharge of any of the Secured
Obligations under any statute or rule of law now or hereafter in effect which
provides that the exercise of any particular right or remedy as provided for
herein (by judicial proceedings or otherwise) constitutes the exclusive means
for satisfaction of the Secured Obligations or which makes unavailable any
further judgment or any other right or remedy provided for herein because the
Bank elected to proceed with the exercise of such initial right or remedy or
because of any failure by the Bank to comply with laws that prescribe conditions
to the entitlement to such subsequent judgment or the availability of such
subsequent right or remedy. In the event that, notwithstanding the foregoing
waiver, any court shall for any reason hold that such subsequent judgment or
action is not available to the Bank, Pledgor shall not (a) introduce in any
other jurisdiction any judgment so holding as a defense to enforcement against
Pledgor of any remedy in the Credit Agreement or executed in connection with the
Credit Agreement or (b) seek to have such judgment recognized or entered in any
other jurisdiction, and any such judgment shall in all events be limited in
application only to the state or jurisdiction where rendered and only with
respect to the collateral referred to in such judgment.
Section 28. Future Advances. This Agreement shall secure the payment of any
amounts advanced from time to time pursuant to the Credit Agreement.
777771.1
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
HEMASURE INC.
By: /s/ James B. Murphy
-----------------------
Name: James B. Murphy
Title: Senior Vice President Finance and
Administration
FLEET NATIONAL BANK
By: /s/ Kimberly A. Martone
-----------------------
Name: Kimberly A. Martone
Title: Vice President
777771.1
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<PAGE>
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF ________________
On this ____ day of September, 1998 before me appeared the above-named,
James B. Murphy, Senior Vice President, and acknowledged the foregoing
instrument to be the free act and deed of Hemasure Inc.
--------------------------------
Notary Public
My commission expires:
777771.1
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK, ss.
On this ____ day of September, 1998 before me appeared the above-named,
Kimberly A. Martone, Vice President, and acknowledged the foregoing instrument
to be the free act and deed of Fleet National Bank.
---------------------------------
Notary Public
My commission expires:
777771.1
<PAGE>
SCHEDULE A
PATENTS
[To be furnished by Pledgor]
777771.1
<PAGE>
SCHEDULE B
TRADEMARKS & SERVICE MARKS
(including registrations and applications)
[To be furnished by Pledgor]
777771.1
<PAGE>
SCHEDULE C
COPYRIGHTS
(including registrations and applications)
[To be furnished by Pledgor]
777771.1
<PAGE>
SCHEDULE D
LIENS
[To be furnished by Pledgor]
777771.1
<PAGE>
SCHEDULE E
REQUIRED CONSENTS AND LICENSES
[To be furnished by Pledgor]
777771.1
<PAGE>
SCHEDULE F
CLAIMS, LITIGATION, ETC.
[To be furnished by Pledgor]
777771.1
Exhibit 10.3
HEMASURE INC.
PROMISSORY NOTE
September 15, 1998
$5,000,000 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, up to the principal amount of FIVE
MILLION DOLLARS ($5,000,000) or such lesser amount as shall equal the principal
amount outstanding hereunder on August 31, 2000 (the "Revolving Credit
Termination Date") 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 that certain Revolving Credit and
Security Agreement dated as of the date hereof, by and between the undersigned
and the Bank (herein, as the same may from time to time be amended or extended,
referred to as the "Agreement").
Upon the occurrence and during the continuance of an Event of Default (as
defined in the Agreement), 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 a payment of interest hereunder is not made within 10 days of its due
date, the undersigned will also pay on demand a late payment charge equal to 5%
of the amount of such payment. Nothing in the preceding sentence shall affect
the Bank's rights to exercise any of its rights and remedies provided in the
Agreement if an Event of Default has occurred.
This Note is issued pursuant to, and entitled to the benefits of, and is
subject to, the provisions of 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.
As provided in the Agreement, this Note is secured by certain assets of the
undersigned.
In case an Event of Default 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
777787.1
<PAGE>
with the effect provided in the Agreement.
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, without
penalty or 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).
HEMASURE INC.
By:
--------------------------------------
Name:
Title:
777787.1
<PAGE>
SCHEDULE I TO PROMISSORY NOTE
DATE AMOUNT OF INTEREST AMOUNT PAID NOTATION
REVOLVING RATE MADE BY
LOAN
777787.1
Exhibit 10.4
EXCLUSIVE DISTRIBUTION AGREEMENT
BETWEEN
HEMASURE INC.
AND
COBE BCT, INC.
Exclusive Distribution Agreement dated as of August 14, 1998, between
HEMASURE INC., a corporation organized under the laws of Delaware ("HemaSure"),
and COBE BCT, Inc. a corporation organized under the laws of the State of
Colorado ("COBE").
RECITALS
A. HemaSure manufactures and distributes certain medical products and
supplies, together with parts necessary for repair and replacement and including
all devices now or hereafter manufactured or designed by HemaSure that filter
blood and its components. HemaSure's current Products are identified in the list
attached as Exhibit 1 (collectively, the "Products"), and such list may be
updated with mutual agreement from time to time to reflect additional Products
as described above (the "Product List").
B. The parties desire that COBE be the exclusive distributor, and that
HemaSure be the exclusive supplier to COBE, pursuant to this agreement (the
"Distribution Agreement"), for the Products throughout the world except for
China and the United States (the "Territory"), for a term commencing on August
14, 1998 (the "Commencement Date").
C. The parties also desire to have HemaSure supply to COBE certain
Products which will be incorporated into medical devices manufactured by COBE
for sale to Affiliates and to third parties (the "COBE Products").
In consideration of these premises and the mutual promises made herein
by the parties to each other, they agree as follows:
ARTICLE 1 - APPOINTMENT
1.1 HemaSure hereby appoints COBE as its exclusive distributor for the
Products with the right to appoint sub-distributors, in the Territory and for
the term of this Agreement, and COBE hereby accepts this appointment. In return,
COBE appoints HemaSure as its sole and exclusive supplier of the Products, for
the term of this Agreement, and HemaSure accepts this appointment.
1.2 All Products shall meet specifications supplied by COBE; provided,
however, that HemaSure, upon thirty (30) days prior written notice specifying
the nature of and
778877.1
<PAGE>
reasons for such changes, shall have the right to make any changes in the
specifications of the Products to the extent necessary to satisfy regulatory
requirements or to avoid a material adverse affect on the quality or performance
of the Products.
1.3 If COBE requests additional Products from HemaSure, or additional
development with respect to a Product, the parties agree to negotiate in good
faith the terms of a development agreement (a "Development Agreement") for the
additional Products or development services. Product development shall be
conducted in accordance with mutually agreed upon plans setting forth the
estimated cost and expense, the proposed specifications for and uses of the
Products and the requirements for and timing of the design, performance, quality
and manufacturability validation, regulatory approval and manufacturing
requirements.
1.4 In connection with any development pursuant to a Development
Agreement, if COBE pays for the complete development of any additional Products
or portions thereof, any improvements to HemaSure's Owned Intellectual Property
resulting therefrom (the "Improvements") shall be COBE's Owned Intellectual
Property, but HemaSure shall have a perpetual, non-exclusive, world-wide,
royalty-free license under such Improvements and Intellectual Property outside
the field of devices that filter blood and its components. If HemaSure's Owned
Intellectual Property existing on the date of any such Development Agreement is
required to practice any such COBE's Owned Intellectual Property, COBE shall
have a perpetual non-exclusive, world-wide, royalty-free license under such
HemaSure Owned Intellectual Property for the term of this Agreement (as such
term may be extended), limited to the field of devices that filter blood and its
components. Additionally, after the term of this Agreement, the provisions of
Section 7.8 shall apply to any product sales by COBE utilizing such HemaSure
Owned Intellectual Property, and HemaSure shall be entitled to the 12% royalty
contemplated in Section 7.8. Notwithstanding the above, any final Development
Agreement may set forth terms and conditions which are different than those set
forth in this Section 1.4.
1.5 COBE's sole compensation under this Agreement shall be the profit
it may realize from the resale of the Products.
1.6 COBE shall not, without the written consent of HemaSure: (i) seek
customers or establish any branch or maintain any distribution depot for the
Products outside the Territory, or (ii) knowingly sell the Products to any
customer for use outside the Territory.
1.7 COBE shall be fully responsible for the acts and conduct of its
employees, agents, sub-agents and sub-distributors and shall indemnify and hold
HemaSure harmless from all claims, liabilities and damages arising out of any
negligence or misconduct of COBE or its employees, agents, sub-agents or
sub-distributors.
1.8 Neither COBE nor HemaSure shall disclose to any third party any
trade secrets of the other party or any Confidential Information concerning the
other party, its Products
-2-
778877.1
<PAGE>
or its business. The terms of the Confidentiality Agreement between them are
attached as Exhibit 2 and incorporated herein by reference. When this Agreement
terminates, except as otherwise agreed, each party shall promptly return to the
other party all trade secret and Confidential Information of said other party
and shall not disclose or otherwise use such information for a period of three
years after the date of termination.
1.9 The following definitions shall apply to this Agreement:
(a) "Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
(b) "Intellectual Property" of COBE or HemaSure, as the case may be, means
(a) inventions, whether or not patentable, whether or not reduced to practice,
and whether or not yet made the subject of a pending patent application or
applications, (b) ideas and conceptions of potentially patentable subject
matter, including, without limitation, any patent disclosures, whether or not
reduced to practice and whether or not yet made the subject of a pending patent
application or applications, (c) national (including the United States) and
multinational statutory invention registrations, patents, patent registrations
and patent applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights therein
provided by international treaties or conventions and all improvements to the
inventions disclosed in each such registration, patent or application, (d)
trademarks, service marks, trade dress, logos, trade names and corporate names,
whether or not registered, and all rights therein provided by international
treaties or conventions, (e) copyrights (registered or otherwise) and
registrations and applications for registration thereof, and all rights therein
provided by international treaties or conventions, (f) computer software,
including, without limitation, source code, operating systems and
specifications, data, data bases, files, documentation and other materials
related thereto, data and documentation, (g) trade secrets and confidential,
technical and business information (including ideas, formulas, compositions,
inventions, and conceptions of inventions whether patentable or unpatentable and
whether or not reduced to practice), (h) whether or not confidential, technology
(including know-how and show-how), manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information, (i) copies and
tangible embodiments of all the foregoing, in whatever form or medium, (j) all
rights to obtain and rights to apply for patents, and to register trademarks and
copyrights, and (k) all rights to sue or recover and retain damages and costs
and attorneys' fees for present and past infringement of any of the foregoing.
(c) "Licensed Intellectual Property" means all Intellectual Property
licensed or sublicensed to COBE or HemaSure, as the case may be, from a third
party.
-3-
778877.1
<PAGE>
(d) "Owned Intellectual Property" means all Intellectual Property, other
than the Licensed Intellectual Property, in and to which COBE or HemaSure, as
the case may be, holds, or has a right to hold, any right, title or interest.
(e) "Person" means an individual, corporation, partnership, association,
trust, joint venture, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Securities Exchange Act of 1934).
ARTICLE 2 - DUTIES OF COBE
During the term of this Distribution Agreement COBE will:
2.1 Use commercially reasonable efforts to market and sell the
Products and develop a profitable market for them in the Territory.
2.2 Maintain and utilize such personnel, organization and facilities
as will be competent and adequate to enable COBE to satisfy its obligations
under this Agreement.
2.3 At least thirty days before the end of each calendar quarter,
prepare and furnish to HemaSure a proposed annual purchase forecast by month for
the following four calendar quarters, specifying the quantities of the Products
which COBE forecasts will be purchased for delivery during each month of that
year; provided, however, that in no event may HemaSure be required to deliver
quantities of any Product during a month which exceed 110% of the maximum
deliveries of such Product to COBE during any earlier calendar month. All orders
for shipment of Products within 30 days from the order shall be deemed to be
firm and non-cancelable.
2.4 Purchase from HemaSure and at all times maintain the minimum
inventories of Products to provide adequate service and delivery to customers in
the Territory. COBE shall meet the minimum purchase requirement set forth in
Exhibit 3, attached hereto, as the same shall be amended from time to time. The
parties shall meet at least three months before the end of each calendar year
beginning in the year 2000 and negotiate in good faith the minimum purchase
requirements for the following calendar year, provided, that if they fail to
agree by the beginning of the year the aggregate minimum purchase requirements
for all Products during that year shall equal 110% of such aggregate minimum
requirements for the preceding year.
2.5 Advise HemaSure of inquiries which COBE or any affiliates receive
from potential customers for the Products outside the Territory and shall use
its commercially reasonable efforts to transfer to HemaSure all customers who
are reasonably likely to use the Products outside the Territory.
-4-
778877.1
<PAGE>
2.6 Except as otherwise agreed by the parties in writing, obtain all
regulatory approvals, registrations, and listing of Products required (F.D.A.,
C.E., C.S.A., etc.) in the Territory to make and sell COBE Products, or certify
that such approvals and registrations have been obtained or are not required,
and comply with all applicable laws, standards, rules and regulations.
2.7 Not modify or alter the Products in any way without the prior
written approval of HemaSure.
2.8 Indemnify and hold harmless HemaSure and its Affiliates and
customers, and their officers, directors, agents and employees, from and against
losses, claims and damages (including reasonable fees and expenses of counsel)
("Losses") as they are incurred, but solely to the extent such Losses arise out
of or are related to any claim by a third party that any Product modifications
or specifications requested by COBE conflict with or infringe upon Intellectual
Property owned or licensed by the third party.
2.9 Indemnify and hold harmless HemaSure and its Affiliates and
customers, and their officers, directors, agents and employees, from and against
Losses as they are incurred, solely to the extent such Losses arise out of or
are related to any claim by a third party that any Product has caused personal
injury or other loss to the third party, and only to the extent such actual or
alleged personal injury or loss arises from a modification to such Product
requested in writing by COBE. COBE shall maintain product liability insurance
covering such risks, on terms and conditions reasonably acceptable to HemaSure,
naming HemaSure and its Affiliates as additional insureds.
2.10 In connection with the promotion and marketing of the Products,
(i) make clear in all dealing with customers that it is acting as a distributor
of the Products and not as an agent of HemaSure, (ii) comply with all material
legal requirements with respect to the storage and sale of the Products, (iii)
provide, at the reasonable request of HemaSure, copies of its price lists and
copies of promotional aids and literature, (iv) permit HemaSure's
representatives to visit during normal business hours, upon reasonable advance
notice, any premises of COBE used in connection with the sale of the Products,
(v) use only those advertising, promotional and other selling materials approved
by HemaSure (which approval shall not be unreasonably withheld).
2.11 Provide full traceability of the Products to its customers. COBE
agrees that at all times it will be able to know its customer for each
individual Product lot for all Products delivered by HemaSure to COBE.
2.12 COBE shall be responsible (when applicable) for obtaining any
necessary import licenses, or other requisite documents, with respect to the
importation of the Products into the Territory and their resale in the
Territory.
-5-
778877.1
<PAGE>
2.13 Provide information to HemaSure on Product complaints received. A
complaint is considered to be any oral or written expression of dissatisfaction
with the identity, quality, durability, reliability, safety, effectiveness, or
performance of a product. Any complaint involving injury or death will be
reported immediately to HemaSure. COBE will be responsible for follow-up
communication with the customer.
2.14 COBE shall cause its warehouses and distribution networks to be
maintained and operated (i) in a manner that will protect the integrity and
quality of the Products, maintaining safety and efficacy at all times; (ii) to
ISO 9000 standards with respect to traceability and complaints, and (iii) to
conform to all national regulatory and other requirements.
2.15 HemaSure shall be COBE's exclusive supplier for any and all
devices and products substantially identical to the Products for sale in the
Territory or that have uses or intended uses substantially identical to the
Products, and COBE shall not purchase any such devices or devices for sale in
the Territory from any other party other than HemaSure and shall purchase all of
its requirements for such products and devices from HemaSure.
ARTICLE 3 - DUTIES OF HEMASURE
During the term of this Distribution Agreement, HemaSure will:
3.1 Manufacture the Products, or have them manufactured, at locations
outside the United States, unless COBE gives prior written consent to their
manufacture in the United States. HemaSure shall manufacture each Product in
sufficient quantities to permit timely delivery of the quantities of the Product
provided for in COBE's forecast.
3.2 Package and mark the Products under COBE's name, in such manner as
COBE may reasonably direct, provided that Products sold to an original equipment
manufacturer ("OEM") unaffiliated with COBE for incorporation into devices
manufactured by the OEM may be labeled with HemaSure's trademarks if COBE
consents.
3.3 Advise COBE of inquiries which HemaSure or its other distributors
receive from potential customers for the Products within the Territory and shall
use its commercially reasonable efforts to transfer to COBE all customers for
the Products who are located within the Territory.
3.4 Except as otherwise agreed by the parties, obtain all regulatory
approvals, registrations, and listing of Products required (F.D.A., C.E.,
C.S.A., etc.) to sell the Products in the Territory (other than for Products
incorporated into devices manufactured by COBE), or certify that such approvals
and registrations have been obtained or are not required, and comply with all
applicable laws, standards, rules and regulations.
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3.5 Perform any investigations required with respect to Product
complaints and similar events and take necessary corrective action, keeping COBE
informed of such investigations and corrective action. HemaSure will conduct any
field actions which may be necessary, including Product recalls, modifications
and upgrades, as determined by HemaSure in its reasonable discretion. Any
extraordinary costs of conducting a field action, such as replacement of Product
and return of Product, shall be borne by HemaSure.
3.6 Notify COBE at least 90 days in advance of any changes in the
Products.
3.7 Comply with the Good Manufacturing Practices (GMP) regulations of
the U.S.F.D.A. and similar requirements of other jurisdictions within the
Territory, making HemaSure's records and documents available and cooperating
with COBE should COBE audit HemaSure for compliance with regulatory
requirements.
3.8 Replace all defective Products at HemaSure's expense, including
all reasonable delivery, handling and related costs of the replacement.
3.9 Take such commercially reasonable actions as may be needed in
order to protect its rights in HemaSure's Owned Intellectual Property against
infringement, and to maintain its proprietary interest in its Owned Intellectual
Property in full force and effect.
3.10 Indemnify and hold harmless COBE and its Affiliates and
customers, and their officers, directors, agents and employees, from and against
Losses as they are incurred, arising out of or related to any claim by a third
party that any Product conflicts with or infringes upon Intellectual Property
owned or licensed by the third party.
3.11 Indemnify and hold harmless COBE and its Affiliates and
customers, and their officers, directors, agents and employees, from and against
Losses as they are incurred, arising out of or related to any claim by a third
party that any Product has caused personal injury or other loss to the third
party. HemaSure shall maintain product liability insurance covering such risks,
on terms and conditions reasonably acceptable to COBE, naming COBE and its
Affiliates as additional insureds.
3.12 Warrant the Products to COBE and its customers under its standard
product warranty as set forth in Exhibit 4 hereto.
3.13 The representations, warranties and indemnification given by
HemaSure herein are subject to the conditions that HemaSure shall not be under
liability in respect of any defect in the Products:
(i) to the extent such defect arises solely from any specification or
modifications supplied by COBE in writing, or
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(ii) to the extent such defect arises solely from willful misconduct,
gross negligence, failure to follow HemaSure's written
instruction, or alteration of the Products without HemaSure's
approval.
ARTICLE 4 - TRADEMARKS
4.1 COBE may use HemaSure's names and marks in advertising, or
marketing and information materials, on COBE's letterheads or at its place of
business, to indicate that the Product is manufactured for COBE by HemaSure (but
not that COBE is otherwise associated with HemaSure). COBE may not otherwise use
HemaSure's trademarks, trade names, or company name in connection with the
promotion or sale of any goods or services, except with HemaSure's prior written
approval. Upon termination of this Agreement for any reason, COBE will
immediately stop using HemaSure's trademarks and trade or company names and will
stop advertising or otherwise indicating that COBE is a distributor of the
Products. COBE hereby acknowledges that HemaSure has the sole rights to such
trade names, company names and trademarks.
4.2 COBE shall not:
(i) make any modifications to the Products or their packaging, except
on specific instructions from local, state or federal authorities
(any modifications for purposes of enhancing the product sales is
to be submitted to HemaSure for approval and said approval shall
not be unreasonably withheld);
(ii) alter, remove or tamper with any Trade Marks, number, or other
means of identification used on or in relation to the Products;
(iii)use any of the Trade Marks in any way which might prejudice their
distinctiveness or validity or the goodwill of HemaSure;
(iv) use in relation to the Products any trade marks other than the
Trade Marks without obtaining the prior written consent of
HemaSure; or
(v) use in the Territory any trade marks or trade names in any way
similar to any Trade Mark or trade names of HemaSure or which
would be likely to cause confusion to customers or potential
customers.
; provided that Section 4.2 (i), (ii) and (iv) shall not apply to COBE Products.
4.3 COBE shall, at the expense of HemaSure, take all such reasonable
steps as HemaSure may reasonably require to assist HemaSure in maintaining the
validity and
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enforceability of the Trade Marks of HemaSure during the term of this Agreement.
COBE shall at the request of HemaSure execute such registered user agreement or
licenses in respect of the use of the Trade Marks in the Territory as HemaSure
may reasonably require, provided that the provisions of any such agreement or
license are not more onerous or restrictive than the provisions of this
Agreement.
4.4 COBE shall promptly notify HemaSure in writing of any actual or
threatened (in writing) infringement in the Territory of any Trade Marks of
HemaSure which comes to COBE's actual notice and of any claim by any third party
so coming to its notice that the importation of the Products into the Territory,
or their sale therein, infringes any rights of any other person, and COBE shall
at the request and expense of HemaSure do all such reasonable things as may be
reasonably required to assist HemaSure in taking or resisting any proceedings in
relation to any such infringement or claim.
4.5 HemaSure may seek to register its trademarks, trade names and
company names in the Territory, and do whatever it deems desirable to prevent
their unauthorized use by others.
4.6 To the extent necessary to fulfill HemaSure's obligations under
paragraphs 3.2, HemaSure is hereby licensed by COBE to apply COBE's trademarks
and trade names to Products to be sold by COBE. COBE shall at all times have
control of the quality of goods bearing COBE's trademarks and trade names and
may reject any products not meeting COBE's quality requirements. Such quality
requirements shall be comparable to the quality requirements established by COBE
for goods manufactured by COBE. HemaSure may not otherwise use COBE's
trademarks, trade names, or company names in connection with the promotion of
sale of any goods or services, except with COBE's prior written approval. Upon
termination of this Agreement for any reason, HemaSure will immediately stop
using COBE's trademarks and trade or company names. HemaSure hereby acknowledges
that COBE has the sole rights to such trademarks and trade and company names.
4.7 COBE may seek to register its trademarks and trade and company
names for use in connection with its sale of the Products in the Territory, and
do whatever COBE deems desirable to prevent their use by others.
ARTICLE 5 - TERMS OF SALES
5.1 COBE shall pay the prices determined as specified in Exhibit 1 for
the Products. The prices set forth in Exhibit 1 will remain in effect until
December 31, 1999. Thereafter, HemaSure and COBE shall negotiate annually in
good faith to establish annual price changes to remain in effect for each annual
period following 1999. Unless otherwise agreed, prices for each Product shall
increase or decrease each year by a percentage equal to any
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percentage increase or decrease in the standard manufacturing cost for the
Product (as determined by HemaSure in accordance with generally accepted
accounting principles and HemaSure's historical accounting practices) during
HemaSure's preceding fiscal year, as more fully set forth in Exhibit 1, provided
that in no event shall such percentage change exceed the percentage change in
COBE's average selling price for the Product during the preceding fiscal year.
5.2 Unless otherwise agreed in writing, all prices for the Products
shall be F.O.B. HemaSure's factory, freight collect, and shall be inclusive of
all taxes, duties and other governmental charges assessed or assessable prior to
passage of title to COBE. Title to the Products and risk of loss shall pass to
COBE on delivery of the Products to the destination specified by COBE in its
purchase orders. Products shall be shipped against COBE purchase orders
specifying shipment dates, transportation requirements and quantities of
Products.
5.3 Unless otherwise agreed in writing, all payments for the Products
shall be made in U.S. dollars, payable within 30 days after delivery, by check
drawn on a U.S. bank.
5.4 The Products will be packaged for shipping in packaging labeled as
provided in paragraph 3.2, substantially comparable in all other respects to
HemaSure's standard packaging, which shall be appropriate for shipment by the
means/carrier specified by COBE in its purchase orders.
5.5 Other terms of sale shall be as agreed to by the parties.
ARTICLE 6 - TRAINING; MARKETING
6.1 To the extent deemed reasonably necessary by COBE and HemaSure,
HemaSure will provide COBE's service personnel with reasonable technical
training for the proper maintenance of the Products, at a mutually agreed upon
location and date. For this purpose, HemaSure will pay for the expenses of its
personnel and, unless the parties have agreed otherwise in advance, COBE shall
bear all expenses of its personnel associated with this training.
6.2 To the extent deemed reasonably necessary by COBE and HemaSure,
HemaSure will provide marketing and sales training and product information to
COBE's sales personnel at a mutually agreed upon location and date. For this
purpose, HemaSure will pay the expenses of its personnel and, unless the parties
have agreed otherwise in advance, COBE shall bear all expenses of its personnel
associated with the training.
6.3 At COBE's reasonable request HemaSure will make technical visits
and presentations to COBE customers, at such times and places as COBE may
reasonably request and subject to the availability of appropriate HemaSure
personnel. COBE will reimburse HemaSure for its reasonable out-of-pocket costs
for such visits and presentations, including per diem charges
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based on HemaSure's actual costs for the employees involved. HemaSure may also
initiate such visits and presentations with COBE's prior approval and at the
expense of HemaSure.
6.4 HemaSure shall supply COBE with standard product information in
the English language and such other English language advertising material, sales
literature and instructions as HemaSure and COBE deem appropriate to assist COBE
in the promotion, sale and service of the Products in the Territory. Additional
quantities of such materials may be purchased by COBE at prices quoted by
HemaSure from time to time. Unless otherwise agreed, any other advertising and
promotional expenses shall be paid by COBE. COBE may modify, adapt or reproduce
any such information provided by HemaSure to the extent COBE deems appropriate
to fulfill its obligations under this Agreement, subject to the approval of
HemaSure, which will not be withheld unreasonably.
ARTICLE 7 - TERM OF AGREEMENT
7.1 This Agreement shall become effective as of the Commencement Date
and, unless earlier terminated in accordance with its provisions, shall remain
in effect for a period of five (5) years. At any time in the next to last year
of a term either party may give written notice to the other party of its intent
to terminate this Agreement at the end of the then-current term. If neither
party gives such notice to the other party, this Agreement shall be extended
automatically for an additional term of three (3) years.
7.2 Either party may terminate this Agreement for a material breach of
the Agreement by the other party, by notifying the other party in writing of
such breach and, except as otherwise provided in paragraphs 7.3, 7.4 and 7.5,
allowing sixty (60) days within which to cure the breach. If the breach is not
cured within the sixty (60) day period, the complaining party may terminate this
Agreement at any time thereafter by giving written notice of termination to the
defaulting party. Failure to exercise this right of termination in any instance
of breach shall not be a waiver of this right as to any subsequent breach.
7.3 This Agreement shall terminate automatically, upon written notice
by one party to the other party, without any further notice, summons or process
whatever, if one of the following circumstances occurs:
(a) An event of bankruptcy occurs with respect to the other
party; or
(b) Either party ceases to function as a going concern or ceases
to engage in the business or activities which are the subject of this Agreement.
7.4 COBE may, at its discretion, terminate this Agreement for cause
immediately upon written notice if:
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(a) HemaSure has failed to supply any Products in quantities
greater than 85% of the minimum amounts forecasted for two of any six
consecutive calendar quarters.
(b) HemaSure violates the provisions of Section 1.1.
7.5 Notwithstanding the foregoing, HemaSure's sole remedy in the event
COBE fails to meet the minimum purchase requirements of Exhibit 3 shall be the
remedies set forth in such Exhibit 3; provided, that COBE may cure any such
breach within the sixty (60) day notice period by ordering sufficient Products
to fulfill the minimum for the quarter during which the sixty (60) day period
ends.
7.6 Neither HemaSure nor COBE owns or shall be deemed to own any right
of property in this Agreement.
7.7 In the event of termination of this Agreement for any reason, the
provisions of paragraphs 1.4, 1.7, 2.8, 2.9, 3.8-3.12, 7.7, 7.8, 7.9, 7.10 and
10.5-10.8 shall nevertheless remain in effect.
7.8 If this Agreement expires by its terms, or is terminated for any
reason other than willful default by COBE, COBE shall have and is hereby granted
a non-exclusive, world-wide perpetual license of HemaSure's Owned Intellectual
Property (but only to the extent such Owned Intellectual Property exists and is
in effect as of the date of the termination) to make, have made, use and sell
devices for filtration of blood and its components, for a royalty, as to any
Product (but only in the Territory) and/or COBE Product (on a world-wide basis)
incorporating such HemaSure Owned Intellectual Property, equal to 12% of the
most recent net purchase price paid by COBE to HemaSure for that Product.
7.9 Notwithstanding Section 7.8, above, if termination or expiration
happens solely as a result of COBE's providing HemaSure notice of termination at
the end of the then-current term under Section 7.1 above, then the COBE license
provided for in Section 7.8 will be a limited time period license for all
Products (except those Products used as a component of COBE's own products,
which shall remain a perpetual license), so as to allow a commercially
reasonable market transition by COBE to other suppliers or distributors.
7.10 Within sixty days following the expiration or termination of this
Agreement, HemaSure shall repurchase from COBE at the original purchase price
any Products delivered to COBE in the sixty days prior to the expiration or
termination of this Agreement, which remain in COBE's inventory and which have
remaining shelf life and are in good re-sellable condition.
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ARTICLE 8 - ASSIGNMENT
8.1 This Agreement shall not be assignable by either party without the
prior written consent of the other party, except that COBE may assign the
Agreement to an Affiliate and, subject to the other party's rights of
termination in Article 7, either party may assign the Agreement as a part of the
sale of substantially all of its assets related to its blood filtration products
business.
ARTICLE 9 - LIMIT OF LIABILITY
9.1 The parties shall not be liable for any breach of this Agreement
resulting from any cause beyond their control including, without limitation,
acts of God, fire, flood, strike, lockout, factory shutdown, act of civil or
military authority, priority request, order of any government or any department
or agency thereof, insurrection, riot, war, embargo, or a party's inability to
obtain labor or materials from its usual sources. Any suspension of a party's
performance by reason of this Section shall be limited to the period during
which the cause of such suspension exists, but shall not affect or extend the
running of the term of this Agreement.
9.2 HemaSure shall maintain its current comprehensive general and
product liability insurance in effect for the term of this Agreement. The
insurance shall name COBE on the list of distributors subject to vendor's
coverage. HemaSure shall provide COBE proof of the continued maintenance of the
insurance annually.
9.3 COBE assumes all risk and liability for loss, damage or injury to
any person or property arising from repair, alteration, misuse, mishandling, or
negligence in storing or handling, of any Products by COBE, including its agents
and employees. COBE's product liability insurance shall cover risks of loss
caused by Products incorporated into devices manufactured by COBE, and HemaSure
shall be a named insured under its product liability policy.
ARTICLE 10 - MISCELLANEOUS
10.1 The parties shall comply with all governmental rules and
regulations in force within the Territory relating to this Agreement, including
without limitation any registration or approval required for the import and sale
of the Products, except where non-compliance would not have a Material Adverse
Effect on either party. HemaSure shall comply with all governmental rules and
regulations to the extent necessary for the performance of HemaSure's
obligations under this Agreement.
10.2 All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by telecopy or by
registered or certified mail (postage prepaid, return
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receipt requested) to the respective parties at the following addresses (or at
such other address for a Party as shall be specified by like notice):
(a) if to COBE:
COBE BCT, Inc.
1185 Oak Street
Lakewood, Colorado 80215
Attention: Edward C. Wood
Telecopier: (303) 988-5782
with copies to:
Legal Department
COBE Laboratories, Inc.
1201 Oak Street
Lakewood, Colorado 80215
Telecopier: (303) 231-4198
and to:
Hardin Holmes, Esq.
Ireland, Stapleton, Pryor & Pascoe, P.C.
1675 Broadway, 26th Floor
Denver, Colorado 80202
Telecopier: (303) 623-2062
(b) if to HemaSure:
HemaSure Inc.
140 Locke Drive
Marlborough, MA 01752
Attention: James B. Murphy
Telecopier: (508) 485-6045
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, NY 10022
Attention: Luke P. Iovine, III
Telecopier: (212) 339-9150
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10.3 The failure of either party to exercise any rights hereunder
shall not be deemed to be a waiver of such right.
10.4 No modification or amendment to this Agreement shall be binding
unless in writing, duly executed by both parties. In the event of any
inconsistent term or condition of a purchase order, invoice or other document
utilized by the parties in connection with matters contemplated under this
Agreement, the terms and conditions of this Agreement shall be deemed to govern.
10.5 In the event that COBE initiates any action under either Section
10.6 or Section 10.7 of this Agreement, this Agreement shall be governed by and
construed under the laws of the State of New York, without reference to its
conflicts of laws provisions. In the event that HemaSure initiates any action
under either Section 10.6 or Section 10.7 of this Agreement, this Agreement
shall be governed by and construed under the laws of the State of Colorado,
without reference to its conflicts of laws provisions.
10.6 If a dispute arises from or relates to this Distribution
Agreement or the breach thereof, whether of law or fact, of any nature
whatsoever, and such dispute cannot be settled through direct discussions
between the parties, the parties agree to endeavor first to settle the dispute
in an amicable manner by mediation administered by the American Arbitration
Association under its Commercial Mediation Rules before resorting to litigation.
The parties agree that the mediator shall be a person who is, or has served as,
a senior vice president of a medical products company for at least five (5)
years. Mediation shall take place in the Denver, Colorado metropolitan area in
the event HemaSure initiates the action, or in New York, New York, in the event
COBE initiates the action. If the dispute cannot be resolved within 60 days of
the initiation thereof by either party, either party may initiate arbitration in
accordance with the provisions of Section 10.7 of this Agreement.
10.7 All disputes arising under this Agreement that cannot be amicably
resolved under Section 10.6, shall be settled by binding arbitration. If Cobe
initiates such arbitration, it shall take place in the New York, New York
metropolitan area, and if HemaSure initiates such arbitration, it shall take
place in the Denver, Colorado metropolitan area. In either case, judgment upon
the award rendered may be entered in any court having jurisdiction thereof.
(a) Any party requesting arbitration shall serve a written demand for
arbitration on the other party. The demand shall set forth in reasonable detail
a statement of the nature of the dispute, the amount involved and the remedies
sought. No later than twenty (20) calendar days after a demand for arbitration
is served, the parties shall jointly select and appoint a retired judge of the
Courts of the State of Colorado (for arbitration in Colorado) or New York (for
arbitration in New York) to act as the arbitrator. In the event that the parties
do not agree on the selection of an arbitrator, the party seeking arbitration
shall apply to the District Court for the City and County of Denver or the City
and County of New York, as applicable, for appointment of a retired judge to
serve as arbitrator.
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(b) No later than ten (10) calendar days after appointment of an
arbitrator, the parties shall jointly prepare and submit to the arbitrator a set
of rules for the arbitration. In the event that the parties cannot agree on the
rules for the arbitration, the arbitrator shall establish the rules. No later
than ten (10) calendar days after the arbitrator is appointed he shall arrange
for a hearing to commence on a mutually convenient date. The hearing shall
commence no later than one hundred twenty (120) calendar days after the
arbitrator is appointed and shall continue from day to day until completed.
(c) The arbitrator shall issue his or her award in writing no later
than twenty (20) calendar days after the conclusion of the hearing. The
arbitration award shall be final and binding regardless of whether any party
fails or refuses to participate in the arbitration. The arbitrator is empowered
to hear and determine all disputes between the parties hereto concerning the
subject matter of this Agreement, and the arbitrator may award money damages
(but specifically not punitive damages), injunctive relief, rescission,
restitution, costs, and attorneys' fees. The arbitrator shall not have the power
to amend this Agreement in any respect.
(d) In the event that any party serves a proper demand for arbitration
under this Agreement, all parties may pursue discovery in accordance with the
Rules of Civil Procedure of the State of Colorado or New York, as applicable,
the provisions of which are incorporated herein by reference, with the following
exceptions: (x) The parties hereto may conduct all discovery, including
depositions for discovery purposes, without leave of the arbitrator; and (y) all
discovery shall be completed no later than the commencement of the arbitration
hearing or one hundred twenty (120) calendar days after the date that a proper
demand for arbitration is served, whichever occurs earlier, unless upon a
showing of good cause the arbitrator extends or shortens that period.
10.8 If any provision of this Agreement is held by any Court, or other
authority having jurisdiction, to be invalid or unenforceable under the law
applicable thereto, the provision shall be deemed modified or deleted to the
extent necessary to result in compliance with such applicable legal provision
and this Agreement, as so modified or amended, shall continue in full force and
effect in all other respects.
10.9 Any waiver by either party of a breach of any provision of this
Agreement shall not be considered as a waiver of any subsequent breach of the
same or any other provision.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
COBE BCT, INC.
By: /s/ Edward C. Wood
------------------------
Edward C. Wood, President
HEMASURE INC.
By:/s/ John F. McGuire III
------------------------
John F. McGuire III, President
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Exhibit 10.5
AMENDED AND RESTATED
MASTER STRATEGIC ALLIANCE AGREEMENT
THIS AMENDED AND RESTATED MASTER STRATEGIC ALLIANCE AGREEMENT, dated as of
August ____, 1998 (the "Agreement"), is made and entered into by and between
HemaSure Inc., a Delaware corporation ("HEMA" or "HemaSure"), and the American
Red Cross Biomedical Services a unit of the American National Red Cross, a
not-for-profit corporation chartered by an act of Congress ("ARCBS"). This
Agreement amends and restates that certain Master Strategic Alliance Agreement
dated June 5, 1996 between HEMA and ARCBS and, as of the date hereof, shall
replace said Master Strategic Alliance Agreement in its entirety.
INTRODUCTION
WHEREAS, ARCBS is the nation's pre-eminent provider of blood services, serving
more than 3,000 hospitals through the generous donations of some 22,000 people
daily;
WHEREAS, HEMA is, among other things, in the business of developing products to
increase the safety of donated blood and to improve certain blood collection and
transfusion procedures; and
WHEREAS, ARCBS and HEMA (collectively, the "Parties") believe that a strategic
alliance and cooperation between them would be in their mutual interest, all in
accordance with the terms and conditions hereinafter set forth,
NOW, THEREFORE, in consideration of the promises and the mutual covenants of the
Parties herein contained, it is hereby agreed as follows:
1. Scope of Agreement.
1.1 The Parties' intention under this Agreement is to facilitate the
development and expansion of a strategic alliance between them covering the
following areas:
(a) a co-development arrangement between the Parties with respect to
HEMA's leukoreduction filter (also known as r\LS System );
(b) a collaboration on HemaSure's leukocyte recovery project;
(c) a collaboration on HemaSure's in-line red blood cell filtration
project;
(d) a collaboration with respect to the development of a dockable
platelet filter;
(e) a collaboration with respect to the development of an in-line
whole blood filter;
(f) a collaboration with respect to a dockable system to remove tumor
cells from stem cell collections.
Each of the projects, collaborations, programs or agreements set forth
above shall be hereinafter referred to as a "Project."
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1.2 Each Party agrees to negotiate in good faith the definitive terms of
each of the Projects described above. All of the agreed projects will be
covered by separate Development Agreements, as described in Section 2.4.
1.3 It is understood by the Parties that this Agreement is intended to
establish a structure of open communication and coordination so as to
facilitate the expansion of the Parties' cooperation as set forth above and
is not intended to inhibit or restrict either Party from pursuing business
opportunities outside of this Agreement where deemed appropriate by such
Party.
2. Administration.
2.1 As soon as practicable after the date hereof, the Parties shall
establish a Contract Management Advisory Committee ("CMAC") which shall
remain in existence for the term of this Agreement. The CMAC shall be
composed of one senior management representative of each ARCBS and HEMA who
shall initially be the individuals set forth in Section 15.1 (i) and
Section 15.1 (iii) below. Such individuals shall have the responsibility
for coordinating and overseeing all HEMA and ARCBS activities taking place
pursuant to this Agreement, and shall each have sufficient authority to
fulfill these responsibilities in the name and on behalf of his or her
company in all matters related to this Agreement. The CMAC will maintain
open communications to coordinate the overall cooperation of the Parties
hereunder. In this regard, the CMAC shall hold a meeting at least once
every three months to discuss:
(a) Status of any existing Projects; and
(b) General issues of business development and strategic cooperation
between the Parties, including possible multi-party cooperative efforts
with other potential strategic partners, in connection with any existing
Products.
2.2 Meetings of the CMAC shall be held at the Parties' convenience at
such times and such locations as are mutually acceptable to the Parties. An
extraordinary meeting may be convened at any time at the written request of
either Party. This extraordinary meeting will be held at a location of the
other Party's choosing. The Party hosting the meeting shall prepare the
agenda and minutes for the meeting.
2.3 No recommendation or other action may be made or taken by the CMAC
unless the representatives of both ARCBS and HEMA are in attendance. All
decisions of the CMAC shall be made by unanimous agreement.
2.4 In such case as the Parties decide to pursue a Project, the CMAC
shall establish the guidelines for the development of such Project. The
apportionment of each Parties' responsibilities pertaining to a specific
Project will be set forth in, and governed by, individual definitive
collaboration, development and/or other similar agreements to be entered
into by the Parties in respect of such Project (each of which shall be
hereinafter referred to as a "Development Agreement"). The CMAC shall
recommend for approval by the Parties the execution of such Development
Agreements.
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2.5 Any issues that may arise during any phase of a Project which
cannot be resolved by the Project teams of the Parties shall be referred to
the CMAC for resolution.
3. Warrants. Upon the execution and delivery by the Parties of Development
Agreements HemaSure shall issue to ARCBS warrants to purchase shares of
HemaSure's common stock, par value $.01 per share (the "Common Stock"), in
the respective amounts set forth on Exhibit A and at an exercise price per
share equal to 110% of the last reported Sale Price for the Common Stock as
of the close of business as of the date hereof (the "Warrants"), pursuant
to a warrant agreement mutually agreeable to HemaSure and ARCBS. The
Warrants shall expire five years from the date of grant as contemplated by
this Agreement. HEMA also shall grant to ARCBS certain demand and "piggy
back" registration rights with respect to the Common Stock issuable upon
exercise of the Warrants pursuant to a registration rights agreement, in
form and substance satisfactory to the respective parties. The "Sale Price"
per share of Common Stock for such date shall be (a) the closing sale price
per share of Common Stock on such date, or if no sales occurred on such
date, the most recent such price, as reported on the composite tape of such
national securities exchange as shall then be the primary market for the
Common Stock, or (b) if the Common Stock shall not then be listed or
admitted to trading on any national securities exchange or if the Common
Stock shall then be so listed or admitted to trading on a national
securities exchange but that shall not then be the primary market for the
Common Stock, the closing sale price per share of the Common Stock on such
date, or if no sales occurred on such date, the most recent such price, as
reported by NASDAQ or a comparable system, or (c) if not determinable as
aforesaid, the mean between the highest and lowest bid prices reported on
such date, or if no sales occurred on such date, the most recent such mean,
by market makers and dealers for the Common Stock listed as such by the
National Quotation Bureau, Incorporated or any similar successor
organization.
4. Disputes. It is the intention of the Parties to settle amicably all
differences or disputes arising from this Agreement by conference and
negotiation. The Parties will first attempt to resolve any working level
disputes through the Project team and, if there is no resolution, through
the CMAC. In the event that any problem or dispute is not so resolved,
either Party may, upon written notice to the other, request that the matter
be referred to senior management officers within each respective
organization with the express authority to resolve the problem or issue.
Such representatives shall meet or confer at least once in good faith to
negotiate a resolution. If the representatives are unable to resolve the
problem or dispute within 21 calendar days, any Party may take the matter
to the Dispute Resolution Procedure set forth below. No Party may institute
litigation until such procedure has been completed unless, and to the
extent that, doing so is necessary to avoid irreparable harm.
Dispute Resolution Procedure. If any problem or dispute arising out of, or
related to, this Master Agreement is not resolved by the Parties in the
manner described above, at the request of either of the Parties, the matter
shall be submitted to mediation, or to such other form of dispute
resolution acceptable to both of the Parties. The mediation shall be
conducted in accordance with the Center for Public Resources Model
Procedure for Mediation of Business Disputes.
3
<PAGE>
5. Specific Performance. Notwithstanding Section 4 above, the Parties agree
that any breach or failure by either Party to perform its obligations under
Sections 6, 7, and 10 below shall result in immediate and irreparable
damage to the other Party which cannot be fully and adequately compensated
in money damages and that, in the event of such breach or failure, the
other Party shall be entitled to injunctive relief and specific performance
in addition to any other remedies to which it may be entitled at law or in
equity.
6. Public Statements and Trade Names
6.1 Neither Party shall make or distribute any public announcement or
media release concerning this Agreement or any Development Agreement or the
subject matter or terms of this Agreement or any Development Agreement
without the prior written approval of the other Party, except as otherwise
required by law as advised by counsel.
6.2 Neither this Agreement nor any Development Agreement grants or is
intended to grant to any Party a license to use the trademark, trade name
or any other intellectual property of any other Party. Each of the Parties
recognizes that the name of the other Party represents a valuable asset of
that Party and that substantial recognition and goodwill are associated
with such trade name and such Party's various trademarks. Each Party hereby
agrees that neither it nor any of its affiliates shall use at any time the
other Party's name, logo, or any other trademarks without prior written
authorization from such other Party.
6.3 Each of the Parties acknowledges that a violation of this Section
6 would cause irreparable harm to the other Party for which no adequate
remedy at law exists and each Party therefore agrees that, in addition to
any other remedies available, the aggrieved Party shall be entitled to
injunctive relief to enforce the terms of this Section. The prevailing
Party shall be entitled to recover all costs and expenses, including
reasonable attorney's fees incurred because of any legal action arising in
relation to this Section.
7. Subject Matter of Projects. Notwithstanding Section 1.3, HEMA agrees that,
during the term of this Agreement and for so long as a particular Project
is covered by a Development Agreement between the Parties that has not
expired or been terminated, it shall not with or from any third party
solicit, entertain, or encourage proposals with respect to, or participate
in any negotiations or discussions concerning, or enter into any
transactions involving, the subject matter of such Project without ARCBS's
prior written consent. HEMA shall instruct its officers, directors, agents
and affiliates to refrain from doing any of the foregoing.
8. Limitation of Liability and Remedies. IN NO EVENT SHALL A PARTY BE LIABLE
TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES, INCLUDING WITHOUT LIMITATION FOR LOSS OF ANTICIPATED PROFITS, IN
CONNECTION WITH AN ALLEGED BREACH OF THIS AGREEMENT, HOWEVER CAUSED, BY
NEGLIGENCE OR OTHERWISE; PROVIDED THAT THIS LIMITATION ON LIABILITY SHALL
NOT APPLY IN THE EVENT OF A WILLFUL OR GROSSLY NEGLIGENT BREACH OF THE
PROVISIONS OF THIS AGREEMENT.
4
<PAGE>
9. Relationship of the Parties.
(a) The relationship of the Parties under this Agreement is that of
independent contractors and that relationship shall continue as such
throughout the term of this Agreement. Nothing contained in this Agreement
shall be construed to constitute a partnership, agency relationship,
association or joint venture between the Parties. No officer, employee or
agent of either Party shall be deemed to be the officer, employee or agent
of the other, and neither Party shall represent otherwise. Neither Party
shall have the authority to make any agreement or commitment, or incur any
liability on behalf or the other, except as specifically authorized in this
Agreement.
(b) The Parties shall not enter into any Development Agreement with
respect to which the substance of sub-paragraph (a) as applied thereto
would not apply.
10. Confidential Information. During the term of this Agreement and for a
period of five (5) years from any termination or expiration hereof, the
Parties agree to keep in confidence and not to disclose to any third party,
or use for any purpose, except pursuant to, and in order to carry out, the
terms and objectives of this Agreement and any Development Agreement, any
Confidential Information. As used herein, "Confidential Information" shall
mean all trade secrets or confidential or proprietary information relating
to the business of the disclosing Party or any information relating to any
Project or the subject matter of any Project. The restrictions on the
disclosure and use of Confidential Information set forth in the first
sentence of this Section 10 shall not apply to any Confidential Information
which (a) was known by the receiving Party (as evidenced by the receiving
Party's written records) prior to disclosure by the disclosing Party
hereunder; (b) is or becomes part of the public domain through no fault of
the receiving Party; or (c) is disclosed to the receiving Party by a third
party having a legal right to make such a disclosure. In addition, the
foregoing confidentiality and nondisclosure obligations shall not apply to
information which is required to be publicly disclosed by law or regulation
provided that, in such event, the receiving Party provides the disclosing
Party with prompt notice of such disclosure so that the disclosing Party
has the opportunity if it so desires to seek a protective order or other
appropriate remedy.
11. Indemnification; Insurance.
5
<PAGE>
(a) HEMA agrees to indemnify and hold harmless ARCBS and its
directors, governors, officers, employees and agents against any liability,
claim, cost or expense (including reasonable attorneys' fees) in respect to
bodily injury, death, and property damage arising from the willful
misconduct or negligent activity of HEMA, its directors, officers,
employees or agents during its performance of its responsibilities under
this Agreement and/or the manufacture or sale of any product developed
pursuant to this Agreement or any Development Agreement, including but not
limited to any claim against ARCBS for infringement of patent rights owned
or held by Pall Corporation. HEMA further agrees to indemnify ARCBS, its
directors, officers, employees and agents from and against any loss,
damages, costs, or expenses ("liability") in connection with any claim
arising from any defect in the merchandise, goods or products provided or
in the provision of any services pursuant to this Agreement or any
Development Agreement, or by reason of the nature of the materials
contained in said merchandise, goods or products or provision of service,
except to the extent that the final order of a court of competent
jurisdiction has determined that a proportion of such liability thereof was
caused by the willful misconduct or negligent activity of ARCBS, its
directors, officers or employees, in which case, ARC shall be responsible
solely for its proportionate share of the liability.
(b) ARCBS agrees to defend, hold harmless, and indemnify HEMA, its
directors, officers, employees and agents against any liability, claim,
cost or expense (including reasonable attorneys' fees) in respect to bodily
injury, death, and property damage arising from the sole negligence of
ARCBS, its directors, officers or employees during its performance of its
responsibilities under this Agreement
(c) Each Party shall maintain the following insurance coverages in full
force and effect for the term of this Agreement. Each Party further agrees
to maintain insurance with terms, conditions and amounts not less than that
set forth herein for the term of any Development Agreement, unless any such
Development Agreement shall specify coverage terms, conditions or amounts
for either or both of the Parties which exceed that set forth in this
Agreement:
(i) Commercial General Liability Insurance in an amount of at
least $4,000,000 (Four Million Dollars) 2) an auto liability policy
with at least $1,000,000 (One Million Dollars) in coverage and; 3)
Workers' Compensation coverage covering each Party's own employees
with statutory limits for each jurisdiction where the work required
under this Agreement or any Development Agreement is performed
(including monopolistic states if any work is to be performed in one
or more of them) and an employers' liability policy with at least the
following limits, $250,000 per accident, $500,000 per disease, and
$250,000 disease (each employee).
(ii) HEMA further agrees to maintain not less than $4,000,000
(Four Million Dollars) of products liability coverage naming ARCBS an
additional insured party with respect to any product developed,
created, manufactured, distributed or sold as a result of this
Agreement or any Development Agreement. Said products liability
coverage shall include coverage for claims made against the policy for
injury occurring as a result of a flaw problem with the design or
manufacture of HEMA's products. HEMA agrees to maintain full
replacement value "All Risk" property insurance on all property and
equipment of HEMA used under this Agreement or any Development
Agreement, and said property insurance shall insure at all times all
HEMA products being manufactured and HEMA agrees to waive any right of
subrogation for loss or damage to any HEMA property at, on, or in
ARCBS' or HEMA's facilities. HEMA agrees to obtain, if required in
such property insurance, a waiver of subrogation in favor of ARCBS.
Said property insurance shall include Business Interruption and Extra
Expense coverage for such losses arising from loss or damage to
aforementioned HEMA property without expectation of contribution from
any such insurance ARCBS may maintain.
6
<PAGE>
(iii) Each Party shall, at its sole expense, keep in force
policies of insurance in the amounts as specified, and as required by
statute, with carriers reasonably satisfactory to the other; and said
insurance will be written as primary policy coverage and not
contributing with, or in excess of any insurance which the other Party
shall carry with respect to the work of each Party under this
Agreement. Certificates of insurance evidencing all of the above
coverages and conditions (types and amounts) shall be produced upon
written request and remain in full force and effect during the term of
this Agreement. HEMA shall supply evidence of its property insurance
on an ACORD "Evidence of Property Insurance" form 27. Each Party's
certificate(s) of insurance shall provide for not less than thirty
(30) days written notice of cancellation, non-renewal or reduction in
terms and conditions below that required herein to the other Party.
12. Term and Termination.
12.1 This Agreement shall become effective upon execution by both
Parties and shall continue in full force and effect for 5 years from the
date of this Agreement, unless terminated earlier by the mutual agreement
of the Parties or in accordance with the provisions herein. This Agreement
shall automatically renew for one additional 5 year term unless either
Party provides written notice to the other Party no later than 90 days
prior to the expiration of the first 5 year term of its desire (for any or
no reason) that this Agreement expire and not renew at the end of the first
5 year term, in which case this Agreement shall expire at such time and
shall not be renewed. In the event this Agreement is renewed for a second 5
year term, it shall continue in full force and effect for 5 years from the
end of the first 5 year term, unless terminated earlier by the mutual
agreement of the Parties or in accordance with the provisions herein.
12.2 On the occurrence of any of the following events (each a
"Termination Event"), this Agreement shall automatically terminate, unless
the Party which has not caused or is not the subject of the Termination
Event elects within 30 days following such Termination Event to waive
termination:
(a) a Party has filed a voluntary petition in bankruptcy, takes the
benefit of any insolvency act, is dissolved or adjudicated a bankrupt;
upon the entry of a decree or order by a court having jurisdiction
approving a petition with respect to a Party seeking reorganization,
arrangement, adjustment, or composition under any applicable federal
or state bankruptcy, insolvency or similar law; upon the written
admission by a Party of its inability to pay its debts generally as
they become due; the taking of any corporate action by a Party in
furtherance of any of the foregoing actions -- each, effective
immediately upon receipt of notice of termination;
(b) the appointment of a receiver, liquidator, assignee, trustee,
sequestrator or similar official for all or substantially all of the
business or assets of a Party, effective immediately upon receipt of
notice of termination.
12.3 Either Party shall have the right to terminate this Agreement for
"cause" at any time, effective upon the giving of written notice to the
other Party in the event that the other Party commits a default or
violation of this Agreement which is not remedied within thirty (30) days
after receipt of written notice thereof.
7
<PAGE>
12.4 ARCBS shall be entitled to unilaterally terminate this Agreement
in the event the conditions for termination arise, as provided in Section
17, effective upon the giving of written notice to HEMA of such event.
13. Entire Agreement. This Agreement is the complete statement of the agreement
between the Parties, and supersedes all prior proposals, understandings and
all other agreements, oral and written, between the Parties relating to the
subject matter of this Agreement. Notwithstanding the foregoing, in no
event shall the Master Purchase Agreement dated April 15, 1996 between the
Parties be deemed to be superseded by this Agreement. This Agreement cannot
be modified or altered except by a written instrument duly executed by both
Parties.
14. Successors, Assignment. This Agreement shall be binding upon, and shall
inure to the benefit of, successors to a Party hereto, but shall not
otherwise be assignable by either Party without the prior written consent
of the other Party.
15. Notices.
15.1 All notices, requests, consents and other communications under
this Agreement shall be in writing and shall be mailed by first class
certified or registered mail, return receipt requested, postage prepaid:
(i) if to HEMA, at HemaSure Inc., 140 Locke Drive, Marlborough,
Massachusetts 01752 ((508) 485-6045), Attention: President, or at such
other address or addresses as may have been furnished in writing by
HEMA to ARCBS;
(ii) a copy of all information sent to HEMA should also be sent
to Luke P. Iovine, III, Esq., Battle Fowler LLP, 75 East 55th Street,
New York, New York, 10022 (telecopier no. (212) 856-7816); and
(iii) if to ARCBS, at 1616 North Fort Myer Drive, Rosslyn,
Virginia 22209 (telecopier no. (703) 312-5734), Attention: Niall M.
Conway, Vice President of Manufacturing, or at such other address or
addresses as may have been furnished in writing by ARCBS to HEMA.
15.2 Notices provided in accordance with this Section shall be deemed
delivered two business days after deposit in the mail.
16. Relation to Development Agreements. Execution of this Agreement shall not
obligate either Party to develop or commercialize any product in the
absence of a Development Agreement relating thereto. All references in this
Agreement to this Agreement shall not encompass or be deemed to encompass
any or all Development Agreements unless this Agreement expressly refers to
such Development Agreements.
8
<PAGE>
17. Severability.In the event implementation of any of the provisions of this
Agreement presents a material risk of loss of American Red Cross's tax
exempt status or the imposition of intermediate sanctions under Section
4958 of the Internal Revenue Code of 1986, as amended ("Sanctions"), or if
any provision of this Agreement is held invalid, illegal or unenforceable
(any such provision, an "Invalid Provision") in any jurisdiction, the
Parties shall promptly negotiate in good faith a lawful, valid and
enforceable provision that is as similar in terms to such Invalid Provision
as may be possible while giving effect to the future benefits and burdens
accruing to the Parties hereunder, and which removes the risk, if any, of
loss of American Red Cross's tax exempt status and the imposition of
Sanctions, and the remaining provisions of this Agreement shall remain
binding on the Parties hereto. In the event that the Parties cannot agree
on a provision to replace an Invalid Provision, at ARCBS's election, (a)
the Parties shall attempt to renegotiate their relationship in good faith
under commercially reasonable terms, or (b) this Agreement shall terminate
under Section 12.3 of this Agreement.
18. Status of the American Red Cross. Notwithstanding any other provision in
this Agreement to the contrary, the Parties acknowledge and agree that
ARCBS shall not be required to engage in any activity hereunder or under
any Development Agreement that compromises or would compromise the
charitable tax-exempt status of, or presents or would present a reasonable
likelihood of the imposition of Sanctions on, the American Red Cross.
19. Expenses. Each Party shall be solely responsible for its own expenses under
this Agreement.
20. Captions. All captions herein are for convenience only and shall not be
interpreted as having any substantive meaning.
21. Governing Law. This Agreement shall be governed by the laws of State of New
York, in a venue in the Commonwealth of Virginia, without regard to its
conflicts of law rules or principles.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized officers effective the date first written above.
HEMASURE INC. AMERICAN RED CROSS
BIOMEDICAL SERVICES
By: By:
------------------------ --------------------------
Name: Name:
------------------------ --------------------------
Title: Title:
------------------------ --------------------------
9
<PAGE>
Exhibit A
<TABLE>
<CAPTION>
Number of Shares Exercisable Under
Warrant Upon Execution of Definitive
Project Agreement
<S> <C>
Definitive collaboration agreement with respect to HemaSure's
leukoreduction filter (subsection 1.1(a)); 150,000
Definitive collaboration agreement with respect to HemaSure's leukocyte
recovery project (subsection 1.1(b)); 50,000
Definitive collaboration agreement with respect to HemaSure's in-line
red blood cell filtration project (subsection 1.1(c)); 50,000
Definitive collaboration agreement with respect to dockable platelet
filters (subsection 1.1(d)); 50,000
Definitive collaboration agreement with respect to in-line whole blood
filters (subsection 1.1(e)); 50,000
Definitive collaboration agreement with respect to a dockable system to
remove tumor cells from stem cell collections (subsection 1.1(f)). 50,000
------
400,000
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS OF HEMASURE INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Sep-30-1998
<EXCHANGE-RATE> 1
<CASH> 2,239
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 309
<CURRENT-ASSETS> 3,532
<PP&E> 3,270
<DEPRECIATION> 1,766
<TOTAL-ASSETS> 5,589
<CURRENT-LIABILITIES> 2,887
<BONDS> 0
<COMMON> 90
0
0
<OTHER-SE> (540)
<TOTAL-LIABILITY-AND-EQUITY> 5,589
<SALES> 25
<TOTAL-REVENUES> 25
<CGS> 657
<TOTAL-COSTS> 657
<OTHER-EXPENSES> 8,347
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (128)
<INCOME-PRETAX> (8,974)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,974)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,974)
<EPS-PRIMARY> (1.00)
<EPS-DILUTED> 0
</TABLE>
