<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 17, 1999
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
IDT, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
PENNSYLVANIA 339110 25-1694487
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or organization) Classification Code Number) Identification
No.)
</TABLE>
2275 SWALLOW HILL ROAD
BUILDING 2500
PITTSBURGH, PENNSYLVANIA 15220
(412) 279-8715
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices and principal place of business)
GLENN KEELING
CHIEF EXECUTIVE OFFICER
IDT, INC.
2275 SWALLOW HILL ROAD
BUILDING 2500
PITTSBURGH, PA 15220
(412) 279-8715
WWW.IDT.COM
(Name, address, of agent for service)
--------------------------
COPIES TO:
THOMAS E. SWEENEY, JR., ESQ. M. KATHRYN SWEENEY, ESQ.
Meyer, Unkovic & Scott LLP 7300 Penn Avenue
1300 Oliver Building Pittsburgh, Pennsylvania 15208
Pittsburgh, Pennsylvania 15222 and Telephone: (412) 731-1000
Telephone: (412) 456-2800 Facsimile: (412) 731-9190
Facsimile: (412) 456-2864
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier registration statement for the same
offering. / /
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(*) PER SHARE PRICE(**) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock................................ 6,665,000 $3.00 $19,995,000 $5,558.61
</TABLE>
(*) Includes 4,520,000 shares registered by IDT to cover outstanding warrants;
135,000 shares of unregistered stock and 2,000,000 shares of stock to be
issued by IDT to public investors.
(**) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act.
--------------------------
THE REGISTRANT MAY AMEND THIS REGISTRATION STATEMENT ON THOSE DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON THE
DATE THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
IDT, INC.
(CROSS REFERENCE OF THE REGISTRATION STATEMENT ITEM TO THE PAGE
IN THE PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1)
<TABLE>
<CAPTION>
PAGE
NUMBER
IN
REGISTRATION STATEMENT ITEMS IN FORM S-1 PROSPECTUS
- ------------------------------------------------------------------------------------------------------ ----
<C> <S> <C>
PART I. INFORMATION REQUIRED IN PROSPECTUS
1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus..............
2. Inside Front and Outside Back Cover Pages of the Prospectus................................
3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Changes...................
4. Use of Proceeds............................................................................
5. Determination of Offering Price............................................................
6. Dilution...................................................................................
7. Selling Security Holders...................................................................
8. Plan of Distribution.......................................................................
9. Description of Securities to be Registered.................................................
10. Interests of Named Experts and Counsel.....................................................
11. Information with Respect to the Registrant.................................................
12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities........
Financial Statements................................................................................
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
13. Other Expenses of Issuance and Distribution................................................
14. Indemnification of Directors and Officers..................................................
15. Recent Sales of Unregistered Securities....................................................
16. Exhibits and Financial Statement Schedules.................................................
17. Undertakings...............................................................................
Index to Exhibits...................................................................................
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 17, 1999
PRELIMINARY PROSPECTUS
IDT, INC.
COMMON STOCK
SALE OF 2,000,000 SHARES OF STOCK BY IDT
RESALE OF 135,000 SHARES OF OUTSTANDING STOCK
ISSUANCE OF 4,520,000 SHARES OF STOCK TO WARRANT HOLDERS
------------------
This is our initial public offering of common stock. No public market
currently exists for our common stock. We are selling these shares directly and
through brokers, but not through an underwriter. We intend to list our shares on
the OTC Bulletin Board. We don't have a listing symbol at this time. We estimate
that the initial offering price to the public will be approximately $ per
share. We will use the money received from selling the stock when we receive
it--there is no minimum that must be sold before we can use the proceeds.
<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
Initial offering price to the public.................................... $ $
Commissions............................................................. $ $
Proceeds to IDT......................................................... $ $
</TABLE>
INVESTING IN OUR STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
(PAGE ).
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF OUR SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. IT'S ILLEGAL FOR ANYONE TO TELL YOU OTHERWISE.
Until , 2000, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus.
THE INFORMATION IN THIS PROSPECTUS ISN'T COMPLETE. IT MIGHT CHANGE. WE'RE
NOT ALLOWED TO SELL THE COMMON STOCK OFFERED BY THIS PROSPECTUS UNTIL THE
REGISTRATION STATEMENT WE HAVE FILED WITH THE SEC BECOMES EFFECTIVE. THIS
PROSPECTUS ISN'T AN OFFER TO SELL OUR COMMON STOCK, AND DOESN'T SOLICIT OFFERS
TO BUY, IN ANY STATE WHERE THE OFFER OR SALE ISN'T PERMITTED.
------------------------
August 17, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
1. SUMMARY OF THE OFFERING............................................................................. 4
1.1 Our Company......................................................................................... 4
1.2 Our Product Development............................................................................. 4
1.3 Growth Strategy..................................................................................... 4
1.4 The Offering........................................................................................ 5
1.5 Selected Financial Data............................................................................. 5
2. RISK FACTORS........................................................................................ 6
2.1 Risks Associated With Our Financial Position........................................................ 6
2.2 Risks Associated With Product Development........................................................... 7
2.3 Risks Associated With Management.................................................................... 8
2.4 Other Factors Which May Adversely Affect Our Financial Results...................................... 9
2.5 Other Factors Which May Adversely Affect Our Common Stock........................................... 9
3. USE OF PROCEEDS..................................................................................... 12
4. CAPITALIZATION...................................................................................... 13
5. DILUTION............................................................................................ 14
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............... 15
6.1 Overview............................................................................................ 15
6.2 Results of Development.............................................................................. 15
6.3 Liquidity and Capital Resources..................................................................... 16
6.4 Certain Transactions................................................................................ 16
7. OUR COMPANY......................................................................................... 17
7.1 Background.......................................................................................... 17
7.2 Development and Operations.......................................................................... 18
7.3 Marketing Strategy--ThermoChem and Disposables...................................................... 22
7.4 Clinical Trials..................................................................................... 23
7.5 Joint Ventures...................................................................................... 24
7.6 Patents............................................................................................. 26
7.7 Manufacturing and Distribution...................................................................... 27
7.8 Certain Relationships and Transactions.............................................................. 27
7.9 Government Regulations.............................................................................. 28
8. OUR MANAGEMENT...................................................................................... 30
8.1 Directors and Executive Officers.................................................................... 30
8.2 Medical Advisory Board.............................................................................. 31
8.3 Compensation........................................................................................ 31
9. PRINCIPAL STOCKHOLDERS.............................................................................. 32
10. DESCRIPTION OF SECURITIES........................................................................... 33
11. STOCK ELIGIBLE FOR FUTURE SALE...................................................................... 33
11.1 In General.......................................................................................... 33
11.2 Sales of Restricted Securities...................................................................... 33
11.3 Effects on Market for Stock......................................................................... 34
12. SELLING STOCKHOLDERS, INCLUDING WARRANT HOLDERS..................................................... 35
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
13. PLAN OF DISTRIBUTION................................................................................ 38
13.1 Purchase of Stock................................................................................... 38
13.2 Acceptance of Subscriptions......................................................................... 38
13.3 Best Efforts, No Minimum Basis...................................................................... 38
13.4 Determination of Offering Price..................................................................... 38
14. LEGAL PROCEEDINGS................................................................................... 39
15. LEGAL MATTERS....................................................................................... 39
16. EXPERTS............................................................................................. 39
17. INDEMNIFICATION OF DIRECTORS AND OFFICERS........................................................... 39
18. ADDITIONAL INFORMATION.............................................................................. 40
FINANCIAL STATEMENTS........................................................................................... F-1
</TABLE>
3
<PAGE>
1. SUMMARY OF THE OFFERING
THIS SUMMARY HIGHLIGHTS IMPORTANT INFORMATION ABOUT OUR BUSINESS AND THIS
OFFERING. BECAUSE IT IS A SUMMARY, IT DOES NOT CONTAIN ALL THE INFORMATION YOU
SHOULD CONSIDER BEFORE INVESTING IN THE COMMON STOCK. PLEASE READ THE ENTIRE
PROSPECTUS.
1.1 OUR COMPANY
We are developing products and conducting clinical trials of a patented new
medical treatment system. Our product facilitates hyperthermia therapy, which
may be effective in treating certain types of cancers. Our treatment system and
its related disposables are known as the ThermoChem System. We are developing
ThermoChem in conjunction with HemoCleanse, Inc., an Indiana corporation. Our
clinical trials of the system must be pre-approved by the U.S. Food and Drug
Administration (FDA).
1.2 OUR PRODUCT DEVELOPMENT
The ThermoChem system delivers perfusion-induced hyperthermia, a form of
whole-body hyperthermia, for treatment of patients suffering from HIV and
metastatic non-small cell lung cancer. A component of the ThermoChem system, the
ThermoChem-HT, is also used to administer regional hyperthermia in combination
with surgery and chemotherapy for treatment of patients with advanced
gastrointestinal and ovarian cancers. Regional hyperthermia is used when disease
has not spread throughout the body and only a region or particular organ
receives treatment.
We have conducted both human and non-human clinical trials of the system.
Most recently we conducted human trials under part of an investigational device
exemption (IDE) application approved by the FDA, in a clinical trial with the
Wake Forest University School of Medicine Comprehensive Cancer Center utilizing
the ThermoChem-HT and related disposables in the treatment of advanced
gastrointestinal and ovarian cancers. The proceeds received from this offering
will further assist our development and marketing of the ThermoChem system.
We believe the ThermoChem system can enable a medical team to perform whole
body or regional hyperthermia treatment with increased safety and effectiveness
because it provides several unique advantages over current systems:
- ThermoChem-HT provides constant, real-time data on the patient's status
while heating and circulating blood or fluid with chemotherapy agents.
- ThermoChem-SB allows for maximum effectiveness while maintaining the
safest possible conditions by balancing blood chemistries on a real-time
basis while removing toxins.
1.3 GROWTH STRATEGY
There is currently a need--which we think the ThermoChem fulfills--for safe
and measurable devices to enable medical experimentation with hyperthermia
treatment. While the results of experimentation to date are inconclusive, we
believe that ThermoChem gives the medical community the option to use heat to
temperatures previously considered unsafe in conjunction with currently
available treatments. We think the technology positions us as a leader in the
highly-specialized and experimental area of hyperthermia therapies.
Our executive offices are located at 2275 Swallow Hill Road, Building 2500,
Pittsburgh, Pennsylvania 15220. Our telephone number is (412) 279-8715.
4
<PAGE>
1.4 THE OFFERING
<TABLE>
<S> <C>
Common stock offered to the
public............................ 2,000,000 shares.
Common stock to be issued to warrant
holders upon exercise of
warrants.......................... 4,520,000 shares.
Common stock for underlying warrants
to be issued to directors......... 135,000 shares.
Common stock to be outstanding
immediately after this offering... 16,742,500 shares, based on the number of shares
outstanding on April 30, 1999.
Use of proceeds..................... We will use the proceeds primarily to conduct
clinical trials and for other general corporate
purposes including research, product development,
and marketing.
Offering Period..................... The offering begins on the date of this prospectus
and may continue for up to nine months thereafter,
unless we terminate it sooner or extend it to a
later date. When we receive subscriptions for a
maximum of $2 million shares of stock, we will end
the offering. If we do not sell all of the stock in
the offering period, we may update this prospectus
and continue the offering for up to 24 months.
Proceeds not held in escrow......... Money that you pay for stock during the initial
offering will be deposited directly into our
account for our use following a 48 hour waiting
period after your purchase.
Minimum subscription................ We do not require that you make a purchase of a
certain minimum number of shares of stock.
</TABLE>
1.5 SELECTED FINANCIAL DATA
The following financial information summarizes the more complete historical
financial information at the end of this prospectus. Our independent certified
public accountants, Thompson Dugan, P.C. have audited it through December 31,
1998 and compiled unaudited financial information through April 30, 1999. You
should read the information below along with all other financial information and
analysis in this prospectus. Please do not assume that the results below
indicate the results we will achieve in the future.
<TABLE>
<CAPTION>
12/31/1998 4/30/1999
-------------- --------------
<S> <C> <C>
Current assets.................................................................... $ 70,339 $ 42,603
Noncurrent assets................................................................. 383,298 41,674
Current liabilities............................................................... (10,091,814) (84,616)
Long Term Debt.................................................................... 0 (10,232,991)
Net loss.......................................................................... $ (1,557,581) $ (984,757)
</TABLE>
Pro forma financial information has not been presented.
5
<PAGE>
2. RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS BEFORE PURCHASING OUR STOCK.
2.1 RISKS ASSOCIATED WITH OUR FINANCIAL POSITION
WE HAVE A LIMITED HISTORY OF OPERATION AND ARE A DEVELOPMENT STAGE COMPANY
WITH LITTLE OR NO REVENUE AND ONLY NET LOSSES TO DATE. We are a developmental
company conducting clinical trials of an experimental treatment. We have
generated aggregate losses with no operating revenue to date. To the extent that
we implement our business plan, our business will be subject to all of the
problems of expenses, capital shortfalls, delays in program development,
possible cost overruns, uncertain market strategy and acceptance which
accompanies a business with a limited operating history. In addition, our future
success will depend upon many factors, including those which may be beyond our
control or which cannot be predicted at this time, such as increased levels of
competition (including the emergence of additional competitors), changes in
economic conditions, emergence of new technologies and changes in governmental
regulations. As a result, it is possible that we may never generate significant
revenues or profits in the foreseeable future.
BECAUSE THE PROGRESS OF OUR PRODUCTS' DEVELOPMENT IS UNCERTAIN, WE WILL
HAVE LITTLE OR NO REVENUES AT TIMES IN THE FUTURE. Research and development of
new products involves a high degree of financial risk and experimentation. Our
current development project involves the application of novel theories, unproven
technology and new engineering. In addition, we have not received any revenues,
nor are those revenues expected unless and until the hyperthermia project has
received all necessary FDA or foreign regulatory approvals, and we can begin
manufacturing. We have been historically dependent upon our largest shareholder,
Biocontrol Technology, Inc. ("Biocontrol"). One purpose of this offering is for
IDT to fund and support its own operations. We can't assure you that the
ThermoChem System currently under development by IDT and HemoCleanse will be
developed and commercially viable.
WE HAVE AND WILL CONTINUE TO EXPERIENCE NET LOSSES AND A SHORTAGE OF CASH
FLOW. We don't have enough money to support our operations. IDT is included as
a consolidated subsidiary for the financial statements of its parent company,
Biocontrol, a Pennsylvania corporation. As of April 30, 1999, Biocontrol owned
approximately 99.1% of our common stock. So far, our operations have been funded
by IDT's principal shareholder, Biocontrol.
Our net loss per common share is based on the weighted average number of
common shares outstanding, which amounted to 10,296,212, 10,086,667, and
10,087,500 for the years ended December 31, 1998, 1997, and 1996 respectively
and 10,538,667 and 10,087,500 for the four month periods ended April 30, 1999
and 1998. Except for warrants issued during the period May 1, 1998 through April
30, 1999, the loss per share does not include common stock equivalents since the
effect would be anti-dilutive.
Net loss per common share is based on the weighted average number of common
shares outstanding and the number of common shares issuable on the exercise of
420,000 warrants issued during the period May 1, 1998 through December 31, 1998
and 140,000 warrants issued during the four months ended April 30, 1999. The
weighted average number of common shares, including the effect of the conversion
of the warrants for the period from October 23, 1992 (inception) to December 31,
1998 amounted to 10,087,292 and for the period October 23, 1992 (inception) to
April 30, 1999 amounted to 10,110,060.
THE GOING CONCERN REPORT OF OUR COMPANY BY INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS INDICATES THAT THERE IS A POSSIBILITY THAT WE WILL NOT BE ABLE TO
CONTINUE AS A GOING CONCERN IF WE FAIL TO ACHIEVE OUR OBJECTIVES. In this
regard, see the Report of Independent Certified Public Accountants at the
6
<PAGE>
beginning of our audited financial statements at the end of this prospectus,
which cites substantial doubts about our ability to continue as a going concern.
It is not certain that we will achieve profitability or generate positive cash
flow in the future. As a result of these and other factors, we can't assure you
that our proposed activities will be successful or that we will be able to
achieve or maintain profitable operations.
2.2 RISKS ASSOCIATED WITH PRODUCT DEVELOPMENT
OUR PRIMARY PRODUCT INVOLVES A NEW SYSTEM AND THE FUTURE OF ITS SUCCESS IS
UNCERTAIN. The process and procedures we use and intend to employ involve new
and relatively untested technology. Although another company and health care
facility has utilized procedures without an FDA exemption involving hyperthermia
for the treatment of HIV, their results have been inconsistent; IDT is using new
processes and procedures in order to achieve safer and more consistent results.
We can't assure you that the results of IDT's procedures will be successful. So
far, human trials for cancer and HIV have not resulted in any patient deaths
during perfusion-induced systemic hyperthermia treatments; however, given the
nature of the treatment and the relative ill health of the patients to be
tested, that possibility exists. In addition, even if patients do survive the
treatments, we can't assure you or the patients that those procedures will
improve the patient's health on a long-term or short-term basis.
OUR PRODUCTS ARE HEAVILY REGULATED BY CERTAIN GOVERNMENT ENTITIES. The
products we are developing are subject to state and federal regulations,
primarily those of the FDA. FDA approval is required prior to conducting all
clinical trials. Additional approvals are mandatory prior to marketing the
ThermoChem System, ThermoChem HT and related disposables. We have received FDA
approval to conduct expanded clinical trials with patients having metastatic
non-small cell lung cancer and expanded clinical trials with patients having HIV
utilizing the ThermoChem System. We have also received FDA approval to conduct
an initial clinical trial utilizing the ThermoChem HT for patients with advanced
gastrointestinal and ovarian cancer. Once, and if, the expanded clinical trials
are successfully completed, we intend to apply to the FDA for clearance to
market the ThermoChem technology. It's possible that we won't receive the FDA
and other regulatory approvals for a given treatment or medical device. Although
we believe that treatments for HIV/AIDS and cancer should receive priority, and
that our FDA applications will receive expedited review, the FDA review of those
applications may be slow, and no approvals may ultimately be received.
We are investigating foreign markets for the testing and marketing of our
technology. Each foreign country has its own regulatory authority, the approval
of which would be necessary prior to clinical trials, marketing or sale of the
technology. Although we can't assure you, we believe that some foreign countries
may allow us to test, market and sell ThermoChem technologies and disposables
prior to receiving FDA approval.
IDT IS SUBJECT TO BOTH DIRECT AND INDIRECT COMPETITION. Most major medical
and drug companies are actively researching and testing drugs and procedures to
treat HIV, cancer and their symptoms. In addition, other companies may have and
may continue to research and test procedures which involve hyperthermia. Many of
those companies are better capitalized, have a stronger market appeal, have more
expertise and experience than we do, and may have various other competitive
advantages over IDT. To the best our knowledge, only one other company besides
ours has received an investigational device exemption from the FDA to conduct
the type of clinical trials in HIV which we conducted.
OUR MARKET AND TECHNOLOGY IS CONSTANTLY CHANGING AND DEVELOPING, AND WE
DON'T KNOW IF OUR PRODUCTS WILL BE ACCEPTED. We, along with our strategic
partner HemoCleanse, are developing experimental medical treatments, treatment
systems and components, and a number of new products to enable hospital staff
and physicians to administer a novel treatment based upon elevating the
temperature of the patient's body referred to as "hyperthermia." To the best of
our knowledge, IDT and HemoCleanse conducted the first clinical trials in the
United States approved by the FDA for
7
<PAGE>
those systems and procedures. Though the results of clinical trials to date have
been promising, hyperthermia based treatment of disease is only beginning to
gain acceptance, and the treatment regimen and technology are considered novel
and experimental. There is always risk that our products will not be successful
in scientific and medical treatment terms. Moreover, even if those treatments,
technologies and products are proven successful, there is a risk that a market
might never develop for our products.
WE DEPEND ON ONLY ONE LINE OF PRODUCTS FOR OUR FUTURE SUCCESS. Our future
success is dependent upon the feasibility, regulatory approval and market
acceptance of our experimental treatment systems and components. We don't have
any other products or services which could produce revenues. Should the
treatment, systems or components prove unsuccessful, we would have no other line
of business or products to make money.
POSSIBLE SCIENTIFIC DISCOVERIES AND TECHNOLOGICAL CHANGES POSE A
SIGNIFICANT RISK TO OUR BUSINESS. There are competing technologies and treatment
protocols that have results comparable that may benefit the patient in ways
comparable to those offered by our products. Scientific discovery and advances
in technology along with a clinical failure of our treatment, system or
components would represent a significant risk to our future success.
THE MARKET ACCEPTANCE OF OUR PRODUCTS IS UNCERTAIN, AS THEY ARE BASED UPON
NEW METHODS OF EXTRACORPOREAL CIRCULATION AND HEATING OF PATIENTS'
BLOOD. Physicians and individuals may not recommend or use our products unless
they determine, based on successful experience, clinical data, relative costs,
and other factors, that these products are an attractive alternative to current
procedures. So far, our products have been tested on only a limited number of
subjects, and no independent studies regarding the products have been published.
The lack of any of those independent studies may have an adverse effect on our
ability to market our products. In addition, purchase decisions for products
like ours are greatly influenced by health-care administrators who are subject
to increasing pressures to reduce costs. If our products fail to achieve
significant market acceptance, our business, financial condition and results of
operations would suffer.
2.3 RISKS ASSOCIATED WITH MANAGEMENT
BY PURCHASING THE SHARES, YOU WILL BE RELYING ON MANAGEMENT WHICH HAS NO
PRIOR EXPERIENCE IN MEDICAL PRODUCT DEVELOPMENT. Our success depends to a
significant extent upon, among other factors, the continued service of its key
senior executive, Glenn Keeling, and on our ability to attract, retain and
motivate qualified personnel. The inability to replace or attract new qualified
personnel could have a material adverse effect on our profitability. Investors
will have no right or power to take part in or direct the management. Thus,
purchasers of the shares will be entrusting the funds to our management, upon
whose judgment the investors must depend, with only limited information
concerning management's specific intentions.
OUR MANAGEMENT TEAM HAS BROAD DISCRETION OVER THE USE OF THE PROCEEDS OF
THIS OFFERING. The use of proceeds section of this prospectus sets forth the
way we now intend to use the monies raised in this offering. The money may be
used for different things depending upon economic conditions and currently
unforeseen events. Among other things, we plan to use the money for developing
the ThermoChem technology as well as for working capital purposes.
THE SUCCESS AND DEVELOPMENT OF OUR COMPANY AND PRODUCTS WILL DEPEND ON THE
TECHNOLOGICALLY QUALIFIED PEOPLE WE HIRE. We are entirely dependent upon our
ability to attract and retain qualified people. There is significant competition
for technologically competent people in our business. We may not be successful
in recruiting and retaining them.
8
<PAGE>
2.4 OTHER FACTORS WHICH MAY ADVERSELY AFFECT OUR FINANCIAL RESULTS
WE HAVE SECURED PATENTS AND PROPRIETARY RIGHTS FOR OUR PRODUCTS. THEY MAY
BECOME THE SUBJECTS OF DISPUTES IN THE FUTURE. We have been assigned a U.S.
patent entitled "Specialized Perfusion Protocol for Whole-Body Hyperthermia."
The patent was issued October 11, 1994. In July 1995, a Continuation in Part
patent, which included the ThermoChem System for the Specialized Perfusion
Protocol for PISH, was allowed, and the patent was granted on December 19, 1995.
In addition, HemoCleanse holds patents on the BioLogic-DT, utilizing the
sorbent-based technology, a core product of the ThermoChem System. In the
future, both companies may undertake to file additional patent applications in
the United States or in foreign countries. Neither of us can assure you that
future patents will be granted, that any patent held or pending will not be
challenged or circumvented by a competitor or other entity, or that any patent
contest will result in a favorable outcome. If any of our patents are
successfully challenged, or if future patents are not granted, or if either
company is found to have infringed upon another company's patent, it could
result in substantial costs and delays in the commercialization of our products,
and would otherwise result in materially adverse consequences. These risks may
adversely affect the implementation of our business plan, and the ultimate value
of your stock.
THE PRINCIPAL STOCKHOLDER HAS A STRONG INFLUENCE ON THE DECISIONS OF THE
BOARD OF DIRECTORS, INCLUDING POSSIBLE ANTI-TAKEOVER EFFECTS. If all the stock
offered is sold, 82.7% of our outstanding shares will be beneficially owned by
Biocontrol on a undiluted basis and 60.36% on a fully diluted basis. As a
result, Biocontrol can exert significant influence over our company including in
the event of a takeover, buy-out or change of control. Prior to the offering,
Biocontrol owned a total of approximately 99.1% of the shares of our stock on an
undiluted basis and 68.66% on a fully diluted basis.
THERE MAY BE POTENTIAL CONFLICTS OF INTEREST BETWEEN US AND OUR PRINCIPAL
STOCKHOLDER WHICH ALSO EMPLOYS OUR CHIEF EXECUTIVE OFFICER. Certain expenses
are allocated between us, Biocontrol, and Biocontrol's other subsidiaries. These
expenses are reimbursed to Biocontrol through the use of intercompany accounts,
which are also used to account for non-interest bearing cash advances between
the companies.
For the years ended December 31, 1998, 1997, and 1996, net intercompany
charges and advances by Biocontrol to us were $820,199, $1,612,578 and
$1,664,093 respectively. For the four month period ended April 30, 1999 the
items totaled $329,353. Total intercompany charges and advances by Biocontrol to
us have accumulated $10,232,992 since our inception, October 23, 1992 through
April 30, 1999. On April 30, 1999 money we owe to Biocontrol was converted to a
long-term note payable.
OUR MANAGEMENT TEAM'S LIABILITY IS LIMITED. Because of certain statutory
and case law relating to broad discretion granted management of a company such
as ours, typically directors and officers of a corporation are indemnified by
and have limited monetary liability to the stockholders. Failure of management
to satisfy its fiduciary responsibility to stockholders could subject management
to certain claims.
2.5 OTHER FACTORS WHICH MAY ADVERSELY AFFECT OUR COMMON STOCK
WE MAY NEED ADDITIONAL CAPITAL AFTER THE COMPLETION OF THIS OFFERING,
BECAUSE THE PROCEEDS FROM THE SALE OF THE STOCK IN THIS OFFERING MAY BE
INADEQUATE. If we raise all $ , it will be enough for the short
term, but may not be sufficient to complete all anticipated clinical trials or
to complete the FDA process. We can't assure you that we will be able to achieve
profitable operations after this offering. There is no minimum amount that must
be sold in this offering and thus we will receive the proceeds regardless of how
few shares are sold. If only a small amount of stock is sold, the proceeds will
be inadequate to fund our operations and to fully implement our business plan.
9
<PAGE>
Specifically, we intend to use a substantial portion of the proceeds from this
offering to fund clinical trials, product development, and other capital needs.
We can't assure you that those proceeds will be sufficient for these purposes,
especially in light of the fact that we are a development stage company with no
revenues. While $ million may be sufficient to pursue the specific
opportunities already targeted and described in this prospectus, that amount
would not be sufficient to pursue our larger business plan--providing medical
products used to treat cancers, HIV/AIDS and other potentially fatal diseases.
Hence, as is true for other companies contemplating significant growth, we will
need additional financing. We can't assure you that we will be able to raise
more money, or that your ownership interest won't be diluted.
THIS OFFERING HAS NO MINIMUM REQUIREMENTS. While $ million is the maximum
amount of money that we can raise in this offering, the offering has no minimum.
If we only raise a small amount, you will risk a significant loss.
THIS OFFERING IS SELF-UNDERWRITTEN. No-one has promised to purchase all or
any part of our stock. Consequently, we can't assure you that any of the stock
will be sold. No underwriter, placement agent or other person has contracted
with us to purchase or sell our stock. Because there is no firm commitment from
an underwriter to purchase the stock, we intend to sell shares ourselves,
perhaps with the help of licensed brokers. If we raise significantly less money
than the $ million maximum, our costs will be allocated among relatively fewer
shares.
THE OFFERING PRICE OF OUR STOCK WAS DETERMINED ARBITRARILY. THE ISSUANCE OF
THE STOCK AND ANY ADDITIONAL STOCK WILL HAVE A DILUTIVE EFFECT. The offering
price of the shares offered has been determined solely by us. No formula was
used in its computation. We considered factors such as our financial condition
and the risks of not meeting our objectives. The offering price of $ per share
exceeds the current net tangible book value per share of the common stock. You
will experience an immediate dilution of the book value of your stock. The
pricing of the stock does not bear any relationship to our assets, book value,
net worth, cash flows or past operating results, and should not be considered to
be an indication of the actual value of our company.
NO PUBLIC TRADING MARKET CURRENTLY EXISTS FOR OUR COMMON STOCK. There is
currently no public market for the trading of our common stock, and therefore,
you may be unable to sell or otherwise dispose of all or any portion of your
stock. We intend to list the stock for trading on the OTC Bulletin Board. Until
then, you may not be able to liquidate your investment and the stock may not be
readily acceptable as collateral for loans. We can't assure you that there will
be a trading market for the stock or that an active public market will develop
or, if developed, will continue. If an active public market does not develop or
is not maintained, the market price and liquidity of the shares may be adversely
affected. Moreover, in the event you are able to sell some or all of your stock,
you may not recover the original investment. As a result, you should view an
investment in our stock as a long-term investment and not plan to sell or
otherwise dispose of the stock for a profit in the near future.
WE DO NOT PLAN TO PAY DIVIDENDS. We have never paid cash dividends on our
common stock and we do not plan to pay dividends in the foreseeable future. We
expect that any earnings will be retained for our use in implementing the
business plan and other operating needs.
OUR PRODUCTS COULD GENERATE LIABILITY AS A RESULT OF DAMAGES CAUSED BY
THEIR USE. Since the ThermoChem system and its resulting products, systems and
devices are intended to treat patients with the HIV virus and certain types of
cancers, it is possible that the patients or their families will assert a claim
that the patient's deteriorating health or death was caused in whole or in part
to our products. The area of law as it relates to these matters is unsettled and
constantly subject to change. We can't assure you that those product liability
risks will not materialize into disputes which we will have to address. Although
we seek to reduce the risk of those losses, there can be no assurance that those
measures will be effective in limiting our liability for those damages. Any
liability for damages could be
10
<PAGE>
substantial and could have a material adverse effect on our financial condition
and results of operations.
OUR OPERATIONS WILL BE AFFECTED BY YEAR 2000 COMPLIANCE ISSUES. The year
2000 poses potential problems, including computer system and data processing
failures resulting from errors in computer-controlled systems using two digits
to express the date rather than four to express the applicable year, 2000. For
example, computer programs that contain time-sensitive software may recognize
"00" as the year 1900, rather than the year 2000. This could result in system
failure or miscalculations causing disruptions of operations, including among
other things, a temporary inability to process transactions and invoices or
engage in similar ordinary business activities. We believe that our software and
hardware systems will function properly with respect to the date 2000 and
thereafter. Nonetheless, we won't know for sure until those systems are
operational in the Year 2000. We are also in the process of contacting all of
our major suppliers and medical institutions involved in clinical trials to
determine the extent to which our systems may be vulnerable because of third
party failure to make their own systems Year 2000 compliant. If the systems of
our suppliers, clients or partners are not fully Year 2000 compliant, we can't
assure you that system interruptions or the costs associated with repairing
systems or equipment will not have a material adverse effect on our business,
results of operations or financial condition.
OUR STOCK'S PRICE COULD BECOME EXTREMELY VOLATILE. Our stock may be
purchased or sold at prices that could be subject to extreme fluctuations due to
such factors as actual or anticipated changes in our periodic operating results,
selection of new products, execution of new contracts, general market conditions
and other actions which typically affect the market value of stock similar to
ours.
WE MAY REQUIRE FURTHER FINANCING IN THE FUTURE BY ISSUING EQUITY OR DEBT
SECURITIES. We may decide to issue debt securities from time to time subject,
among other things, to compliance with applicable securities law considerations
and possible future credit or other financing agreements. Accordingly, the
future issuance of debt securities could have a positive or an adverse impact on
the stockholders and the value of their stock.
THE FUTURE SALE OF THE STOCK MAY BE RESTRICTED. Our current stockholders
beneficially hold 10,087,500 of the 80,000,000 shares authorized by our Articles
of Incorporation, as amended. The majority of the stock they own is "restricted"
as defined in Rule 144 under the Securities Act. The "restricted" shares may
have been owned beneficially for less than one year by existing stockholders, in
such a case they may not be sold in the market pursuant to Rule 144 with regard
to sales by affiliates until at least one year has passed from the date of their
purchase. We can make no prediction as to the effect, if any, that sales of
unregistered stock, or the availability of unrestricted stock for future sale,
will have on our stock's market price. Sales of substantial amounts of stock in
the public market, or the perception that those sales could occur, could depress
stock prices. Stock sales may also make it more difficult for us to sell
securities in the future.
CERTAIN "PENNY STOCK" REGULATIONS MAY APPLY TO THIS OFFERING. As of the
date of the prospectus, our stock is considered so-called "penny stock." It is
uncertain in the future when and if the stock would be listed on the OTC
Bulletin Board or the pink sheets or otherwise or whether broker-dealers will
make a market in the shares. The so-called "penny stock" low-priced securities
regulations could affect the sale of our stock. These regulations require
broker-dealers to disclose the risk associated with buying penny stocks and to
disclose their compensation for selling the stock. They may have the effect of
reducing the level of trading activity in the secondary market, if any, for the
stock and make it more difficult for you to sell your stock.
In addition to the above risks, businesses are often subject to risks not
foreseen by management. In reviewing the prospectus, potential investors should
keep in mind other potential risks that could be important.
11
<PAGE>
3. USE OF PROCEEDS
We intend to use the money we raise for general corporate purposes,
including general working capital, to fund clinical trials, product development
and inventory build-up, and to cover our general capital expenditures. We are
selling the stock on a best efforts, no minimum basis. No underwriters are
involved. Thus, there can be no assurance that we will receive funds sufficient
to fund any aspect of our business or meet our financial requirements. In the
event that we do not raise sufficient capital to finance the projects and
activities described below; we will apply whatever money we receive through the
offering as we, in our sole discretion, determine to be in our best interest.
As set forth in the following table, the maximum gross proceeds from the
sale of the 2,000,000 shares offered hereby will generate $ in gross
proceeds. We reserve the right to offer more stock for sale should the initial
2,000,000 shares be sold. The net proceeds from the sale of the shares (after
offering expenses of approximately $ ) are estimated to be approximately
$ if the maximum of 2,000,000 shares are sold. We may, at our sole
discretion, pay commissions, up to a maximum of ten percent (10%), where
permitted by laws and only to persons permitted to receive commissions for
selling stock. The tables set forth below disclose our approximate use of
proceeds if 100% of the shares of stock are sold. If less than 100% of the stock
is sold, with the exception of the offering expenses, the items in the Use of
Proceeds table will be reduced on a pro rata basis.
<TABLE>
<CAPTION>
PERCENT OF GROSS
OFFERING
DOLLAR AMOUNT PROCEEDS
-------------- ----------------
<S> <C> <C>
Gross Offering Proceeds......................................................... $ 100.0%
Less Offering Expenses (1)...................................................... $ 10.0%
Net Offering Proceeds after Expenses............................................ $ 90.0%
Clinical Trials (2)
$ 38.3%
Working Capital (3)
$ 30.0%
Product Development Inventory Buildup (4)....................................... $ 21.7%
Total Net Offering Proceeds after Expenses...................................... $ 90.0%
</TABLE>
- ------------------------
(1) Includes state filing fees, legal fees, printing and other expenses of this
Offering. These amounts will have first priority. Also includes a maximum
commission of ten percent (10%), which will be paid only as permitted by
applicable laws, and at our sole discretion.
(2) We plan to expend approximately $ to fund additional clinical
and preclinical trials
(3) We plan to expend approximately $ to provide funds for working
capital.
(4) We plan to spend approximately $ to 1) complete development of
the ThermoChem-HT and the ThermoChem System for FDA approval and CE
Marking. 2) Buildup of inventory of ThermoChem-HT and related disposables.
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<PAGE>
4. CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998
and April 30, 1999. The December 31, 1998 figures were taken from the audited
financial statements for the year ended December 31, 1998, which included a
qualification regarding our ability to continue as a going concern. The April
30, 1999 figures were taken from the unaudited financial statements for the four
months ended April 30, 1999.
The following table shows our capitalization as of December 31, 1998. Also
shown is the pro forma capitalization showing, hypothetically, the money raised
in this stock offering factored in as if it were raised on December 31, 1998.
<TABLE>
<CAPTION>
APRIL 30, 1999
AS ADJUSTED DECEMBER 31, 1998
(ACTUAL, AS ADJUSTED
UNAUDITED) (ACTUAL) PRO FORMA
----------------- ----------------- --------------
<S> <C> <C> <C>
Stockholders' equity (deficit)
Common stock, par value $.01;............................ $ 100,875 $ 100,875 $ 100,875
80,000,000 Shares authorized;
10,087,500 Shares issued and outstanding;
2,000,000 to be issued and outstanding, as adjusted...... 6,000,000
Warrants for common stock with various redemption terms.... 496,536 106,932 496,536
Additional paid-in capital................................. 75,125 75,125 74,125
Deficit accumulated during the development stage........... (10,905,866) (9,921,103) (10,905,866)
----------------- ----------------- --------------
(10,233,330) (9,638,177) (10,233,330)
----------------- ----------------- --------------
Total Stockholders' equity (deficiency) and total
capitalization........................................... $ 84,277 $ 453,637 $
----------------- ----------------- --------------
----------------- ----------------- --------------
</TABLE>
13
<PAGE>
5. DILUTION
The value of the stock, expressed in terms of price per share, will be
diminished immediately upon your purchase. This concept is referred to as
dilution. Dilution represents the difference between the offering price and the
net tangible book value per share immediately after the completion of the
offering. Dilution of the value of the shares is due, in part, to the lower book
value of the shares now outstanding, to expenses incurred in connection with
this offering; and to our indebtedness, as well as other factors. The following
table illustrates this dilution rounding off the dilution to the nearest one
thousandth of a cent:
The negative net tangible book value of our stock as of December 31, 1998,
was ($9,638,177). Net tangible book value consists of our net tangible assets
(total assets less total liabilities and intangible assets). As of December 31,
1998, there were 10,087,500 shares of our common stock outstanding, 10,000,000
of which were owned by Biocontrol, and 87,500 of which were purchased in our
first private placement. Therefore, the negative net tangible book value of our
common stock as of that date was ($.955) per share.
In the event that all of our stock offered in this prospectus is sold, its
negative net tangible book value as of December 31, 1998 would be ($ ) or
approximately ($ ) per share. These figures give effect to the deduction of
all of the estimated expenses, including filing, printing, legal, accounting,
commissions and other fees. The net tangible book value of each share will have
increased by approximately ($ ) per share to the present stockholders, and
decreased by approximately $ per share to the investors, if the maximum
offering is sold.
<TABLE>
<S> <C> <C>
ASSUMING MAXIMUM SHARES SOLD
Offering Price Per Share.................................. $
Negative Net Tangible Book Value Per Share Before
Offering................................................ $ (.955)
Increase Per Share Attributable to Payment by Investors... $
Negative Net Tangible Book Value Per Share After
Offering................................................ $ ()
--------- ---------
Dilution Per Share to Investors........................... $
--------- ---------
--------- ---------
</TABLE>
14
<PAGE>
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
6.1 OVERVIEW
The following is a discussion of certain factors affecting our results for
the three fiscal years ending December 31, 1998 and our liquidity and capital
resources. This discussion should be read along with our financial statements
and their notes, which can be found at the end of this prospectus.
We are a developmental stage company. We have accumulated a net loss from
operations from our inception in 1992 through April 30, 1999 of $10,905,866.
This is a total net loss per share of $1.08. We are developing a complex medical
treatment system and are conducting FDA-approved clinical trials of the system.
The risks and uncertainties that can affect our operations, performance,
research and development and our operating results include the following:
- delays in research and development caused by technical issues;
- continued FDA approvals for clinical trials and marketing;
- uncertainty of funding to meet our needs;
- dependence on a single technology;
- continued lack of revenue from sales.
SALES. We are a developmental stage company and have no sales revenue to
date.
Operating expenses consist of research and development expenses of $693,000
from January 1, 1999 to April 30, 1999, as compared with $88,256 for the same
period in 1998, and general and administrative expenses of $291,500 and $199,152
for those respective periods. Our total loss for this year during the first four
months was $984,737 versus a loss of $287,408 for the first four months of 1998.
These changes are attributable to a charge of $389,604 for warrants to purchase
common stock and recognition of a loss on assets of $177,000 for stock we hold
in Hemocleanse, Inc..
6.2 RESULTS OF DEVELOPMENT
We have incurred significant losses and negative cash flows from operations
from inception through April 30, 1999 and we have a significant accumulated
deficit as of April 30, 1999, raising substantial doubt about our ability to
continue as a going concern. We have financed our research and development
program primarily by advances from our parent company, Biocontrol. We intend to
raise additional capital through this public offering. We may, however, continue
to be dependent on Biocontrol for advances to meet short-term cash requirements.
We believe that our available cash resources, including funds we reasonably
expect to raise through stock sales and advances from Biocontrol, will be
sufficient to fund our operations through April 30, 2000.
NET LOSS PER COMMON SHARE. Net loss per common share is based on the
weighted average of common shares outstanding which amounted to 10,296,212,
10,087,500 and 10,087,500 for the years ended December 31, 1998, 1997 and 1996
respectively and 10,538,667 and 10,087,500 for the four month periods ended
April 30, 1999 and 1998. Except for warrants issued during the period May 1,
1998 through April 30, 1999, the loss per share does not include common stock
equivalents.
Net loss per share is based on the weighted average number of shares of
common stock outstanding and the number of common shares issuable on the
exercise of 420,000 warrants issued during the period May 1, 1998 through
December 31, 1998 and 140,000 warrants issued during the four months ended April
30, 1999. The weighted average number of common shares, including the effect of
the conversion of the warrants for the period from October 23, 1992 (inception)
to December 31, 1998 amounted to 10,087,292 and for the period October 23, 1992
(inception) to April 30, 1999 amounted to 10,110,060.
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<PAGE>
6.3 LIQUIDITY AND CAPITAL RESOURCES
As discussed above, Biocontrol has funded our operations through April 30,
1999. Although we believe we can raise capital through a public offering of our
stock, we may continue to require funding from Biocontrol and continue to be
economically dependent on our parent company. Biocontrol has also experienced,
and continues to experience, substantial losses and difficulties of its own. The
consolidated financial statements for Biocontrol for the year ended December 31,
1998 included disclosures which referred to the existence of substantial doubt
about their ability to continue as a going concern. Biocontrol had a net loss
for the three month period ended March 31, 1999 of $4,255,245 (unaudited) and
for the fiscal year ended December 31, 1998 of $22,402,644. As of December 31,
1998 and March 31, 1999, Biocontrol's accumulated deficit was $143,101,880 and
$147,357,125 (unaudited) respectively.
In the past, Biocontrol has financed its own operations from proceeds
generated from private and public sales of its securities, the issuance of debt
in the form of convertible debentures, from funds paid by other subsidiaries to
Biocontrol for research and development and from intercompany advances from
other Biocontrol subsidiaries. The failure of Biocontrol to continue to exist as
a going concern would have a material adverse effect on our business and ability
to continue operations.
6.4 CERTAIN TRANSACTIONS
INTERCOMPANY ADVANCES. For the years ended December 31, 1998, 1997 and
1996, net intercompany charges and advances by Biocontrol to us were $820,199,
$1,612,578 and $1,664,093 respectively. For the four month period ended April
30, 1999, such items totaled $329,353. Total intercompany charges and advances
by Biocontrol to us have accumulated $10,232,992 since our inception, October
23, 1992, through April 30, 1999. On April 30, 1999 the intercompany amounts due
to Biocontrol were converted to a long-term note payable.
AGREEMENT WITH BIOCONTROL. In 1998, we entered into an agreement with
Biocontrol under which they agreed to help us complete development on the
ThermoChem-HT product and to manufacture the product. Under the agreement, we in
turn assigned design authority over the product to Biocontrol and provided data
necessary for completing the product. We also agreed to assume the costs of
clinical and other testing, and made Biocontrol the exclusive manufacturer of
the product. We also agreed on procedures for the sale and marketing of the
ThermoChem-HT.
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<PAGE>
7. OUR COMPANY
We commenced operations in January, 1992, to explore the medical and
commercial potential of the use of whole body hyperthermia in the treatment of
cancer and AIDS with a goal of developing a safe delivery system for the
therapy. We were incorporated in Pennsylvania as a wholly-owned subsidiary of
Biocontrol Technology, Inc. Biocontrol is a publicly-traded corporation with
common stock registered under the securities laws. It trades as BIOCONTROL on
the OTC Bulletin Board. We are included in the reports our parent company files
with the SEC and our financials are consolidated with Biocontrol's. As of April
30, 1999, Biocontrol owned 99.1% of our common stock.
7.1 BACKGROUND
We have conducted research in the area of a specialized method for
administering whole-body hyperthermia, including extracorporeal blood heating
and sorbent-based detoxification, as an antiviral and antineoplasm protocol.
Hyperthermia involves circulating and heating the patient's blood
extracorporeally to approximately 118 DEG.F which results in raising core body
temperature to maximum of 108.4 DEG.F. We found hyperthermia to be a treatment,
perhaps hundreds of years old, that showed promise in the treatment of some
cancers. There are many critics of the process, and serious questions about its
safety and effectiveness. Nonetheless, some information about hyperthermia
suggested its possibilities as a cancer and HIV/AIDS treatment. Our research and
development continued with the objective of developing a safe method for
administering hyperthermia therapy. These efforts resulted in a patent awarded
to us in 1994 for a specialized method for whole-body extracorporeal
hyperthermia.
Hyperthermia as a treatment of tumors has been carefully studied and
applied since the 1960's. Prior to that time there were multiple reports of
tumor regression coincident with febrile episodes. Further analysis revealed
that temperatures greater than 105.8 DEG.F are necessary to induce tumor
necrosis. Although there are numerous methods to induce hyperthermia by either
direct skin contact or radiant heating, the most efficient is extracorporeal
whole body hyperthermia--heating the patient's blood outside of the body.
Research has indicated that tumors are vulnerable to heat and that the goal of
hyperthermic treatment therapy is to achieve cytotoxic temperatures in the tumor
for a sufficient length of time without damaging the surrounding normal tissue.
SEE DeMoss, J.L. et al., "Hyperthermia in the Treatment of Cancer," THE JOURNAL
OF EXTRA-CORPOREAL TECHNOLOGY, Vol. 17, No. 1, pp. 37-43 (1985); Sanchez, R.,
"Overview of Whole Body Hyperthermia Experience at American International
Hospital," CONSENSUS ON HYPERTHERMIA FOR THE 1990'S, Plenum Press, New York, pp.
203-208 (1990); and Perez, C.A. et al., "Randomized Phase III Study Comparing
Irradiation and Hyperthermia with Irradiation Alone in Superficial Measurable
Tumors," Am. J. Clin. Oncol., Vol. 14, No. 2, pp. 133-141 (1991).
In 1993, we entered into an agreement with HemoCleanse, Inc. to develop and
commercialize the process and develop technology to administer perfusion-induced
systemic hyperthermia safely and in a way that could be monitored by the medical
treatment team. The resulting technology is called the ThermoChem System.
HemoCleanse is an Indiana company that designs and manufacturers medical devices
and disposables. HemoCleanse successfully developed technology for the treatment
of acute hepatic failure and serious drug overdose. This core technology, called
the Biologic DT, uses a sorbent that balances blood chemistries on a real-time
basis.
Our products, the ThermoChem System, ThermoChem-HT, and related disposables
facilitate the hyperthermic treatment of certain cancers. To date we do not know
of any system or product that is designed specifically to enable hyperthermia
therapy. This could change, of course, without notice. Numerous companies large
and small make components which can be integrated into systems that perform
functions comparable to those of our product's system; however, we believe our
product's capability to monitor the process on a real-time basis, as well as
other features, sets us apart from our competition.
17
<PAGE>
7.2 DEVELOPMENT AND OPERATIONS
THE THERMOCHEM SYSTEM
The ThermoChem system is a hyperthermia therapy system that consists of two
key components, the ThermoChem-HT and ThermoChem-SB. In addition, we support the
systems with related disposables. Our system induces artificial fever conditions
by circulating the patient's blood extracorporeally at an increased temperature
while maintaining balance of blood chemistries.
[PHOTO OF THE THERMOCHEM SYSTEM]
FIGURE 1. THE THERMOCHEM SYSTEM
THERMOCHEM-HT
The ThermoChem-HT is comprised of several specialty integrated devices that
perform the following:
- Blood/Fluid Propulsion via roller pump with maximum flow rate of 2000 cc
per minute
- Water heating and cooling to control extracorporeal blood/fluid
temperature up to maximum of 118.4 DEG.F
- Air bubble detection
- Roller pump occlusion detection
- Monitoring and recording temperatures up to seven sites
- Constant up-to-the minute information on status of patient via video
touch screen
- Data acquisition capabilities
THERMOCHEM-SB
The ThermoChem-SB is an extracorporeal blood treatment system that
circulates blood from the ThermoChem-HT, passes through a cellulosic plate
dialyzer, and returns it to the ThermoChem-HT circuit. Within the dialyzer,
diffusion causes many chemicals to pass from the blood into a sorbent suspension
surrounding the membranes. Depending upon the binding characteristics of the
sorbents, some chemicals remain at low concentration in the dialysate (and are
therefore efficiently removed from the blood), and others reach concentrations
similar to the blood (are therefore not removed from the blood). Inclusion of
certain chemicals in the sorbent suspension composition can partially saturate
sorbent binding sites, and cause return of those chemicals to the blood during
treatment. The ThermoChem-SB does not use a roller pump to move blood, as the
ThermoChem-HT, but rather uses pressure changes in the sorbent side to expand
and compress the membrane packages, thus pulling and returning blood to the
ThermoChem-HT circuit. The sorbent suspension is contained within a bag in which
all ultrafiltrate is captured; the weight change of the entire machine mirrors
the weight change of
18
<PAGE>
the patient. By simple algorithms, the ThermoChem-SB alters blood inflow and
outflow cycle times to increase fluid removal from the patient, or automatically
reinfuse fluid to the patient to obtain exactly the prescribed weight increase
or decrease.
PERFUSION-INDUCED SYSTEMIC HYPERTHERMIA UTILIZING THE THERMOCHEM SYSTEM AND
RELATED DISPOSABLES
Perfusion-induced systemic hyperthermia, a form of whole-body hyperthermia,
is achieved through extracorporeal blood heating by heating the patient's blood
outside the body to approximately 118.4 DEG.F and returning it back to the body
at approximately 114.8 DEG.F, thus raising the body's core temperature to the
desired treatment temperature to the desired treatment temperature up to a
maximum of 108.4 DEG.F. The use of the ThermoChem System can be summarized as
follows.
The patient is placed under general anesthesia and ventilated mechanically.
Catheters are placed for the purpose of monitoring cardiac index, central venous
pressure, pulmonary artery pressures, pulmonary capillary wedge pressure, venous
oxygen saturation and delivery of fluids and medications. An access catheter is
positioned in the external jugular vein as the site of removal of blood from
patient. A second catheter is positioned in the femoral vein for return of blood
to the patient.
The extracorporeal circuit consisting of the ThermoChem-HT is connected by
tubing to the catheter with the orientation of blood being withdrawn through the
external jugular vein. Blood passes a roller pump at a maximum rate of 2000 cc's
per minute, which sends it onward to the heat exchanger where the blood is
indirectly heated to a maximum of 118.4 DEG.F. A portion of the blood passes
through a T-connection to the ThermoChem-SB, located between the roller pump and
the heat exchanger, where a wide range of chemicals and toxins can be removed
from blood while maintaining a balance of electrolytes and important nutrients
on a real-time basis and then returned to the blood flow path before it reaches
the heat exchanger. The continually circulating blood is returned to the patient
via the femoral vein at approximately 114.8 DEG.F, gradually raising the
patient's core temperature to the desired treatment temperature, which is
measured and monitored on a video touch screen and recorded at the following
sites: deep esophagus, bilateral auditory canals, rectum, bladder, airway,
pulmonary artery, blood and skin.
The desired core body temperature is reached in about 20 to 50 minutes
after the system is activated depending on the extent of extracorporeal heating
and flow rate among other parameters. The elevated body temperature is
maintained for treatment time of two hours. After treatment, the system is
reversed and cooling of blood starts and patient is cooled to normal body
temperature in about 40 minutes and treatment is ended.
We are still at the experimental stage, but we believe that the technology
could mark a significant advance in the field of therapeutic hyperthermia, with
the potential to increase the efficacy of some current treatment regimes,
especially chemotherapy, in the treatment of cancer and to increase the
potential of some drugs in the treatment of HIV. If the ThermoChem System
continues to prove safe and effective in the FDA clinical trials, hyperthermia
could be an additional method for the medical community to increase the survival
and quality of life for patients who have few options.
We have assembled a medical advisory board with a goal to move this
technology through clinical trials and the FDA to hospitals where the medical
community can utilize its potential. We believe that once a safe delivery system
is established, serious, extensive and well-documented testing will determine
whether PISH, when combined with other treatments, can be used as an effective
treatment for certain persons with cancer or HIV.
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<PAGE>
A Phase I clinical trial is ongoing for treatment of patients with
metastatic non-small cell lung cancer. A Phase II clinical trial has been
completed for treatment of patients with HIV. An extended Phase II clinical
trial has been approved by the FDA for an additional 60 patients.
[DIAGRAM OF THE THERMOCHEM SYSTEM]
THERMOCHEM-HT
[PHOTO OF THE THERMOCHEM-HT]
FIGURE 3. THE THERMOCHEM-HT
The ThermoChem-HT is comprised of several specialty integrated devices that
perform the following:
- Blood/Fluid Propulsion via roller pump with maximum flow rate of 2000 cc
per minute
- Water heating and cooling to control extracorporeal blood/fluid
temperature up to a maximum of 118.4 DEG.F
- Air bubble detection
- Roller pump occlusion detection
- Monitoring and recording temperatures up to seven sites
- Constant up-to-the minute information on status of patient via video
touch screen
- Data acquisition capabilities
REGIONAL HYPERTHERMIA UTILIZING THERMOCHEM-HT AND RELATED DISPOSABLES
Regional hyperthermia is used in cases where a whole-body treatment is not
necessary. Regional hyperthermia involves heating a specific organ or region of
the body. Current methods of local
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hyperthermia treatment for primary and recurrent tumors employ the application
of heated needles, ultrasound, electromagnetic waves, circulating water baths,
microwaves and radio waves.
The ThermoChem-HT has been approved for human clinical trials by an FDA
Investigational Device Exemption (IDE). A Phase I trial has been completed for
the treatment of advanced gastrointestinal and ovarian cancer in a surgical
procedure that involves debulking tumors in the peritoneal cavity and
circulating heated fluids with a chemotherapy in and out of the peritoneal
cavity. This procedure, called intraperitoneal hyperthermic chemotherapy has
been done in a National Cancer Institute funded study at Wake Forest School of
Medicine since 1992 with encouraging results.
Pre-clinical studies, in preparation for Phase I trials involving
thermochemotherapy of patients with lower extremity cancers of different types,
have been completed at the University of Texas MD Anderson Cancer Center.
THERMOCHEM TREATMENT KITS
THERMOCHEM SYSTEM
- Treatment kits for perfusion induced systemic hyperthermia are designed
for one patient treatment and incorporate the following:
- Tubing connecting cannula from patient to ThermoChem-HT
- Heat exchanger
- Esophageal and rectal temperature probe
- 16 French Foley catheter temperature probe and collection bag
- Hemoglobin indicator cassette
- Pharmaceutical kit
- ThermoChem-SB disposable pack (see figure 1)
[PHOTO OF THE THERMOCHEM-SB DISPOSABLE PACK]
FIGURE 4. THERMOCHEM-SB DISPOSABLE PACK
THERMOCHEM-HT
Treatment kits for perfusion induced regional hyperthermia are specific for
each application: 1) isolated limb perfusion; 2) intraperitoneal hyperthermic
chemotherapy; 3) thermochemotherapy hemi-perfusion and are designed for one
patient treatment and incorporate the following:
- ThermoChem-HT sterile disposable pack specific for each indication for
patient connection to ThermoChem-HT
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- Temperature probes
- Toughy-Borst temperature probe
- Tubing connectors
- IBM formatted 3.5 floppy disk-specific for each indication
Although others have experimented with the use of whole body hyperthermia,
specifically, perfusion-induced systemic hyperthermia one significant problem
has been the safe delivery of the procedure. We believe the ThermoChem
technology addresses the issue of a safe delivery system. Although we can't
assure you that the therapy is safe for all humans, clinical trials to date have
confirmed that the patients were able to safely tolerate hyperthermia at a core
temperature of 107.6 DEG.F to 108.4 DEG.F for two hours. Based upon the results
of clinical trials, the FDA has approved additional clinical trials.
Since the bone marrow is a common repository for metastatic tumor cells and
systemic viral infections, it is important to attain the target temperature in
the application of hyperthermia for therapeutic purposes. The ThermoChem
technology represents a significant step towards perfusion-induced hyperthermia
to be used in combination with surgery, chemotherapy and radiation to treat
certain cancers and combined with current drug cocktails in treatment of HIV as
a standard of care for patients who have few options.
7.3 MARKETING STRATEGY--THERMOCHEM AND DISPOSABLES
Currently, to the best of our knowledge, there is no developed technology
like the ThermoChem System or the ThermoChem-HT and related disposables. In the
United States and the European Union comprehensive cancer centers or hospitals
offering surgery, drug treatment or radiation treatment could use the ThermoChem
System and the ThermoChem-HT and related disposables in the following
departments in the hospital:
- Department of Surgery
- Department of Radiology
- Department of Oncology
- Department of Infectious Disease
The procedure personnel needed to deliver PISH or regional hyperthermia
would include the following:
- Surgeon--skilled in placement of catheters
- Perfusionist--operate the ThermoChem System or the ThermoChem-HT and
place the temperature probes
- Anesthesiologist--sedate, intubate, and ventilate the patient and
maintain anesthesia
- Treatment Nurse--assist surgeon, prepare patient
The use of the ThermoChem System and the ThermoChem-HT could be a source of
revenue for the hospital and the personnel involved, because of its potential
for treating different cancers and diseases that are heat sensitive.
Upon regulatory approval in the United States and the European Union, IDT
expects to generate revenue and develop our systems in the following ways:
- Sale of ThermoChem System and ThermoChem-HT
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- Sale of ThermoChem System and ThermoChem-HT disposable kits
- IDT will seek a license agreement with a major medical device company
that has infrastructure to service the market
- Continue ongoing clinical trials with comprehensive cancer centers for
different types of cancers and diseases leading to medical publications
that will demonstrate the efficacy of hyperthermia combined with current
treatments as a standard of care for each indication
7.4 CLINICAL TRIALS
COMPREHENSIVE CANCER CENTER AT WAKE FOREST UNIVERSITY
FEBRUARY 1997 THROUGH MAY 1999
In May, 1998, the FDA approved an Investigational Device Exemption to allow
human clinical trials utilizing the ThermoChem-HT and related disposables for
intraperitioneal hyperthermic chemotherapy (IPHC) in the treatment of advanced
gastrointestinal and advanced ovarian cancers. In IPHC, all cancerous growths
are surgically removed from the patient's abdomen and pelvis and all spaces and
lining surfaces are opened. The abdomen is perfused utilizing the ThermoChem-HT
with a gently heated physiologic solution circulating for a two-hour period and
containing cancer fighting chemotherapy agents that bathe over all the lining
surfaces. IPHC has been done at the Comprehensive Cancer Center at Wake Forrest
under a National Cancer Institute study since 1992 utilizing a non-standardized
perfusion setup.
It is anticipated that the ThermoChem-HT can make the IPHC procedure more
efficient and standardize the procedure and educate others on the utilization of
the ThermoChem-HT.
In May 1999, a Phase I study was completed on patients with advanced
gastrointestinal and advanced ovarian cancers utilizing the ThermoChem-HT and
related disposables.
UNIVERSITY OF TEXAS MEDICAL BRANCH AT GALVESTON
SEPTEMBER 1996 THROUGH MAY 1999
Pre-clinical studies were conducted on six swine to assure safety at an
increased flow rate and maintenance of a higher core temperature of 109.4 DEG.F
for a period of two hours. This study concluded that blood chemistries were
normalized with the use of the ThermoChem system. In November 1996, we submitted
an IDE application to the FDA for a study utilizing the ThermoChem System for
PISH for two hours at 108.4 DEG.F to treat patients with metastatic non-small
cell lung cancer. This protocol was developed by the University of Texas in
Galveston. The FDA responded in December 1996 with an approval to conduct a
Phase I trial. The University of Texas' Institutional Review Board (IRB) granted
approval of this study in May 1997.
On September 11, 1997, we entered into an agreement with the University of
Texas Medical Branch at Galveston (UTMB) to begin a human clinical trial in
November 1997. The trial utilized the ThermoChem System and disposables to
deliver perfusion-induced systemic hyperthermia to treat patients with
metastatic non-small cell lung cancer. One of the objectives of this Phase I
trial was to evaluate the ThermoChem system for the use in the treatment of
metastatic non-small cell lung cancer with regard to patient selection, tumor
response, patient performance status, and patient survival. The follow-up of the
patients is patterned after the Southwest Oncology Group protocols, which are
considered state-of-the-art studies to follow response of cancer to the therapy.
The study is being conducted at the General Clinical Research Center (GCRC) at
UTMB, which is supported by the National Institute of Health (NIH). This is the
only PISH study for metastatic non-small cell lung cancer approved by the FDA.
Five patients with stage IV metastatic non-small cell lung cancer received PISH
treatment through June 1998. An expansion of the study to include five stage III
patients was
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approved by the FDA in June, 1998. An abstract of the results of the first five
patients was presented by the principal investigator at the American Association
for Cancer Research at Philadelphia, Pennsylvania, Joseph B. Zwischenberger,
M.D., in March, 1999.
THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER
FEBRUARY 1997 THROUGH NOVEMBER 1997
Pre-clinical studies in preparation for a Phase I trial involving
thermochemotherapy of patients with lower extremity cancers of different types
have been completed at the University of Texas M.D. Anderson Cancer Center.
These animal studies were used to develop the surgical techniques necessary for
a clinical trial on humans and to train and familiarize the center's staff in
the use of ThermoChem technology.
ST. ELIZABETH HOSPITAL, LAFAYETTE, INDIANA
JULY 1993 THROUGH FEBRUARY 1994
We conducted several preclinical studies in order to obtain additional
information to support a submission to the FDA for an investigational device
exemption. With all this completed data, we requested a clinical study.
MARCH 1994 THROUGH NOVEMBER 1994
We received FDA approval for a protocol entitled "Evaluation of Whole-Body
Hyperthermia Utilizing the ThermoChem System in the Treatment of Kaposi's
Sarcoma with AIDS" to conduct a randomized, controlled feasibility study on six
HIV-positive patients with Kaposi's Sarcoma and CD4+ counts of 50-1150. Three
patients received a one-hour treatment at 104 DEG.F, and three patients received
one-hour treatment at 107.6 DEG.F. Subsequently we requested a Phase II clinical
study. This is the first FDA-approved (PISH) Perfusion-Induced Systemic
Hyperthermia study in the United States Data from this study was later published
in the March 1996 issue of the JOURNAL OF ACQUIRED IMMUNODEFICIENCY SYNDROMES
AND HUMAN RETROVIROLOGY.
DECEMBER 1994 THROUGH JULY 1996
An approved Phase II Clinical Study was randomized to include HIV-positive
patients with CD4+ counts of 50-250 and included ten patients who received no
treatment (controls); ten patients who received two one-hour treatments that
were administered 96 hours apart and at 104 DEG.F (treated control); and ten who
received two one-hour treatments that were administered 96 hours apart and at
107.6 DEG.F (treated). Data from this study was published in the AMERICAN
SOCIETY FOR ARTIFICIAL INTERNAL ORGANS JOURNAL, September/October 1997.
7.5 JOINT VENTURES
JOINT VENTURE WITH HEMOCLEANSE, INC.
We are developing the ThermoChem System used in the PISH treatment in
cooperation with HemoCleanse. HemoCleanse is an Indiana corporation with offices
located at 2700 Kent Avenue, West Lafayette, Indiana 47906. It designs,
manufacturers and markets medical devices and disposables for treatment of blood
outside the body. HemoCleanse's technology, the BioLogic-DT, is based on
chemical sorbents that remove selected toxins from the blood while balancing
blood chemistries. The BioLogic-DT which is a combination detoxifier/blood
delivery system was approved by the FDA in 1994 as a detoxifier for treatment of
drug overdose. We own a total of 1,042,253 shares of HemoClease common stock, or
8.08% of their company on a fully diluted basis, including 67,533 shares of
stock which are held by our wholly-owned subsidiary, Infectious Disease
Treatment of Florida. Our parent,
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Biocontrol, purchased our stake during the period of 1994 through 1999 at an
average price of $2.36 per share for an aggregate consideration of $2,459,226.
In April, 1999 we converted a note receivable into common stock of HemoCleanse.
In return for reduction of $130,493 in principal, plus $16,593 in interest, we
received 67,533 shares of HemoCleanse common stock. The total cost of the
investment of $106,209 was charged off by us as an impairment loss due to the
speculative nature of the investment and HemoCleanse's financial condition which
shows a net deficiency in assets.
In 1996, HemoCleanse received FDA 510(K) approval to market the BioLogic-DT
for an acute hepatic coma indication. HemoCleanse believes that its systems are
uniquely able both to selectively remove small, intermediate and protein-bound
toxins and to provide extracorporeal hyperthermia to kill infected or rapidly
dividing cells without the risk of electrolyte imbalances. The ThermoChem
System, which incorporates the Biologic-DT technology, is designed especially
for use in the PISH procedure. The ThermoChem System and disposables are used in
our clinical trials.
Under the terms of our agreement with HemoCleanse, we have exclusive
worldwide rights to commercialize the ThermoChem System for PISH. We also have
the manufacturing rights to the ThermoChem-HT, a key component of the ThermoChem
System, and rights to make all of the system's disposables. The ThermoChem-HT is
being reconfigured to be used in regional hyperthermia, including isolated limb
perfusion and intraperitoneal hyperthermic chemotherapy. The ThermoChem HT is
being developed under ISO 9001 standards by Biocontrol for CE marking. CE Mark
on a product means the product conforms to directive requirements, and can be
freely traded to and from European Union countries.
We initially entered into a License Agreement with HemoCleanse, dated July
21, 1993 giving IDT the exclusive worldwide right to market the ThermoChem
System and its disposables. In return, we agreed to pay a non-refundable license
fee of $500,000 in addition to paying out-of-pocket product development
expenses, including patent expenses and insurance.
The License Agreement was amended in 1998 to give us: (i) a reduction in
the transfer pricing of the ThermoChem-SB machines and treatment kits; (ii)
exclusive manufacturing rights for the ThermoChem-HT and treatment kits; and
(iii) elimination of the annual minimums. In return, we paid HemoCleanse a
$700,000 license fee and will pay a 6% royalty on all sales of hyperthermia
products (after costs of goods sold) not purchased from HemoCleanse
(ThermoChem-SB machines and treatment kits) beginning upon receipt of a CE Mark
or FDA approval, depending on the jurisdiction where the sales are to be made. A
LICENSE AND RESEARCH AGREEMENTS WITH WAKE FOREST UNIVERSITY SCHOOL OF
MEDICINE
On March 16, 1999, we entered into two agreements with Wake Forest
University School of Medicine ("Wake Forest"), a License Agreement and a
Research Agreement, both in connection with the research and development of the
ThermoChem-HT System.
Under the license agreement, Wake Forest has granted us the exclusive,
worldwide right to use and practice a method owned by Wake Forest of heated
perfusion of chemotherapy drug in the treatment of intraperitoneal and other
cancers, which utilizes the ThermoChem-HT System, and related disposables. The
term of the license agreement is seven years. While Wake Forest agreed in the
license agreement that it will not grant any other similar license, it reserved
its right to use and practice the method. In exchange, we agreed to issue 50,000
shares of our common stock to Wake Forest for each FDA approval received for the
method we licensed or use of our System in its method. In addition, we are to
pay Wake Forest a six percent (6%) royalty of net sales of ThermoChem-HT
disposable kits used in the method until the termination of the license
agreement or as long as Wake Forest utilizes the System for its method,
whichever is longer. Finally, if we sublicense Wake Forest's method, we would be
obligated to pay a sublicense fee to Wake Forest which would equal the amounts
Wake Forest would have otherwise received without the sublicense.
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The research agreement anticipates collaborative efforts between us and
Wake Forest to evaluate and improve the method of heated perfusion of
chemotherapy drugs in the treatment of other cancers, including developing
applications for the use of the ThermoChem system and related disposables.
We view both of the agreements with Wake Forest as milestones in reaching
our ultimate objective of full FDA approval and marketing the ThermoChem
technology and related disposables.
7.6 PATENTS
A patent is a right, granted by the government, which allows an inventor to
prevent others from making, using, or selling the invention for a certain period
of time. In September 1992, a research team funded by us applied for a domestic
patent in connection with the use of PISH and the treatment of HIV-positive
patients. The patent is assigned to us. In October 1994, we received
notification that the patent application for our specialized method for
whole-body extracorporeal hyperthermia had been issued. A Continuation in Part
which included the ThermoChem system was allowed in July 1995, and issued in
December 1995.
The patent, entitled "Specialized Perfusion Protocol for Whole-Body
Hyperthermia", contains seventeen claims for the hyperthermia procedure,
including the method of using a hemodialysis machine capable of heating all of
the blood in the extracorporeal blood circuit to raise the patient's core
temperature to approximately 118 DEG.F without adverse effects on blood
physiology. A Continuation in Part, including the ThermoChem system, was allowed
in July 1995 and was issued in December 1995, addressed the use of a
hemodialyzer with a sorbent suspension in the dialysate, a blood pump and a heat
exchanger to effect the extracorporeal treatment also without the above stated
adverse effects. The Continuation solves several problems which plagued prior
hyperthermia techniques as it rectifies any imbalances of sodium, potassium,
magnesium, bicarbonate or phosphate, and may remove toxins incident to necrosis
of tumors and virally infected cells. This sorbent based technology alleviates
the side effects previously suffered from hyperthermia treatments, including in
the most extreme cases, the death of the patient.
HEMOCLEANSE PATENTS
HemoCleanse has the following patent and patent applications which enhance
our position.
APPARATUS FOR WHOLE-BODY HYPERTHERMIA
(U.S. Patent Application filed January, 1995)
This application focuses on the use of a specialized, precipitated calcium
phosphate sorbent suspension and the specific composition of that suspension for
use in whole-body hyperthermia.
DEVICE AND METHOD FOR EXTRACORPOREAL BLOOD TREATMENT
(Issued January 1994)
This patent gives broad coverage of the BioLogic-DT System, its sorbent
systems, and its method of treating blood. It is the cornerstone of the
technology covering all features of the present and future BioLogic-DT System
machines. From it evolves the system's ease of use, enhanced biocompatibility
and simplified mechanical and disposable design features.
We also rely upon copyright, trademarks and unpatented trade secrets. We
can't assure you that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the our trade secrets or disclose our technology.
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7.7 MANUFACTURING AND DISTRIBUTION
We have obtained the manufacturing rights for the ThermoChem-HT and
disposables from HemoCleanse in our license agreement. Upon FDA clearance, we
will have Biocontrol manufacture the device at a manufacturing facility. This
manufacturing facility has recently completed an audit which resulted in ISO
9001 approval, the international standard, for both its Pennsylvania
manufacturing and product development facilities, together with certification to
EN 46001/09.96, which shows conformance with the European Medical Device
Directives ("MDD") for medical products, certificate number SY 981000201.
The ThermoChem-SB and related disposables, will be manufactured by
HemoCleanse. HemoCleanse has been ISO 9001 certified. The ThermoChem-SB and
disposables and the ThermoChem-HT and disposables will be submitted for CE
marking upon completion. Effective June 1998, all medical devices in the
European Economic Community ("EEC") require the CE Mark.
7.8 CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
Biocontrol, our largest shareholder and a publicly traded company on the
OTC Bulletin Board under the symbol "BICO," currently owns 99.1% of our
outstanding stock. Even if this offering is completely sold, Biocontrol will
still hold a majority of our outstanding stock and will therefore be in a
position to cast a significant vote for all of our directors, and thereby all
officers. We have entered into an agreement with Biocontrol to limit the amount
of our stock it may sell to 10% of Biocontrol's issued and outstanding IDT stock
until our promissory note due to Biocontrol is paid in full or until June 21,
2002, whichever occurs first.
Under another agreement between us and Biocontrol, they have the exclusive
right to manufacture the ThermoChem-HT used in the ThermoChem system.
Glenn Keeling, our CEO and director, is also an employee and director of
Biocontrol. Because Mr. Keeling devotes a majority of his time to our
operations, we are charged by Biocontrol for 76.9% of his salary and benefits
received from Biocontrol. We pay Fred E. Cooper, Chief Executive Officer of
Biocontrol, $90,000 per year for consulting work.
We share office space with Biocontrol in an office condominium owned by
Diasense, Inc., which is a Pennsylvania company and also a subsidiary of
Biocontrol. Biocontrol pays Diasense rent for the space we use. We currently
reimburse Biocontrol for the rent and other general and administrative expenses
paid by Biocontrol on our behalf through the use of intercompany accounts.
We also have made a significant investment in HemoCleanse amounting to
owning 8.08% of their common stock as discussed above in connection with our
joint venture and in Note F to our financial statements.
In 1998 we established a subsidiary, Infectious Disease Treatment of
Florida. At this time its only asset if 67,533 shares of HemoCleanse stock. Mr.
Keeling, our CEO, is our subsidiary's officer and director.
AFFILIATION WITH BIOCONTROL
Since 1992, our parent company, Biocontrol, has funded our development. In
June 1999 and in connection with the execution and delivery of a Note to
Biocontrol, we entered into a Lock-Up Agreement with Biocontrol under which
Biocontrol has agreed not to offer, pledge, sell, contract to sell, or otherwise
transfer or dispose, directly or indirectly, more than 10% of the shares per
year of our stock owned by Biocontrol or enter any swap or any other agreement
or transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership more than 10% of
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the shares in any one year. Biocontrol's commitment to limit sales of the shares
owned by Biocontrol continues throughout the three year period of the Note.
In 1998, we entered into an agreement with Biocontrol under which
Biocontrol agreed to help us complete development of the ThermoChem-HT.
Biocontrol will manufacture the product for us under the agreement. We in turn
assigned design authority over the product to Biocontrol and provided data
necessary for manufacturing the product. We also agreed to assume the costs of
clinical and other testing, and made Biocontrol the exclusive manufacturer of
the product.
7.9 GOVERNMENT REGULATIONS
Our products are subject to extensive regulation by numerous governmental
authorities, principally the FDA and corresponding state and foreign agencies.
The FDA has broad regulatory powers with respect to preclinical and clinical
testing of new medical products and the manufacturing, marketing and advertising
of medical products. The products may also be subject to various domestic and
foreign safety standards.
The FDA requires that all medical devices introduced to the market be
preceded either by a premarket notification clearance order or a Section 510(k)
approval of the Federal Food, Drug and Cosmetic Act. A 510(k) notification
clearance order indicates FDA agreement with an applicant's determination that
the product for which clearance has been sought is substantially equivalent to
medical devices that were on the market prior to 1976 or have subsequently
received clearance. A premarket approval application indicates that the FDA has
determined that the device has been proven, through the submission of clinical
trial data and manufacturing quality assurance information, to be safe and
effective for its labeled indications.
The FDA will require the ThermoChem system, ThermoChem-HT, and related
disposables to undergo an approval process, either by 510(k) notification or
premarket approval. HemoCleanse has received FDA approval of its Form 510(k)
notification in connection with the use of the BioLogic-DT model, which is used
in drug detoxification procedures. The 510(k) Notification process, intended to
be a shorter, less complex FDA procedure than a full Pre-Market Approval
process, may not be available for the ThermoChem System, which is used in the
PISH project, or the ThermoChem-HT. We intend to hold discussions with the FDA
regarding the number of patients who must be treated with the ThermoChem model
before the FDA will accept an application to market the ThermoChem System or the
ThermoChem-HT in the U.S. We believe that the federal government will place a
priority on development of new drugs and procedures for treatment of HIV and
AIDS. Because of this, we believe that our FDA application, in whatever form,
may receive expedited review. If either a Pre-Market Approval application or a
510(k) Notification is approved by the FDA, it would allow us, through the
license agreement, to market the ThermoChem device and related disposables.
In December 1994, the FDA approved our request to expand the PISH studies.
The FDA approved and recommended additional trials of 30 to 40 persons divided
into three to four groups of ten each: one group to be treated with 107.6 DEG.F
PISH for one hour, with the same treatment four days later; one group to be
treated at 104 DEG.F PISH, with the same treatment four days later; one control
group, with no PISH treatment; and, at the FDA's suggestion, one group to be
treated at 104 DEG.F PISH for one hour, to be followed by a second PISH
treatment at 107.6 DEG.F four days later. We conducted those trials on thirty
persons during 1995, and based on the success of those trials, applied for FDA
approval to conduct additional trials. In December 1995, the FDA approved
additional trials for sixty persons with one treatment at 107.6 DEG.F for one
hour, with a second treatment four days later at 107.6 DEG.F for two hours. The
FDA approved this study to be conducted at a combination of three sites: St.
Elizabeth Hospital Medical Center, Lafayette, IN; UCLA, Los Angeles, CA; and the
University of Texas, Galveston, TX.
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Any research projects involving the use of human beings must receive
Institutional Review Board (IRB) approval before testing can begin. The FDA's
approval letter allows the new trials to begin once we obtained IRB approval
from the hospitals where the trials will be conducted. IRB approval was received
from St. Elizabeth Hospital in West Lafayette, Indiana. Subsequent to FDA
approval, the FDA approved a substitute site, a major hospital in Miami,
Florida, where we obtained IRB approval in January 1997. We decided that the
University of Texas in Galveston would be a more suitable site for us to conduct
a cancer trial. The Miami hospital was therefore substituted for the University
of Texas as the third site for the HIV trial.
Although the federal government has publicly stated that experimental drugs
and procedures in connection with the treatment of HIV will receive priority
treatment, we cannot ensure that any future 510(k) Notifications, Pre-Market
Approval applications, or Investigational Device Exceptions will obtain FDA
approval. Without FDA approval, the ThermoChem System cannot be used or marketed
in the United States. Without the ability to market in the United States, the
value of our potential product will greatly diminish.
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8. MANAGEMENT
8.1 DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers and directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- --------------------------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Glenn Keeling...................................... 48 Chief Executive Officer, Interim Chief Financial
Officer and Director
Stephen P. Tomasovic, Ph.D......................... 52 Director
Corklin R. Steinhart, M.D., Ph.D................... 50 Director
John Unitas........................................ 64 Director
James McGuire...................................... 49 Director
</TABLE>
GLENN KEELING is the Chief Executive Officer and Interim Chief Financial
Officer, a director and is our founder. Mr. Keeling has been an employee of
Biocontrol in the position of Vice President of Marketing and Manager of New
Product Development since 1992. He has also served as a Director of Biocontrol
since 1991 and Diasensor Com. since April 1999. Pursuant to an agreement between
us and Biocontrol, we are charged by Biocontrol for Mr. Keeling's time. Prior to
joining Biocontrol, Mr. Keeling was co-owner of Commercial Funding Corp. an
equipment leasing company from 1991 to 1992. From 1976 to 1991 Mr. Keeling was
employed by Equitable Financial Management, a regional equipment leasing company
where he became Vice President responsible for new business development. Prior
to Equitable Financial Management, Mr. Keeling was marketing representative for
R/C W.V.P., a regional electrical manufacturing representative. Prior to R/C
W.V.P., Mr. Keeling served in the US Army, from which he was honorably
discharged.
STEPHEN P. TOMASOVIC, PH.D. is one of our directors. Dr. Tomasovic is
employed by the University of Texas in its M.D. Anderson Cancer Center as its
Associate Vice President for Educational Programs in the Office of the Senior
Vice President and Chief Academic Officer. He is a professor in the Department
of Cancer Biology and the Graduate School of Biomedical Sciences at the
University of Texas. Dr. Tomasovic is a graduate of Oregon State University
(B.S. 1969, M.S. 1973). He earned a Ph.D. from Colorado State University in
Radiation Biology and Cell and Molecular Biology (1977). Dr. Tomasovic has
served in various capacities researching molecular, cell and hyperthermia
biology among other related areas with the Anderson Cancer Center, Colorado
State University, and the University of Utah Medical Center. He also served in
the United States Army from 1969 to 1971. Dr. Tomasovic has been appointed to
numerous academic, professional and administrative positions, has served on
national and international committees and has published numerous articles and
presented papers on cancer research and hyperthermia treatment among other
subjects.
CORKLIN R. STEINHART, M.D., PH.D. is one of our directors. Dr. Steinhart is
a consultant for General Medical Industries, Inc. and is engaged in the private
practice of medicine in Miami, Florida specializing in the treatment of
HIV/AIDS. He is a graduate of Bucknell University (B.S. 1969, M.S. 1970), earned
a Ph.D. in Cardiophysiology from The Johns Hopkins University (1981), and an
M.D. from the University of South Florida College of Medicine (1986). Dr.
Steinhart has also served in various capacities related to HIV/AIDS treatment at
several HIV/AIDS treatment and training centers, and has conducted research in
the area at the University of South Florida College of Medicine, State
University of New York at Buffalo, and the Millard Fillmore Hospital, Buffalo,
New York. In addition, he has received numerous research grants from
Ortho-Biotech, The Campbell Foundation, Agouron, Merck and Co., Abbott
Laboratories, Bristol-Myers Squibb, and the National Institute of Health. Dr.
Steinhart has also been appointed to academic, professional and administrative
positions, has lectured and has been published on numerous occasions in the area
HIV/AIDS and hyperthermia treatment among many other areas.
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JOHN UNITAS is one of our directors. Mr. Unitas is currently employed by
Matco Electronics in Baltimore, Maryland as a Vice President. Mr. Unitas has
worked for Matco Electronics, Inc. since 1990. Prior to Matco, Mr. Unitas was
self-employed. Mr. Unitas has also served as a spokesman for Merck & Co., Inc.
in support of early testing for prostate cancer. Previously, Mr. Unitas was a
quarterback for the Baltimore Colts and San Diego Chargers of the National
Football League, and is a member of the National Football League Hall of Fame in
Canton, Ohio.
JAMES MCGUIRE is one of our directors. Mr. McGuire is currently employed by
Biocontrol as a Manager of New Product Development and has been with Biocontrol
since 1994. Prior to his employment with Biocontrol, Mr. McGuire was the Chief
Executive Officer of Barnacle Ban Corporation, a manufacturer of marine paint
and a subsidiary of Biocontrol.
All of the directors are reimbursed for any expenses incurred in connection
with their attendance at meetings. None of the directors receives any fees as a
result of his membership on the board; however Drs. Tomasovic and Steinhart and
Mr. Unitas each will receive a warrant to purchase 5000 shares of our stock at
$.10 per share per month for each month that they serve on our board of
directors from April 15, 1999 through April 15, 2000.
8.2 MEDICAL ADVISORY BOARD
Our Medical and Scientific Advisory Board consists of the following
professionals. Currently, none of them receives a fee for serving on the
advisory board, but they are reimbursed for expenses incurred.
CORKLIN R. STEINHART, M.D., PH.D., a director of our company, is also on
our Medical Advisory Board.
MILTON B. YATVIN, PH.D., is a professor in the Radiation & Thermal Biology
Division, Department of Radiation Oncology at Oregon Health Sciences University
in Portland, Oregon.
STEPHEN R. ASH, M.D., F.A.C.P., is the Chairman of the Board and Director
of Research and Development of HemoCleanse, our joint-venture partner located in
West Lafayette, Indiana.
MARSHALL W. ASHBY, M.D., is a practicing physician at the Northwest
Hospital and Miners Hospital in Spangler, Pennsylvania, and has served in
several capacities in the area of transplantation, among many others, over the
last 40 years.
The advisory board assists us in assessing and designing technology and
conducting clinical trials. They do not have final authority to make decisions
ordinarily reserved for officers and directors.
8.3 COMPENSATION
Our only significant employee at this time is Glenn Keeling. Mr. Keeling
coordinates our efforts with clinical hospitals and their medical staff, along
with a team of medical advisers who are compensated as consultants to conduct
business. He is also a director of Biocontrol, our parent company. The majority
of his time is devoted to us. His salary of $250,000 is paid by Biocontrol and
is charged to us.
31
<PAGE>
9. PRINCIPAL STOCKHOLDERS
As of June 30, 1999, there were 10,087,500 shares of our common stock
issued and outstanding. Ten million of those shares of stock are held by
Biocontrol. The remaining 87,500 shares are held by purchasers of stock in our
private placement.
The table sets forth the percentage of the total number of shares of common
stock outstanding as of June 30, 1999 which would be owned by each named person
or group upon the exercise of all of the warrants held by a person or group
together with common stock currently owned.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL AMOUNT AND NATURE
OWNERSHIP PRIOR OF BENEFICIAL
NAME OF TO THE OWNERSHIP AFTER
BENEFICIAL OWNER OFFERING(1) PERCENTAGE THE OFFERING(1) PERCENTAGE
- ---------------------------------------- ----------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Biocontrol.............................. 10,000,000 68.66% 10,000,000 60.38%(4)(5)
Glenn Keeling........................... 750,000(2) 5.14%(4) 750,000(2) 4.52%(4)
All directors and executive officers as
a group (4) persons).................. 870,000(3) 870,000
(Keeling,
Steinhart,
Tomasovic,
and Unitas)
</TABLE>
- ------------------------
(1) Each shareholder has the sole power to vote and dispose of all of the
shares of common stock listed opposite his name. Biocontrol is our parent
company and while it has and will continue to hold a majority of the stock,
even after this offering, Biocontrol's voting control of our stock is
limited.
(2) Includes currently exercisable warrants to purchase 500,000 shares of stock
at $.10 per share until September 1, 1999; and warrants to purchase 250,000
shares at $.10 per share until May 19, 2002.
(3) Includes currently exercisable warrants to purchase 795,000 shares of stock
at $0.10 per share which expire between September 1, 1999 and July 12,
2004. Includes currently exercisable warrants to purchase 10,000 shares of
stock at $2.00 per share which expire between November 15,1999 and
September 13, 2000. Includes currently exercisable warrants to purchase
65,000 shares of stock at $1.00 per share which expire between July 10,
2001 and March 18, 2004.
(4) The percentages reflect the percentage of outstanding shares held assuming
the exercise of all of the warrants in the class.
32
<PAGE>
10. DESCRIPTION OF THE SECURITIES
COMMON STOCK
We are authorized to issue 80 million shares of common stock. All
outstanding shares of our common stock including stock to be issued to warrant
holders will be fully paid and nonassessable. Each share of common stock will be
equal to all others with respect to liquidation rights and dividend rights and
there are no preemptive rights to purchase any additional shares of common
stock. Stockholders are entitled to one vote per share on all matters submitted
to a vote, but are not entitled to accumulate their votes in the election of
directors. In the event of liquidation, dissolution or winding up, our
stockholders are entitled to receive on a pro rata basis all our assets
remaining after satisfaction of all liabilities.
11. STOCK ELIGIBLE FOR FUTURE SALE
11.1 IN GENERAL
When this offering is completed, assuming that all of the stock offered and
stock underlying warrants are issued and including 135,000 shares of stock
issued to directors plus 87,500 shares of stock issued to investors in the
company's 1995 private placement, the company will have 16,742,500 shares of
common stock outstanding. Of these shares, the 2,000,000 shares of common stock
offered in this prospectus to public investors will be freely tradable without
restriction or registration under the Securities Act by persons who are not
affiliated with us. Although Biocontrol will be the majority owner of our stock
even if all shares of this offering are sold, we have entered into an agreement
with Biocontrol to limit the amount of our stock it may sell to 10% of its
issued and outstanding IDT stock until our promissory note due to Biocontrol is
paid in full or until June 21, 2002, whichever occurs first.
11.2 SALES OF RESTRICTED SECURITIES
Of the restricted securities, shares of our common stock owned by current
stockholders will be eligible for sale to the public market beginning 90 days
after the date of this prospectus. Common stock acquired by warrant holders and
current stockholders will be eligible for sale in the public market under Rule
701 of the Securities Act beginning ninety days after the date of this
prospectus. In addition, stock subject to the warrant provisions will become
eligible for sale in the public market at various times in the future.
Under Rule 144, a person who has beneficially owned restricted securities
for at least one year, including persons who are affiliated with us, is entitled
to sell within any three month period that amount of stock that does not exceed
the greater of one percent of the number of shares of stock then outstanding, or
the average weekly trading volume of the stock during the four calendar weeks
preceding the filing of a Form 144 covering the sale. In our case, one percent
would equal 120,875 shares upon completion of the offering. The rule also
restricts the way in which a restricted securities holder may sell his or her
stock. In addition, that person is subject to notice requirements and to the
availability of current public information about our company. The person who has
not been an affiliate of ours at any time during a ninety day period prior to a
sale of the restricted stock and who has owned the stock for at least two years
would also be entitled to sell the stock under Rule 144(k) without regard to the
requirements of notice and percentage limitations described above. The rule also
provides that affiliates who are selling stock and who are not owners of
restricted shares must also comply with the same restrictions applicable to the
restricted shares with the exception of the holding period requirement.
Rule 701 provides that common stock acquired after the exercise of warrants
outstanding prior to this offering and common stock issued under written
compensation plans or contracts may be resold by persons other than affiliates
beginning ninety days after the date of this prospectus. The sales would be
33
<PAGE>
subject to some of the restrictions of Rule 144. Under Rule 701, the stock could
be sold beginning ninety days after the date of this prospectus subject to all
of the provisions of Rule 144 except its one year minimum holding period
requirement.
11.3 EFFECTS ON MARKET FOR STOCK
Prior to this offering, there had been no public market for our common
stock and no predictions can be made of the effect, if any, that the sale or
availability for sale of our stock will have on the market price. Sales of
substantial amounts of restricted shares in a public market, or the reception
that the sales of restricted shares could occur, could materially and adversely
affect the market price of our stock and could impair our ability to raise
capital in the future through an offering of stock or other securities.
34
<PAGE>
12. SELLING STOCKHOLDERS, INCLUDING WARRANT HOLDERS
We are also registering stock for people who own restricted stock and
warrants to purchase stock at prices ranging from $.10 to $2.00 per share. The
stock was purchased in a private offering during 1995. We granted the warrants
to people who helped us or provided services. The warrants give each holder the
right to purchase a certain number of shares of our stock at a certain price. As
shown in the notes to the table below, the warrants expire at different times,
usually five years after they were granted. The warrants have different exercise
prices, which match the prices assigned to our stock at the time the warrants
were granted. Some of the stockholders, noted in the table below, are our
current or former officers, directors or employees of us or our affiliates. For
warrant holders, the table shows the number of shares of stock that underlie the
warrants owned by each person listed. In order to determine the percentage
ownership, we assumed that the warrants were exercised, which would increase the
amount of our outstanding stock. We made that assumption only to compute the
possible percentage of ownership, since we don't know when or if any of the
warrants will be exercised.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF STOCK NUMBER OF
SHARES OF STOCK
OR STOCK UNDERLYING COVERED BY THIS
WARRANTS OWNED AS OF JUNE PROSPECTUS
30, 1999 --------------- PERCENT OF
--------------------------- RESALE OWNERSHIP AFTER
NAME OF OWNER NUMBER PERCENT(1) SHARES(2) OFFERING(3)
- ----------------------------------------------------------- ---------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
WARRANT HOLDERS
Ashby, Marshall(4)......................................... 10,000 * 10,000 0
Clupper, Mark(5)........................................... 110,000 1 110,000 0
Cooper, Fred E.(6)......................................... 1,000,000 9 1,000,000 0
Fausset, Michael(7)........................................ 225,000 2 225,000 0
Feola, T.J. and Lori(8).................................... 750,000 7 750,000 0
Fleming, Ronald(9)......................................... 30,000 * 30,000 0
Gingrich, Carole(10)....................................... 10,000 * 10,000 0
Grose, Rebecca(11)......................................... 55,000 * 55,000 0
Hamilton, Thomas(12)....................................... 100,000 1 100,000 0
Keeling, Gary(13).......................................... 250,000 2 250,000 0
Keeling, Glenn and Carol(14)............................... 750,000 7 750,000 0
Loggie, Brian W.(15)....................................... 30,000 * 30,000 0
Peyton, Richard(16)........................................ 50,000 * 50,000 0
Purdy, David L.(17)........................................ 750,000 7 750,000 0
Rainier, J. Bradford(18)................................... 60,000 * 60,000 0
Staudenmeier, David(19).................................... 200,000 2 200,000 0
Steinhart, Corklin(20)..................................... 25,000 * 25,000 0
Tomasovic, Stephen(21)..................................... 80,000 * 80,000 0
Unitas, John(22)........................................... 15,000 * 15,000 0
Yatvin, Milton(23)......................................... 20,000 * 20,000 0
Total...................................................... 4,520,000 30 4,520,000
</TABLE>
- ------------------------
Notes:
(1) Percentage of ownership of each individual or entity shown when compared to
the total number of shares of common stock outstanding as of June 30, 1999.
An asterisk indicates that the percentage of ownership is less than 1%.
(2) These shares are included in this prospectus on behalf of the stockholders
and warrant holders.
35
<PAGE>
(3) Percentage of ownership of each individual or entity shown assuming all
stock offered in this prospectus is sold, when compared to the total number
of shares of stock outstanding as of June 30, 1999. An asterisk indicates
that the percentage of ownership is less than 1%.
(4) Dr. Ashby, a member of our Medical Advisory Board, owns warrants to
purchase 10,000 shares of stock at $0.10 per share until April 9, 2002.
(5) Mr. Clupper owns warrants to purchase 30,000 shares of stock at $1.00 per
share until April 14, 2003 and 80,000 shares of stock at $0.10 per share
until July 10, 2001.
(6) Mr. Cooper, an officer and director of Biocontrol and other affiliates,
owns warrants to purchase 500,000 shares of stock at $0.10 per share until
September 1, 1999 and 500,000 shares at $0.10 per share until May 19, 2002.
(7) Mr. Fausset owns warrants to purchase 25,000 shares of stock at $1.00 per
share until November 1, 2001, 50,000 shares of stock at $0.10 per share
until May 19, 2002, and 150,000 shares of stock at $0.10 per share until
July 10, 2001.
(8) Mr. Feola, an officer and director of Biocontrol and other affiliates,
along with his wife, owns warrants to purchase 250,000 shares of stock at
$0.10 per share until September 1, 1999 and 500,000 shares of stock at
$0.10 per share until May 19, 2002.
(9) Mr. Fleming owns warrants to purchase 30,000 shares of stock at $0.10 per
share until April 9, 2004.
(10) Ms. Gingrich owns warrants to purchase 10,000 shares of stock at $0.10 per
share until April 9, 2004.
(11) Ms. Grose, a former employee, owns warrants to purchase 25,000 shares of
stock at $1.00 per share until March 5, 2002 and 30,000 share of stock at
$0.10 per share until May 19, 2002.
(12) Mr. Hamilton, a former Biocontrol employee, owns warrants to purchase
25,000 shares of stock at $1.00 per share until November 1, 2001 and 75,000
shares of stock at $0.10 per share until July 10, 2001.
(13) Mr. Keeling, a former Biocontrol employee and brother of Glenn Keeling, our
CEO, owns warrants to purchase 250,000 shares of stock at $0.10 per share
until May 19, 2002.
(14) Mr. Keeling, our CEO, along with his wife, owns warrants to purchase
500,000 shares of stock at $0.10 per share until September 1, 1999 and
250,000 shares of stock at $0.10 per share until May 19, 2002.
(15) Mr. Loggie owns warrants to purchase 30,000 shares of stock at $0.10 per
share until April 19, 2004.
(16) Mr. Peyton owns warrants to purchase 50,000 shares of stock at $0.10 per
share until July 10, 2001.
(17) Mr. Purdy, an officer and director of Biocontrol and other affiliates, owns
warrants to purchase 250,000 shares of stock at $0.10 per share until until
September 1, 1999 and 500,000 shares of stock at $0.10 per share until May
19, 2002.
(18) Mr. Ranier owns warrants to purchase 40,000 shares of stock at $1.00 per
share until May 8, 2003 and 20,000 shares of stock at $0.10 per share until
April 9, 2004.
(19) Mr. Staudenmaier, a Biocontrol employee, owns warrants to purchase 200,000
shares of stock at $0.10 per share until May 19, 2002.
36
<PAGE>
(20) Dr. Steinhart, one of our directors and a member of our Medical Advisory
Board, owns warrants to purchase 5,000 shares of stock at $2.00 per share
until September 13, 2000, 5,000 shares of stock at $2.00 per share until
November 15, 1999 and 15,000 shares of stock at $0.10 per share until July
12, 2004.
(21) Dr. Tomasovic, one of our directors, owns warrants to purchase stock as
follows:
5,000 shares of stock at $1.00 per share until March 1, 2003
5,000 shares of stock at $1.00 per share until April 1, 2003
5,000 shares of stock at $1.00 per share until May 1, 2003
5,000 shares of stock at $1.00 per share until June 1, 2003
5,000 shares of stock at $1.00 per share until July 10, 2001
5,000 shares of stock at $1.00 per share until August 3, 2003
5,000 shares of stock at $1.00 per share until September 1, 2003
30,000 shares of stock at $1.00 per share until March 18, 2004
15,000 shares of stock at $0.10 per share until July 12, 2004.
(22) Mr. Unitas, one of our directors, owns warrants to purchase 15,000 shares
of stock at $0.10 per share until July 12, 2004.
(23) Dr. Yatvin, a member of our Medical Advisory Board, owns warrants to
purchase 10,000 shares of stock at $2.00 per share until September 13, 2000
and 10,000 shares of stock at $0.10 per share until April 9, 2004.
37
<PAGE>
13. PLAN OF DISTRIBUTION
13.1 PURCHASE OF STOCK
There is no underwriter offering the securities. In order to purchase our
stock through this offering, you must complete and execute the Subscription
Agreement which accompanies this prospectus and return it, together with payment
in full of the purchase price for all of the stock you are purchasing, to us no
later than December 31, 1999. This date may be extended in our sole discretion.
If you decide to invest, please mail a check or money order in full payment for
the stock to be purchased, accompanied by a completed and signed Subscription
Agreement to the following address:
IDT, Inc.
2275 Swallow Hill Road
Building 2500
2nd Floor
Pittsburgh, PA 15220
13.2 ACCEPTANCE OF SUBSCRIPTIONS
If we accept a Subscription Agreement and payment for the stock, we intend
to deposit the investor's funds directly into our general corporate account for
immediate use. (See "Use of Proceeds") Upon sale of the stock, we will issue a
certificate to you.
Any Subscription Agreement for stock is subject to possible rejection by
us, as well as possible withdrawal, cancellation or modification of the
offering. No stock is valid unless and until the Subscription Statement is
accepted by us.
13.3 BEST EFFORTS, NO MINIMUM BASIS
We are selling our stock on a best efforts, no minimum basis, through our
officers and directors. No commissions will be paid for sales by the officers or
directors. All proceeds will be immediately sent to us regardless of how few
shares are sold; no funds will be escrowed and no funds will be returned to
subscribers regardless of how few shares are sold. We may, in our sole
discretion, pay commissions to brokers of up to 10% as permitted by state and
federal laws, and only to those persons authorized to receive commissions
pursuant to those laws.
13.4 DETERMINATION OF OFFERING PRICE
The initial offering price has been arbitrarily determined solely by our
management, and bears no relationship whatsoever to our assets, earnings, book
value or any other objective standard of value. No formula was used in the
computation, although we did consider our financial condition, the nature and
illiquidity of the stock and the risks of not meeting our objectives. This
offering price should not be considered as indication of the actual value of our
securities.
38
<PAGE>
14. LEGAL PROCEEDINGS
We are not currently involved in any material litigation. In early 1998,
IDT, along with other affiliates of Biocontrol, were served with subpoenas from
the U.S. Justice Department which requested the submission of documents. We,
along with Biocontrol and its other affiliates, have produced the documents. No
charges have been made against any entity, and we cannot determine the impact of
this matter at this time.
The Pennsylvania Securities Commission is conducting a private
investigation of Biocontrol in connection with the sale of its securities.
Biocontrol has cooperated with and provided information to the Pennsylvania
Securities Commission in connection with the private investigation. As the
investigation is not yet complete, there can be no estimate or evaluation of the
likelihood of an unfavorable outcome in this matter or the range of possible
loss, if any.
Several class action lawsuits have been filed against Biocontrol and its
subsidiaries and certain of their directors, all of which have been consolidated
into a single action. The suit alleges various violations of the securities laws
on behalf of a class of plaintiffs who purchased common stock of Biocontrol
between April 25, 1995 and February 26, 1996. Management believes that no
securities violation has occurred, and they intend to strongly defend the
action. At this time it is not possible to predict the outcome of the litigation
or to estimate the potential damages arising from the claims, since the number
of class members, and the volume and pricing of shares traded, are unknown. We
cannot say for certain whether this or any related litigation will not have an
effect on the price of or market for our stock.
15. LEGAL MATTERS
Meyer, Unkovic & Scott LLP, Pittsburgh, Pennsylvania, will pass upon the
validity of the stock issued by us.
16. EXPERTS
Our financial statements ending December 31, 1997 and December 31, 1998 and
for each of the years for the three year period ending December 31, 1998 have
been audited by Thompson Dugan, PC and are included in this registration
statement in reliance on the report of Thompson Dugan, PC, independent certified
public accountants, and upon the authority of that firm as experts in auditing
and accounting.
17. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as set forth in this Registration Statement, we have no provisions
for indemnification of our officers, directors or control persons. Glenn
Keeling, the Chief Executive Officer and a director, has an employment contract
which includes indemnification provisions and which indemnifies him to the
extent permitted by law. IDT and our parent company, Biocontrol Technology,
Inc., are incorporated under the Pennsylvania Business Corporation Law of 1998.
Section 1741 of that law, in general, provides that an officer or director shall
be indemnified against reasonable and necessary expenses incurred in the
successful defense of any action by reason of the fact that he or she serves as
a representative of IDT. Mr. Keeling may be indemnified in other cases if he has
acted in good faith and in a manner reasonably believed to be in, or not opposed
to, the best interests of IDT, and if he had no reason to believe that his
conduct was unlawful. However, no indemnification is permitted when the person
has been adjudged liable for recklessness or misconduct in the performance of
his duties to IDT, unless otherwise permitted by a court of competent
jurisdiction.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or controlling persons, we have
been informed that, in the opinion of the SEC,
39
<PAGE>
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. In the event that a claim for indemnification
against liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person in the successful
defense of any action, suit or proceeding) is asserted by a director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification is against public policy as expressed in the Securities Act, and
will be governed by the final adjudication of that issue.
18. ADDITIONAL INFORMATION
We have filed our registration with the U.S. Securities and Exchange
Commission in Washington, D.C. and, as appropriate, with the securities
administrators of the states in which the offering is being made. You are
encouraged to seek further information about us and the industry, and to examine
corporate documents and ask questions of our management. Statements herein
concerning the contents of any contract or other document are not necessarily
complete, and in each instance reference is made to the full text of those
contract or other document and each those statement is qualified in all respects
by those reference.
We intend to be registered as a reporting company under Section12(g) of the
Securities Exchange Act of 1934. Following the conclusion of each fiscal year,
stockholders will receive an annual report, including a balance sheet,
statements of operations, cash flows and changes in stockholders' equity and
related footnotes. The financial statements contained in the annual report will
be audited by our independent certified public accountants. Unaudited quarterly
reports on operations also will be distributed to stockholders or made available
through e-mail and/or the internet.
40
<PAGE>
THOMPSON DUGAN, PC
CERTIFIED PUBLIC ACCOUNTANTS
------------------------
Pinebridge Commons
1580 McLaughlin Run Rd.
Pittsburgh, PA 15241
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report
Board of Directors
IDT, Inc.
We have audited the accompanying consolidated balance sheets of IDT, Inc.
(a development stage company) as of December 31, 1998 and 1997, and the related
statements of operations, changes in stockholders' equity (deficiency) and cash
flows for each of the three years in the period ended December 31, 1998, and for
the period from October 23, 1992 (inception) through December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of IDT, Inc. as of December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998, and for the period from
October 23, 1992 (inception) through December 31, 1998, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in note
B to the financial statements, the Company is in the development stage and has
incurred losses from operations and negative cash flows from operations for each
of the three years in the period ended December 31, 1998 and from October 23,
1992 (inception) through December 31, 1998, raising substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in note B. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty,
including adjustments relating to the recoverability and classification of
recorded assets that might be necessary in the event the Company cannot continue
to meet its financing requirements and achieve productive operations.
In addition, as discussed in note B, the Company is dependent upon its
parent, Biocontrol Technology, Inc. (BICO) to continue to perform and fund
research, development and manufacturing activities of products for the Company.
There has been and continues to be substantial doubt about BICO's ability to
continue as a going concern due to their recurring losses from operations and
negative cash flow. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
June 4, 1999
F-1
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER DECEMBER
APRIL 30, 31, 31,
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and case equivalents (note A).............................. $ 42,603 $ 1,291 $ 18,666
Inventory (note A).............................................. -- 64,515 --
Notes receivable (note D)....................................... -- -- 75,000
Prepaid expenses................................................ -- 4,533 11,426
----------- ----------- -----------
Total current assets.......................................... 42,603 70,339 105,092
Property and equipment--at cost (Note A)
Machinery & Equipment........................................... 77,939 366,939 795,851
Furniture and fixtures.......................................... 2,698 2,698 2,698
----------- ----------- -----------
80,637 369,637 798,549
Less accumulated depreciation................................... 38,963 113,425 203,976
----------- ----------- -----------
41,674 236,212 594,573
Other assets
Notes receivable (notes D and F)................................ -- 130,493 --
Interest receivable (note F).................................... -- 16,593 --
Deposit of equipment............................................ -- -- 300,000
----------- ----------- -----------
-- 147,086 300,000
----------- ----------- -----------
TOTAL ASSETS...................................................... $ 84,277 $ 453,637 $ 999,665
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Due to BICO..................................................... $ -- $9,903,638 $9,038,439
Accounts payable................................................ 84,616 175,338 6,003
Accrued payroll and withholdings................................ -- 12,838 --
----------- ----------- -----------
Total current liabilities..................................... 84,616 10,091,814 9,089,442
Long-Term Liabilities
Note Payable--BICO.............................................. 10,232,991 -- --
Commitments and Contingencies (note G)
Stockholders' equity (Deficiency)
Common stock 80,000,000 shares of $.01 par value authorized
issued and outstanding 10,087,500 at April 30, 1999, December
31, 1998 and 1997............................................. 100,875 100,875 100,875
Additional paid-in capital...................................... 75,125 75,125 75,125
Warrants........................................................ 496,536 106,932 97,751
Deficit accumulated during the development stage................ (10,905,866) (9,921,109) (8,363,528)
----------- ----------- -----------
(10,233,330) (9,638,177) (8,089,777)
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)........... $ 84,277 $ 453,637 $ 999,665
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FROM OCTOBER FROM OCTOBER
FOR THE FOUR MONTHS 23, 1992 23, 1992
ENDED (INCEPTION) (INCEPTION)
------------------------ YEAR ENDED DECEMBER 31, THROUGH THROUGH APRIL
APRIL 30, APRIL 30, ---------------------------------- DECEMBER 31, 30,
1999 1998 1998 1997 1996 1998 1999
----------- ----------- ---------- ---------- ---------- --------------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Research and development
expenses (note A)....... $ 693,248 $ 88,256 $ 266,533 $ 326,138 $ 656,630 $ 4,593,934 $ 5,287,182
General and administrative
expenses................ 291,509 199,152 1,352,920 718,577 723,841 5,389,047 5,680,556
Interest income........... -- -- (61,872) -- -- (61,872) (61,872)
----------- ----------- ---------- ---------- ---------- --------------- ---------------
Net Loss................ $(984,757) $(287,408) $(1,557,581) $(1,044,715) $(1,380,471) $ 9,921,109) $10,905,866)
----------- ----------- ---------- ---------- ---------- --------------- ---------------
----------- ----------- ---------- ---------- ---------- --------------- ---------------
Net loss per common
share (note A)........ $ (0.09) $ (0.03) $ (0.15) $ (0.10) $ (0.14) $ (0.98) $ (1.08)
----------- ----------- ---------- ---------- ---------- --------------- ---------------
----------- ----------- ---------- ---------- ---------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FROM OCTOBER FROM OCTOBER
23, 1992 23, 1992
(INCEPTION) (INCEPTION)
FOR THE YEARS ENDED DECEMBER 31, THROUGH THROUGH APRIL
------------------------------------- DECEMBER 31, 30,
1999 1998 1998 1997 1996 1998 1999
----------- ----------- ----------- ----------- ----------- --------------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss............... $(984,757) $(287,408) $(1,557,581) $(1,044,715) $(1,380,471) $(9,921,109) $ (10,905,866)
Adjustments to
reconcile net loss to
net cash used by
operating activities:
Depreciation......... 17,538 36,690 41,315 93,925 48,119 245,290 262,828
Warrants issued for
services........... 389,604 -- 9,181 58,961 106,932 496,536
Loss on disposal of
assets............. 177,000 -- 29,405 -- -- (29,405 206,405
(Increase) decrease
in inventory....... 64,515 -- (64,515) -- -- (64,515) --
(Increase) decrease
in prepaid
expenses........... 4,533 (1,681) 6,893 (354) (6,172) (4,533) --
Increase (decrease)
in accounts
payable............ (49,845) (2,542) 169,335 (9,925) (24,902) 175,338 125,493
Increase (decrease)
in accrued payroll
and withholdings... (12,838) -- 12,838 (7) 7 12,838 --
Impairment Loss...... 106,209 -- -- -- -- -- 106,209
----------- ----------- ----------- ----------- ----------- --------------- ---------------
Net cash used in
operating
activities....... (288,041) (254,941) (1,353,129) (902,115) (1,363,419) (9,420.354) (9,708,395)
Cash flows from investing
activities:
Proceeds from sale of
equipment............ -- -- 4,000 -- -- 4,000 4,000
Purchase of property
and equipment........ -- (2,390) (5,359) (325,816) (293,840) (803,908) (803,908)
(Increase) in notes
receivable........... -- (75,000) (166,493) (75,000) -- (241,493) (241,493)
(Increase) in interest
receivable........... -- -- (16,593) -- -- (16,593) (16,593)
Reduction of notes
receivable........... -- -- 700,000 -- -- 700,000 700,000
Deposits on
equipment............ -- -- -- (300,000) -- (300,000) (300,000)
----------- ----------- ----------- ----------- ----------- --------------- ---------------
Net cash used in
investing
activities....... -- (77,390) 515,555 (700,816) (293,840) (657,994) (657,994)
Cash flows from financing
activities:
Advances from BICO..... 329,353 371,980 820,199 1,612,578 1,664,093 9,903,639 10,232,992
Proceeds from issuance
of common stock...... -- -- -- -- -- 175,000 175,000
Proceeds from issuance
of common stock to
BICO................. -- -- -- -- -- 1,000 1,000
----------- ----------- ----------- ----------- ----------- --------------- ---------------
Net cash provided
by financing
activities....... 329,353 371,980 820,199 1,612,578 1,664,093 10,079,639 10,408,992
----------- ----------- ----------- ----------- ----------- --------------- ---------------
Net increase
(decrease) in
cash and cash
equivalents...... 41,312 39,649 (17,375) 9,647 6,834 1,291 42,603
Cash and cash
equivalents at
beginning of
period........... 1,291 18,666 18,666 9,019 2,185 -- --
----------- ----------- ----------- ----------- ----------- --------------- ---------------
Cash and cash
equivalents at
end of period.... $ 42,603 $ 58,315 $ 1,291 $ 18,666 $ 9,019 $ 1,291 $ 42,603
----------- ----------- ----------- ----------- ----------- --------------- ---------------
----------- ----------- ----------- ----------- ----------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD OCTOBER 23, 1992 (INCEPTION) THROUGH APRIL 30, 1999
<TABLE>
<CAPTION>
DEFICIT
-----------------------------------------------------
ACCUMULATED TOTAL
COMMON STOCK ADDITIONAL DURING THE STOCKHOLDERS'
--------------------- PAID-IN DEVELOPMENT EQUITY
SHARES AMOUNT CAPITAL WARRANTS STAGE (DEFICIT)
---------- --------- ----------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
October 23, 1992 sale of stock ($
par) to BICO..................... $ 1,000 $ 1,000 $ -- $ -- $ -- $ 1,000
Net loss--1992................. -- -- -- -- (182,743) (182,743)
---------- --------- ----------- --------- ------------- --------------
Balances at Dec. 31, 1992.......... 1,000 1,000 -- -- (182,743) (181,743)
Net loss--1993................. -- -- -- -- (1,086,939) (1,086,939)
---------- --------- ----------- --------- ------------- --------------
Balances at Dec. 31, 1993.......... 1,000 1,000 (1,269,682) (1,268,682)
January 31, 1994, 10,000 for 1
stock split and adjustment of par
value to $.01.................... 9,999,000 99,000 (99,000) -- -- --
Warrants issued................ -- -- -- 38,790 -- 38,790
Net loss--1994................. -- -- -- -- (1,614,733) (1,614,733)
---------- --------- ----------- --------- ------------- --------------
Balances at Dec. 31, 1994.......... 10,000,000 100,000 (99,000) 38,790 (2,884,415) (2,844,625)
Private Placement at $2 per
share............................ 87,500 875 174,125 -- -- 175,000
Net loss--1995................. -- -- -- -- (3,053,927) (3,053,927)
---------- --------- ----------- --------- ------------- --------------
Balances at Dec. 31, 1995.......... 10,087,500 100,875 75,125 38,790 (5,938,342) (5,723,552)
Net loss--1996................. -- -- -- -- (1,380.471) (1,380,471
---------- --------- ----------- --------- ------------- --------------
Balances at Dec. 31, 1996.......... 10,087,500 100,875 75,125 38,790 (7,318,813) (7,104,023)
Warrants issues................ -- -- -- 58,961 -- 58,961
Net loss--1997................. -- -- -- -- (1,044,715) (1,044,715)
---------- --------- ----------- --------- ------------- --------------
Balances at Dec. 31, 1997.......... 10,087,500 100,875 75,125 97,751 (8,363,528) (8,089,777)
Warrants issued................ -- -- -- 9,181 -- 9,181
Net Loss--1998................. -- -- -- -- (1,557,581) (1,557,581)
---------- --------- ----------- --------- ------------- --------------
Balances at Dec. 31, 1998.......... 10,087,500 100,875 75,125 106,932 (9,921,109) (9,638,177)
Warrants issued................ -- -- -- 389,604 -- 389,604
Net Loss--Four months ended
4/30/99...................... -- -- -- -- (984,757) (984,757)
---------- --------- ----------- --------- ------------- --------------
Balances at April 30, 1999......... 10,087,500 100,875 75,125 496,536 (10,905,866) (10,233,330)
---------- --------- ----------- --------- ------------- --------------
---------- --------- ----------- --------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of this statement.
Information for the four months ended April 30, 1999, is unaudited.
F-5
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, 1996 AND APRIL 30, 1999
(INFORMATION FOR THE FOUR MONTHS ENDED APRIL 30, 1999 IS UNAUDITED)
NOTE A-- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
1. ORGANIZATION
IDT, Inc. (the Company) was incorporated in the Commonwealth of
Pennsylvania on October 23, 1992 as a wholly owned subsidiary of Biocontrol
Technology, Inc. (BICO) and is included as a consolidated subsidiary for
BICO's financial reporting purposes. BICO owned approximately 99.1% of the
stock of the Company at December 31, 1998 and April 30, 1999. The Company
is developing a medical treatment system to facilitate hyperthermia therapy
for use in the treatment of certain types of cancer. If successfully
developed, the system and associated equipment and disposable supplies will
be marketed either directly or through distributors to hospitals both
domestically and internationally.
The consolidated financial statements include the accounts of Infectious
Disease Treatment Corporation (a Florida corporation) a 100% owned
subsidiary of the Company as of December 31, 1998 and April 30, 1999. All
significant intercompany accounts and transactions have been eliminated.
2. CASH AND CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with original maturities of three
months or less to be cash equivalents. The Company places temporary cash
deposits in financial institutions and such deposits may be in excess of
the FDIC insurance limit.
3. INVENTORY
Inventories are stated at lower of cost or market using the first-in,
first-out method. Inventory includes material for use in the manufacturing
of medical equipment.
4. PROPERTY AND EQUIPMENT
Property and equipment are accounted for at cost and are depreciated over
their estimated useful lives (37 years for property and 10 years for
equipment) on a straight-line basis. The carrying value of property and
equipment are reduced for impairment losses determined by management.
5. INCOME TAXES
As a subsidiary of BICO, the Company is one of several companies included
in a consolidated Federal income tax return. Since becoming a part of this
consolidated group, the Company and each of the other consolidated
companies have never reported taxable income on a consolidated or
individual basis. Any potential income tax benefits would be entirely
reduced by valuation losses. Also, net operating loss carryovers could be
reduced or eliminated by changes in ownership of the Company.
F-6
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997, 1996 AND APRIL 30, 1999
(INFORMATION FOR THE FOUR MONTHS ENDED APRIL 30, 1999 IS UNAUDITED)
NOTE A-- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
6. ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
7. NET LOSS PER COMMON SHARE
Net loss per common share is based on the weighted average number of common
shares outstanding which amounted to 10,296,212, 10,087,500 and 10,087,500
for the years ended December 31, 1998, 1997 and 1996 respectively and
10,538,667 and 10,087,500 for the four month periods ended April 30, 1999
and 1998. Except for warrants issued during the period May 1, 1998, through
April 30, 1999 (as discussed below)the loss per share does not include
common stock equivalents since the effect would be anti-dilutive.
Net loss per common share is based on the weighted average number of common
shares outstanding and the number of common shares issuable on the exercise
of 420,000 warrants issued during the period May 1, 1998 thru December 31,
1998 and 140,000 warrants issued during the four months ended April 30,
1999. The inclusion of the warrants for the period May 1, 1998 through
April 30, 1999, in the loss per share calculation is required by the rules
of the Securities and Exchange Commission relative to an initial
registration statement which include the Company's financial statements
through the period ended April 30, 1999. The weighted average number of
common shares including the effect of the conversion of the warrants for
the period from October 23, 1992 (inception) to December 31, 1998 amounted
to 10,087,292 and for the period October 23, 1992 (inception) to April 30,
1999 amounted to 10,110,060.
8. RESEARCH AND DEVELOPMENT
All research and development costs incurred by the Company are charged to
operations as incurred.
9. INTERCOMPANY ACTIVITY
Certain expenses are allocated by management between the Company, BICO and
BICO's other subsidiaries. These expenses are reimbursed to the paying
entity through the use of intercompany accounts, which accounts are also
used to account for non-interest bearing cash advances between the
companies.
F-7
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997, 1996 AND APRIL 30, 1999
(INFORMATION FOR THE FOUR MONTHS ENDED APRIL 30, 1999 IS UNAUDITED)
NOTE A-- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
10. COMMON STOCK WARRANTS
The Company recognizes cost on warrants granted based upon the minimum
value method. Under this method, the warrants are valued by reducing the
current estimated fair value of the underlying stock by the present value
of the exercise price discounted at an estimated risk-free interest rate of
5% and assuming no dividends.
11. COMPREHENSIVE INCOME
The Company's consolidated net income (loss) is substantially the same as
comprehensive income required to be disclosed by Financial Accounting
Standards Board Statement No. 130.
NOTE B--OPERATIONS
The Company is in the development stage, and accordingly, it has presented
cumulative information on results of operations, cash flows, and changes in
stockholders' equity since inception.
The Company is developing a medical treatment system and is conducting FDA
approved clinical trials on that system. The medical treatment system being
developed is a specialized method for administering whole-body and regional
hyperthermia, including extracorporeal blood heating and sorbent-based
detoxification, as an antiviral and antineoplasm protocol. The risks and
uncertainties that may affect the Company's operations, performance,
research and development, and results of the business include the
following: additional delays in research, development and FDA marketing
approval; the uncertainty of additional funding for future operations and
capital needs; dependence on a single technology; continued operating
losses; and uncertainty of future profitability.
The Company has incurred significant losses and negative cash flows from
operations from inception through April 30, 1999 and has a significant
accumulated deficit as of April 30, 1999 raising substantial doubt about
its ability to continue as a going concern. The Company has financed its
losses and its research and development program, primarily by advances from
its parent company, BICO. The Company intends to raise additional capital
through a public offering of its common stock. However, it may continue to
be dependent on BICO for advances to meet its short term cash requirements.
Management believes that its available cash resources, including funds it
reasonably expects to raise through its securities offering and advances
from BICO will be sufficient to fund its operations through April 30, 2000.
As discussed above, BICO has funded the Company's operations through April
30, 1999. Although management believes that it can raise capital through a
public offering of its common stock, the Company may continue to require
funding from BICO and continue to be economically dependent on BICO.
However, BICO has also experienced, and continues to experience,
substantial losses and financial difficulties of its own. The consolidated
financial statements for
F-8
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997, 1996 AND APRIL 30, 1999
(INFORMATION FOR THE FOUR MONTHS ENDED APRIL 30, 1999 IS UNAUDITED)
NOTE B--OPERATIONS (CONTINUED)
BICO for the year ended December 31, 1998 included disclosures which
referred to the existence of substantial doubt about BICO's ability to
continue as a going concern. BICO had a net loss for the three month period
ended March 31, 1999 of $4,255,245 (unaudited) and for the fiscal year
ended December 31, 1998 of $22,402,644.
As of December 31, 1998, and March 31, 1999, BICO's accumulated deficit was
$143,101,880 and $147,357,125 (unaudited) respectively.
In the past, BICO has financed its own operations from proceeds generated
from private and public sales of its securities, the issuance of debt in
the form of convertible debentures, from funds paid by other subsidiaries
to BICO for research and development and from intercompany advances from
other BICO subsidiaries. The failure of BICO to continue to exist as a
going concern would have a material adverse effect on the Company's
business and ability to continue operations.
NOTE C--RELATED PARTY TRANSACTIONS
1. INTERCOMPANY ADVANCES
For the years ended December 31, 1998, 1997 and 1996, net intercompany
charges and advances by BICO to the Company were $820,199, $1,612,578 and
$1,664,093 respectively. For the four month period ended April 30, 1999
such items totaled $329,353. Total intercompany charges and advances by
BICO to the Company have accumulated $10,232,992 since the Company's
inception, October 23, 1992 through April 30, 1999. On April 30, 1999 the
intercompany amounts due to BICO were converted to a long-term note payable
(see Note D).
2. AGREEMENT WITH BICO
In 1998, the Company entered into an Agreement with BICO under which BICO
agreed to help the Company complete development on the ThermoChem-HT
product and to manufacture the product for the Company. Under the
Agreement, The Company in turn assigned design authority over the product
to BICO and provided data necessary for completing the product. The Company
also agreed to assume the costs of clinical and other testing, and made
BICO the exclusive manufacturer of the product. The two companies also
agreed on procedures for the sale and marketing of the ThermoChem-HT.
3. SALE OF INVENTORY TO BICO
In 1999, the Company sold BICO its inventory to be used in manufacturing.
The transaction was conducted at the Company's cost for the inventory and
was offset by a reduction in the Company's intercompany liability to BICO.
F-9
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997, 1996 AND APRIL 30, 1999
(INFORMATION FOR THE FOUR MONTHS ENDED APRIL 30, 1999 IS UNAUDITED)
NOTE C--RELATED PARTY TRANSACTIONS (CONTINUED)
4. COMMON EMPLOYEES WITH BICO
The Company's Chief Executive Officer and Chairman of the Board of
Directors, Glenn Keeling, is employed by BICO, the Company's parent and
primary shareholder. Mr. Keeling's salary and benefits are paid by BICO and
allocated 76.92% to the Company for reimbursement.
BICO's Chief Executive Officer and a member of its board of directors, Fred
E. Cooper is an employee of the Company.
NOTE D--NOTES RECEIVABLE
Notes receivable consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Note receivable from HemoCleanse, Inc.,
Payable without interest on demand................................. 0 75,000
Note receivable from HemoCleanse, Inc.,
Payable on demand after December 31, 2002 with interest accrued at
a rate of 20% per annum............................................ 130,493 0
-------- --------
$ 130,493 $ 75,000
-------- --------
-------- --------
</TABLE>
In April 1999, the above notes receivable were converted common stock of
HemoCleanse, Inc. (Note F).
NOTE E--NOTE PAYABLE--BICO
On April 30, 1999 the Company's intercompany payable to BICO was converted
to a promissory note. The note's total principal plus interest, accrued at
a rate of 6% per annum, is payable on May 1, 2002.
NOTE F--INVESTMENT IN HEMOCLEANSE, INC.
In April, 1999 the Company converted a note receivable with associated
accrued interest into common stock of HemoCleanse, Inc., who is
participating in the development and commercialization of the process and
technology to administer perfusion-induced hyperthermia (See Notes D and
F). In return for the reduction of $130,493 in notes receivable, $16,593 of
interest receivable and $40,877 of accounts payable, the Company received
67,533 shares of HemoCleanse common stock. The total cost of the
investment, $106,209, was charged off as an impairment loss due to the
speculative nature of the investment and the HemoCleanse financial
position, which shows a net deficiency in assets.
In 1994, 1995 and 1996 the Company also acquired shares of HemoCleanse
through conversion of cash advances. These investments were also charged to
operations with no value recognized on
F-10
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997, 1996 AND APRIL 30, 1999
(INFORMATION FOR THE FOUR MONTHS ENDED APRIL 30, 1999 IS UNAUDITED)
NOTE F--INVESTMENT IN HEMOCLEANSE, INC. (CONTINUED)
the Hemocleanse investment. Total HemoCleanse shares owned by the Company
as of April 30, 1999 account for approximately 8.5% of total HemoCleanse
stock outstanding on that date.
NOTE G--COMMITMENTS AND CONTINGENCIES
1. LICENSE, AGREEMENT WITH HEMOCLEANSE
To facilitate development and commercialization of the process and
technology to administer perfusion-induced hyperthermia the Company entered
into a joint venture with Hemocleanse, Inc., an Indiana company, which
designs, manufacturers and markets medical devices and disposables for
treatment of blood outside the body. HemoCleanse's technology, the
BioLogic-DT, is based on chemical sorbents that remove selected toxins from
the blood while balancing blood chemistries. The BioLogic-DT which is a
combination detoxifier/blood delivery system was approved by the FDA in
1994 as a detoxifier for treatment of drug overdose.
The Company entered into a License Agreement with HemoCleanse, dated July
21, 1993 giving the Company the exclusive world-wide right to market the
ThermoChem System-TM- and its disposables. In return, the Company agreed to
pay a non-refundable license fee of $500,000 in addition to paying
out-of-pocket product development expenses, including patent expenses and
insurance.
The License Agreement was amended in 1998 to give the Company: (i) a
reduction in the transfer pricing of the ThermoChem-SB-TM- machines and
treatment kits; (ii) exclusive manufacturing rights for the
ThermoChem-HT-TM- and treatment kits; and (iii) elimination of the Annual
Minimums. In return, the Company paid HemoCleanse a $700,000 license fee
and will pay a six percent (6%) royalty on all sales of hyperthermia
products (after costs of goods sold) not purchased from HemoCleanse.
2. LICENSE AGREEMENT WITH WAKE FOREST
By a License Agreement with Wake Forest University School of Medicine, the
Company was granted the exclusive, worldwide right to use and practice a
method owned by Wake Forest of heated perfusion of chemotherapy drug in the
treatment of intraperitoneal and other cancers, which utilizes the
ThermoChem-HT System-TM- or a related system. The term of the License
Agreement is seven years. While Wake Forest agreed, in the License
Agreement, that it will not grant any other similar license, it reserved
its right to use and practice the method licensed to IDT. In exchange, the
Company agreed to issue 50,000 shares of its common stock to Wake Forest
for each PMA or 510(k), or equivalent thereof, for which FDA approval is
received for the method licensed by Wake Forest or use of the System in its
method. In addition, the Company is to pay Wake Forest a six percent (6%)
royalty of net sales until the termination of the License Agreement or as
long as Wake Forest utilizes the System for its method, whichever is
longer.
F-11
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997, 1996 AND APRIL 30, 1999
(INFORMATION FOR THE FOUR MONTHS ENDED APRIL 30, 1999 IS UNAUDITED)
NOTE G--COMMITMENTS AND CONTINGENCIES (CONTINUED)
3. LITIGATION
Several class action lawsuits have been filed against the Company's parent,
BICO, and its subsidiaries and certain of their directors, all of which
have been consolidated into a single action. The suit alleges various
violations of federal securities laws on behalf of a class of plaintiffs
who purchased common stock of BICO between April 25, 1995 and February 26,
1996, at which time the value of BICO's stock dropped as a result of an
unfavorable recommendation of a Panel Review convened by the United States
Food and Drug Administration with respect to a certain medical device owned
by Diasense (another BICO subsidiary) and manufactured by BICO. The Company
has engaged in voluntary mediation in order to explore whether settlement
is an option. As a result of the mediation, the plaintiffs agreed to a
"standstill" period, which has now expired; however, no further activity
has been conducted by the plaintiffs to move the case forward. Management
believes that no federal securities violation has occurred, and they intend
to strongly defend the action. At this time it is not possible to predict
the outcome of the litigation or to estimate the potential damages arising
from the claims, since the number of class members, and the volume and
pricing of shares traded, are unknown.
During April 1998, BICO and its subsidiaries were served with subpoenas by
the U.S. Attorneys' office for the U.S. District Court for the Western
District of Pennsylvania. The subpoenas requested certain corporate,
financial and scientific documents from BICO and its subsidiaries. The
Company has provided documents in response to such requests.
4. PENNSYLVANIA SECURITIES COMMISSION
The Pennsylvania Securities Commission is conducting a private
investigation of BICO in connection with the sale of securities. BICO has
cooperated with and provided information to the Pennsylvania Securities
Commission in connection with the private investigation. As the
Commission's investigation is not yet complete, there can be no estimate or
evaluation of the likelihood of an unfavorable outcome in this matter or
the range of possible loss, if any.
NOTE H--STOCKHOLDERS EQUITY
COMMON STOCK
The initial capitalization of the Company on October 23, 1992, was from the
sale of 1000 shares of $1 par value common stock to BICO. On January 31,
1994 the Company's common stock was split 10,000 for 1 and par value was
adjusted to $.01. After the split BICO owned 10,000,000 shares.
In 1995, an additional 87,500 shares of common stock were issued for $2 per
share through a Private Placement.
F-12
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997, 1996 AND APRIL 30, 1999
(INFORMATION FOR THE FOUR MONTHS ENDED APRIL 30, 1999 IS UNAUDITED)
NOTE H--STOCKHOLDERS EQUITY (CONTINUED)
RESTRICTION ON COMMON STOCK OWNED BY BICO
Concurrent with the execution of the note payable to BICO (note E) the
Company entered into an agreement with BICO regarding BICO's ability to
sell or otherwise transfer shares of the Company's common stock. Under the
terms of this agreement BICO agreed that, without the prior written consent
of the Company, BICO would not, during the term of the note payable: (a)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, more than ten (10) percent of the shares, or (b) enter into any
swap or other arrangement that transfers to another in whole or in part,
any of the economic consequences of ownership of more than ten (10) percent
of the shares.
COMMON STOCK WARRANTS
At December 31, 1998, the Company has reserved 4,335,000 shares of the
Company's unissued common stock for warrants which were outstanding and
exercisable. Of these, warrants on 4,055,000 shares were issued to
directors, officers, and employees for meritorious service and warrants on
280,000 shares were issued to consultants and medical advisers. The per
share exercise price for 4,135,000 shares is $.10, for 180,000 shares is
$1.00 and for 20,000 shares is $2.00. In connection with these warrants,
the Company recognized general and administrative expenses of $5,819 in
1998, $58,961 in 1997, and $38,790 in 1994. The Company also recognized
$3,362 in research and development expenses in connection with warrants
issued in 1998. The fiscal years in which warrants outstanding at December
31, 1998, expire are as follows:
<TABLE>
<CAPTION>
WARRANT EXPIRATION YEAR NUMBER OF SHARES
- ----------------------------------------------------------------------------------------- -----------------
<S> <C>
1999..................................................................................... 1,505,000
2000..................................................................................... 15,000
2001..................................................................................... 410,000
2002..................................................................................... 2,305,000
2003..................................................................................... 100,000
-----------------
4,335,000
-----------------
-----------------
</TABLE>
During March and April 1999 the Company granted warrants on 140,000 shares
to consultants and medical advisors. Of these warrants, which all expire in
2004, there were 30,000 with an exercise price of $1 and 110,000 with a
exercise price of $.10. The Company recognized $389,604 of research and
development expenses in connection with these warrants granted in 1999.
F-13
<PAGE>
IDT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998, 1997, 1996 AND APRIL 30, 1999
(INFORMATION FOR THE FOUR MONTHS ENDED APRIL 30, 1999 IS UNAUDITED)
NOTE H--STOCKHOLDERS EQUITY (CONTINUED)
The following is a summary of warrant transactions,
<TABLE>
<CAPTION>
APRIL 30,
1999 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of year............... 4,335,000 3,875,000 1,570,000 1,520,000 1,505,000 0
Granted during the year..................... 140,000 460,000 2,305,000 50,000 15,000 1,505,000
Canceled during the year.................... 0 0 0 0 0 0
Exercised during the year................... 0 0 0 0 0 0
--------- --------- --------- --------- --------- ---------
Outstanding, and eligible for exercise...... 4,475,000 4,335,000 3,875,000 1,570,000 1,520,000 1,505,000
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
NOTE I--SUPPLEMENT CASH FLOW INFORMATION
The Company's financing activities included the following noncash
transactions.
1. During 1998 a deposit of $300,000 on future equipment purchases was
converted to a note receivable.
2. During 1998, $289,000 of funds initially paid for the purchase of
equipment were converted to a note receivable when the equipment
purchase was cancelled.
3. In 1999, intercompany amounts payable to BICO were converted to a
long-term obligation totaling $10,232,991.
There have been no payments for interest or income taxes since the
inception of the Company on October 23, 1992 through April 30, 1998.
NOTE J--YEAR 2000 ISSUE
The Company is currently working to resolve the potential impact of the
Year 2000 on the processing of date-sensitive information. The Year 2000
Issue is the result of computer programs being written using two digits
(rather than four) to define the applicable year. Programs which are
susceptible to problems after December 31, 1999 are those which recognize a
date using "00" as the year 1900 rather than the year 2000, which could
result in miscalculations or system failures. Based upon a review of its
own internal programs and software, the Company currently believes that the
Year 2000 will not pose significant operational problems to its information
systems, because such systems are already compliant or will be made
compliant with minor adjustments. The Company is also conducting an
investigation of its major suppliers, vendors and other parties to
determine their respective plans for the Year 2000 compliance. The
Company's current estimates indicate that the costs of addressing potential
problems are not expected to have a material impact upon the Company's
financial position, results of operations or cash flows in future periods.
There can be no assurance, however, that modifications to information
systems which impact the Company and which are required to remediate year
2000 issues will be made on a timely basis and that they will not adversely
affect the Company's systems or operations.
F-14
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS
OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NO ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS PROSPECTUS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of the Offering................................................... 4
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 12
Capitalization............................................................ 13
Dilution.................................................................. 14
Management's Discussion and Analysis...................................... 15
Our Company............................................................... 17
Our Management............................................................ 30
Principal Stockholders.................................................... 32
Description of Securities................................................. 33
Stock Eligible for Future Sale............................................ 33
Selling Stockholders, Including Warrant Holders........................... 35
Plan of Distribution...................................................... 38
Legal Proceedings......................................................... 39
Legal Matters............................................................. 39
Experts................................................................... 39
Indemnification of Directors and Officers................................. 39
Additional Information.................................................... 40
Financial Statements...................................................... F-1
</TABLE>
SHARES
IDT, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
AUGUST 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an estimate of expenses incurred in connection with the
issuance and distribution of the securities described in the prospectus other
than underwriting discounts and commissions:
<TABLE>
<S> <C>
Registration fees.................................................. $ 4,000*
Printing........................................................... $ 5,000
Legal fees......................................................... $ 50,000
Accounting fees.................................................... $ 15,000
State filing fees.................................................. $ 10,000
---------
TOTAL.......................................................... $ 84,000
---------
---------
</TABLE>
- ------------------------
* Estimated for purposes of this filing.
UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that, in the opinion of the Securities
and Exchange Commission, those indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against those liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by
those director, officer, or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether those indemnification by it is
against public policy as express in the Securities Act and will be governed by
the final adjudication of those issue.
UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR
IDT, Inc. issued or sold shares of common stock within one year
prior to filing this registration statement for an aggregate offering price of
$ to the following investors
On May 8, 1998, we awarded Bradford J. Rainier a warrant to purchase 40,000
shares of IDT stock at $1.00 per share in consideration of consulting services.
On July 10, 1998, we awarded Marc Clupper a warrant to purchase 80,000
shares of IDT stock at $0.10 per share in consideration of consulting services.
On July 10, 1998, we awarded Michael Fausset, BSCP a warrant to purchase
150,000 shares of IDT stock at $0.10 per share in consideration of consulting
services.
On July 10, 1998, we awarded Tom Hamilton a warrant to purchase 75,000
shares of IDT stock at $0.10 per share in consideration of consulting services.
On July 10, 1998, we awarded Richard Peyton a warrant to purchase 50,000
shares of IDT stock at $0.10 per share in consideration of consulting services.
Between May 1, 1998 and March 18, 1999, we awarded Stephen Tomasovic, Ph.D.
55,000 shares of IDT stock at $1.00 per share in consideration of consulting
services.
II-1
<PAGE>
On April 9, 1999 we awarded Marshall W. Ashby, M.D. a warrant to purchase
10,000 shares of IDT stock at $0.10 per share in consideration of service on our
Medical Advisory Board. Dr. Ashby's term on our Medical Advisory Board is due to
expire on April 9, 2000.
On April 9, 1999 we awarded Milton Yatvin, Ph.D. a warrant to purchase
10,000 shares of IDT stock at $0.10 per share in consideration of service on our
Medical Advisory Board. Dr. Yatvin's term on our Medical Advisory Board is due
to expire on April 9, 2000.
On April 9, 1999, we awarded Ronald Fleming, Ph.D. a warrant to purchase
30,000 shares of IDT stock at $0.10 per share in consideration of consulting
services.
On April 9, 1999, we awarded Carole Gingrich a warrant to purchase 10,000
shares of IDT stock at $0.10 per share in consideration of consulting services.
On April 9, 1999, we awarded Brian W. Loggie, MD a warrant to purchase
30,000 shares of IDT stock at $0.10 per share in consideration of consulting
services.
On April 9, 1999, we awarded Bradford J. Rainer a warrant to purchase
20,000 shares of IDT stock at $0.10 per share in consideration of consulting
services.
On April 14, 1999 we agreed to award a warrant to purchase 5000 shares of
IDT stock at $.10 per share per month to Corklin Steinhart, M.D., Ph.D. in
consideration of service on our board of directors from April 15, 1999 until
April 15, 2000. The warrants will be issued at the end of each quarter.
On April 14, 1999 we agreed to award a warrant to purchase 5000 shares of
IDT stock at $.10 per share per month to Stephen P. Tomasovic, Ph.D. for service
as a member of our board of directors for a period from April 15, 1999 to April
15, 2000. The warrants will be issued at the end of each quarter.
On April 14, 1999 we agreed to award a warrant to purchase 5000 shares of
IDT stock at $.10 per share per month to John Unitas for service as a member of
our board of directors for a period from April 15, 1999 to April 15, 2000. The
warrants will be issued at the end of each quarter.
These sales were exempt from registration under Section 4(2) of the
Securities Act.
II-2
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-1 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Pittsburgh State of Pennsylvania, on August 16, 1999
<TABLE>
<S> <C> <C>
IDT, INC.
By: /s/ GLENN KEELING
-----------------------------------------
Glenn Keeling
CHIEF EXECUTIVE OFFICER, INTERIM CHIEF
FINANCIAL OFFICER, AND DIRECTOR
IDT, Inc.
2275 Swallow Hill Road
Building 2500
2nd Floor
Pittsburgh, PA 15220
(412) 279-8715
(412) 279-1367
</TABLE>
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<C> <S> <C>
/s/ STEPHEN P. TOMASOVIC
PH.D. Date: August 16,
- ------------------------------ Director 1999
Stephen P. Tomasovic Ph.D.
/s/ CORKLIN R. STEINHART,
M.D., PH.D.
- ------------------------------ Date: August 16,
Corklin R. Steinhart, M.D., 1999
Ph.D.
/s/ JOHN UNITAS
- ------------------------------ Director Date: August 16,
John Unitas 1999
/s/ JAMES MCGUIRE
- ------------------------------ Director Date: August 16,
James McGuire 1999
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
3.1 Articles of Incorporation
3.2 Bylaws of IDT, Inc.
4.1 Form of Specimen stock certificate
4.2 Form of warrant agreement
4.3 Form of Subscription agreement
5.1 Legal Opinion of Meyer, Unkovic & Scott, P.C.
10.1 Promissory Note with Biocontrol
10.2 Agreement with Biocontrol
10.3 License Agreement with Wake Forest University School of Medical
10.4 Research Agreement with Wake Forest School of Medicine
10.5 Agreement with Carotech LLC
10.6 License Agreement with Hemocleanse, Inc.
10.7 Consulting Agreements
10.8 Non-Governmental Pre-Clinical Study Agreements
10.9 Design and Engineering Agreement
10.10 Sponsored Laboratory Study Agreement
23.1 Consent of Thompson Dugan, Independent CPAs
23.2 Consent of Counsel (Included in 5.1 above)
24.1 Power of Attorney of Glenn Keeling (included under "Signatures")
<PAGE>
Number 9280-192 Filed with the Department of State on Oct 23, 1992
----------
Entity Number 2134544 /s/
---------- --------------------------------
Secretary of the Commonwealth
ARTICLES OF INCORPORATION FOR PROFIT
DSC8:15-1340621022303270228037102a (Rev 9C)
Indicate type of domestic corporation (check one):
<TABLE>
<S> <C>
X Business-stock (15 Pa. C.S. Section 1306) Management (15 Pa.C.S. Section 2702)
- -- --
Business nonstock (15 Pa. C.S. Section 2102) Professional (15 Pa. C.S. Section 2903)
- -- --
Business-statutory close (15 Pa. C.S. Section 2303) Cooperative (15 Pa. C.S. Section 7102A)
- -- --
</TABLE>
In compliance with the requirements of the applicable provisions of 15 Pa. C.S.
(relating to corporations and unincorporated associations) the undersigned,
desiring to incorporate a corporation for profit hereby state(s) that:
1. The name of the corporation is IDT, INC.
2. The (a) address of this corporation's initial registered office in
this Commonwealth or (b) name of its commercial registered office
provider and the county of venue is:
The Bourse, Building 2500, Second Floor
(a) 2275 Swallow Hill Road Pittsburgh Pennsylvania 15220
Number and Street City State Zip
(b) c/o
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.
The corporation is incorporated under the provisions of the Business Corporation
Law of 1988.
The aggregate number of shares authorized is 10,000 (other provisions, if any,
attach 8 1/2 x 11 sheet)
The name and address, including street and number, if any, of each incorporator
is:
Name Address
Houston Harbaugh, P.C.
THOMAS J. MILLER 1200 Two Chatham Ctr., Pittsburgh, PA 15219
The specified effective date, if any is
--------------------------------------
month day year hour, if any
Any additional provisions of the articles, if any, attach an 8 1/2 x 11 sheet.
Statutory close corporation only: Neither the corporation nor any shareholder
shall make an offering of any of its shares of any class that would constitute a
<PAGE>
"public offering" within the meaning of the Securities Act of 1933 (15 U.S.C.
Section 77 seq.)
Cooperative corporations only: (Complete and strike out inapplicable term) The
common bond of membership among its members/shareholders
is:___________________________
IN TESTIMONY WHEREOF, the incorporator(s) has (have) signed these Articles of
Incorporation this 22nd day of October, 1992.
/s/
------------------------------- ----------------------------------
(Signature) Signature
Thomas J. Miller, Incorporator
<PAGE>
Number Filed with the Department of State of
------------------ ----
Number
------------------ -----------------------------------------
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSC8:15-1915(Rev 9C)
In compliance with the requirements of 15 Pa. C.S. Section 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: IDT, Inc.
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial register office provider and
the county of venue is (the Department is hereby authorized to correct
the following information to conform to the records of the Department):
The Bourse, Building 2500, Second Floow
(a) 2275 Swallow Hill Road Pittsburgh Pa 15220 Allegheny
----------------------------------------------------------------
Number and Street City State Zip County
(b) c/o
--------------------------------------------------------------
Name of Commercial Registered Office Provider
For a corporation represented by a commercial registered office
provider, the county in (b) shall be deemed the county in which the
corporation is located for venue and official publication purposes.
3. The statute by or under which is was incorporated is: Business
Corporation Law of 1988
4. The date of its incorporation is October 23, 1992
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of
-- Amendment in the Department of State.
X The amendment shall be effective on: at
-- ------------- ---------------
Date Hour
6. (Check one of the following):
The amendment was adopted by the shareholders (or members)
pursuant to 15 Pa.C.S.Section 1914(a) and (b).
--
X The amendment was adopted by the board of directors pursuant to
-- 15 Pa.C.S.Section 1914(c).
7. (Check, and if appropriate complete, one of the following):
X The amendment adopted by the corporation, set forth in full, as
-- follows:
<PAGE>
Paragraph 4 of the Articles of Incorporation shall be amended as
follows:
"4. The aggregate number of shares authorized is 40,000,000
shares of common stock, each such share having a par value
of $0.01."
The amendment adopted by the corporation as set forth in full in
-- Exhibit A attached hereto and made a part hereof.
8. Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original
-- Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of
Amendment to be signed by a duly authorized officer thereof this ____ day of
January, 1994.
IDT, INC.
----------------------------------
(Name of Corporation)
By: /s/
-----------------------
Title: Glenn Keeling, President
-------------------------
<PAGE>
Number Filed with the Department of State of
------------------- Sept. 19, 1994
Number 2134544 ------------------------------------
------------------- Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
In compliance with the requirements of 15 Pa. C.S. Section 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: IDT, INC.
2. The (a) address of this corporation's current registered office in
this Commonwealth or (b) name of its commercial register office
provider and the county of venue is (the Department is hereby
authorized to correct the following information to conform to the
records of the Department):
The Bourse, Building 2500, Second Floor
(a) 2275 Swallow Hill Road Pittsburgh Pa 15220 Allegheny
--------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o
----------------------------------------------------------------------
Name of Commercial Registered Office Provider
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.
3. The statute by or under which is was incorporated is: Business
Corporation Law of 1988
4. The date of its incorporation is OCTOBER 23, 1992
5. (Check, and if appropriate complete, one of the following):
The amendment shall be effective upon filing these Articles of
-- Amendment in the Department of State.
The amendment shall be effective on: at
-- ------------- -------------
Date Hour
6. (Check one of the following):
XX The amendment was adopted by the shareholders (or members)
-- pursuant to 15 Pa.C.S.Section 1914(a) and (b).
The amendment was adopted by the board of directors pursuant
-- to 15 Pa.C.S.Section 1914(c).
7. (Check, and if appropriate complete, one of the following):
X The amendment adopted by the corporation, set forth in full,
-- as follows:
Paragraph 7 of the Articles of Incorporation shall be amended as
follows:
"7. Additional Provisions: There shall be no cumulative voting
in any election of Directors."
<PAGE>
The amendment adopted by the corporation as set forth in full in
-- Exhibit A attached hereto and made a part hereof.
8. Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original
-- Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of
Amendment to be signed by a duly authorized officer thereof this ____ day of
September, 1994.
IDT, INC.
----------------------------------
(Name of Corporation)
By: /s/
----------------------------
Title: Glenn Keeling, President
---------------------------
<PAGE>
Number Filed with the Department of State of
--------------------- Apr 03 1997
Number 2134544
--------------------- -------------------------------------
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
In compliance with the requirements of 15 Pa. C.S. Section 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: IDT, INC.
2. The (a) address of this corporation's current registered office in
this Commonwealth or (b) name of its commercial register office
provider and the county of venue is (the Department is hereby
authorized to correct the following information to conform to the
records of the Department):
The Bourse, Building 2500, Second Floor
(a) 2275 Swallow Hill Road Pittsburgh Pa 15220 Allegheny
---------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o
----------------------------------------------------------------------
Name of Commercial Registered Office Provider
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.
3. The statute by or under which is was incorporated is: 1988 PA
Business Corporation Law
4. The date of its incorporation is October 23, 1992
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of
-- Amendment in the Department of State.
-- The amendment shall be effective on: at
------------- --------------
Date Hour
6. (Check one of the following):
XX The amendment was adopted by the shareholders (or members)
-- pursuant to 15 Pa.C.S.Section 1914(a) and (b).
The amendment was adopted by the board of directors pursuant
-- to 15 Pa.C.S.Section 1914(c).
7. (Check, and if appropriate complete, one of the following):
X The amendment adopted by the corporation, set forth in full, as
-- follows:
Paragraph 4 of the Articles of Incorporation shall be amended as
follows:
"4. The aggregate number of shares authorized is 80,000,000
shares, $0.01 per value."."
<PAGE>
The amendment adopted by the corporation as set forth in full in
-- Exhibit A attached hereto and made a part hereof.
8. Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original
-- Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of
Amendment to be signed by a duly authorized officer thereof this ____ day of
September, 1994.
IDT, INC.
----------------------------------
(Name of Corporation)
By: /s/
-------------------------
Title: Glenn Keeling, President
--------------------------
<PAGE>
IDT, INC.
BY-LAWS
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.01. ANNUAL MEETINGS; NOTICE. An annual meeting of the
shareholders shall be held each year within five (5) months after the end of the
corporation's tax year on such day and at such time and place as may be designed
by the Board of Directors, or, if not so designated, as shall be agreed to by
the shareholders; or if not so designated or agreed to, on the first Monday in
the third (3rd) month after the end of the corporation's tax year if not a legal
holiday, and if a legal holiday, then on the next business day following at
10:00 A.M., local time, at the principal office of the corporation. Written
notice of the annual meeting shall be given at least five (5) days prior to the
meeting to each shareholder of record entitled to vote thereat, except that ten
(10) days prior notice shall be given for a meeting called to consider
fundamental changes as required by law. Any business may be transacted at the
annual meeting, irrespective of whether the notice of such meeting contains a
reference thereto, except as otherwise expressly required herein or by law.
Section 1.02. SPECIAL MEETINGS; NOTICE. Special meetings of the
shareholders may be called at any time, for the purpose or purposes set forth in
the call, by the President, or by the Board of Directors, or by the holders of
not less than one-fifth (1/5) of all the shares outstanding and entitled to vote
by delivering a written request to the Secretary. Special meetings of the
shareholders shall be held at such place as may be designated by the Board of
Directors, or if not so designated, at the principal office of the corporation.
Written notice of special meetings shall be given at least five (5) days prior
to the meeting to each shareholder entitled to vote thereat, except that ten
(10) days prior notice shall be given for a meeting called to consider
fundamental changes as required by law. No business may be transacted at any
special meeting other than that the general nature of which has been stated in
the notice of meeting, and business which is germane thereto.
Section 1.03. ORGANIZATION AND MANNER OF ACTING.
(a) QUORUM: A shareholders' meeting duly called shall not be organized for the
transaction of business unless a quorum is
<PAGE>
present. At any meeting and except as otherwise provided by law, the presence
in person or by proxy of shareholders entitled to cast at least a majority of
the votes which all shareholders are entitled to cast on the particular matter
to be acted upon at the meeting shall constitute a quorum for the purpose of
consideration and action on such matter. The shareholders present at a duly
organized meeting can continue to do business until adjournment, notwithstanding
the withdrawal of enough shareholders to leave less than a quorum. If a meeting
cannot be organized because a quorum has not attended, including a meeting
called for the election of Directors, those present may adjourn the meeting to
such time and place as they may determine, by giving immediate notice of such
time and place to the absent shareholders until a quorum as aforesaid shall be
present. (b) VOTING: In all elections of Directors, voting shall be conducted
according to the principles of cumulative voting. In all other cases,
resolutions of the shareholders shall be adopted, and any action of the
shareholders at a meeting upon any matter shall be taken and be valid, if
authorized by a majority of the votes cast at the meeting by the shareholders
entitled to vote thereon, except as otherwise provided by law and except that
any fundamental change shall be authorized only by the affirmative vote of
shareholders entitled to cast a majority of the votes which all shareholders are
entitled to cast thereon. (c) PRESIDING OFFICER, SECRETARY: The Chairman of
the Board, or in his absence or if such office is vacant the President, shall
preside, and the Secretary shall take the minutes, at all meetings of the
shareholders. In the absence of the presiding officer hereinabove designated,
the presiding officer shall be designated by the Board of Directors, or if not
so designated, selected by the shareholders present; and in the absence of the
Secretary, the presiding officer shall designate any person to take the minutes
of the meeting. (d) MEETING BY TELEPHONE: One or more of the shareholders may
participate in a meeting of the shareholders by means of conference telephone or
similar communication equipment by means of which all persons participating in
the meting can hear each other.
Section 1.04. CONSENT OF SHAREHOLDERS IN LIEU OF MEETING. Any action
required or permitted to be taken at a meeting of the shareholders or of a class
of shareholders may be taken without a meeting (a) if, prior or subsequent to
the action, a consent or consents in writing, setting forth the action so taken,
is signed by all of the shareholders who would be entitled to vote at a meeting
for such purpose and filed with the secretary of the corporation, or (b) upon
the written consent, filed with the Secretary of the corporation, of
-2-
<PAGE>
shareholders who would have been entitled to cast the minimum number of votes
that would be necessary to authorize the action at a meeting at which all
shareholders entitled to vote thereon were present and voting. In the latter
case, the action shall not become effective until after at least ten (10) days'
written notice thereof has been given to each shareholder entitled to vote
thereon who has not consented thereto.
ARTICLE II
DIRECTORS
Section 2.01. NUMBER, ELECTION AND TERM OF OFFICE. The number of
Directors which shall constitute a full Board of directors shall be a minimum of
four (4) and a maximum of ten (10), as determined from time to time by the vote
of the Board. A full Board shall be elected at each annual meeting of
shareholders. Each Director shall hold office from the time of his election,
but shall be responsible as a Director from such time only if he consents to his
election; otherwise from the time he accepts office or attends his first meeting
of the Board. Each Director shall serve until the next annual meeting of
shareholders, and thereafter until his successor is duly elected and qualifies,
or until his death, resignation or removal. The shareholders or any group of
shareholders may select an alternate for any given Director. In the absence of
a Director from a meeting of the Board, his alternate, if any, may attend the
meeting or execute a written consent and exercise all the powers of the absent
Director.
Section 2.02. ORGANIZATION MEETING; NOTICE. An organization meeting
of the newly elected Board of Directors shall be held each year at the same
place as and promptly after the annual meeting of shareholders. At such
meeting, the Board or Directors shall organize itself and elect the executive
officers of the corporation for the ensuing year, and may transact any other
business. Notice of the organization meeting of the Board or of the business to
be transacted therat shall not be required to be given, except as otherwise
expressly required herein or by law.
Section 2.03. REGULAR MEETINGS; NOTICE. Regular meetings of the
Board of Directors shall be held at such time and place as shall be designated
by the Board from time to time. Notice of such regular meetings of the Board
shall not be required to be given, except as otherwise expressly required herein
or by law, except that wherever the time or place of
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regular meetings shall be initially fixed or changed, notice of such action
shall be given promptly by telephone or otherwise to each Director not
participating in such action.
Section 2.04. SPECIAL MEETINGS; NOTICE. Special meetings of the
Board of Directors may be called at any time by the Board itself by vote at a
meeting, or by any Director, or by the Chairman or the President, to be held at
such place and day and hour and for such purposes as shall be specified by the
person or persons calling the meeting. Notice of every special meeting of the
Board of Directors, which states the place, day and hour thereof, shall be given
to each Director either by being mailed on at least the fifth (5th) day prior to
the date of the meeting, or by being sent by telegram, courier service or
telecopy, or given personally or by telephone, on at least the third (3rd) day
prior to the date of the meeting; any business may be transacted at a special
meeting, irrespective of whether the notice of such meeting contains a reference
thereto, except as otherwise expressly required herein or by law.
Section 2.05. ORGANIZATION AND MANNER OF ACTING. At all meetings of
the Board of Directors, the presence of at least a majority of the Directors in
office shall be necessary and sufficient to constitute a quorum for the
transaction of business. If a quorum is not present at any meeting, the meeting
may be adjourned from time to time by a majority of the Directors present, until
a quorum as aforesaid shall be present; but notice of the time and place to
which such meeting is adjourned shall be given to any Director not present on at
least the day prior to the date of reconvening. Resolutions of the Board shall
be adopted, and any action of the Board at a meeting upon any matter shall be
taken and be valid, with the affirmative vote of at least a majority of the
Directors present and voting at a meeting duly convened, except as otherwise
expressly required herein or by law. The Chairman of the Board, or in his
absence or if such office is vacant the President, shall preside at all meetings
of the Board. The Secretary shall take the minutes at all meetings of the
Board. In the absence of the presiding officer hereinabove designated, the
Directors present shall select a member of the Board to preside; and in the
absence of the Secretary, the presiding officer shall designate any person to
take the minutes of the meeting. One or more of the Directors may participate
in a meeting of the Board by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other.
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Section 2.06. RESIGNATIONS. Any Director may resign by submitting to
the Chairman of the Board or the President his resignation, which (unless
otherwise specified therein) need not be accepted to make it effective and shall
be effective immediately upon its receipt by such officer.
Section 2.07. REMOVAL OF DIRECTORS. The entire Board of Directors or
any individual Director may be removed from office at any time without assigning
any cause, by the vote of shareholders entitled to elect Directors. In case the
Board or any one or more Directors are so removed, new Directors may be elected
at the same meeting. Unless the entire Board is removed, not more than one
Director at a time may be removed by any one vote of the shareholders. No
individual Director shall be removed in case the votes of a sufficient number of
shares are cast against the resolution for his removal which if cumulatively
voted at an annual election of the Board would be sufficient to elect at least
one (1) Director.
Section 2.08. VACANCIES. Vacancies in the Board of Directors,
including vacancies resulting from an increase in the number of Directors, shall
be filled by a majority of the remaining members of the Board though less than a
quorum, or by a sole remaining Director, and each person so elected shall be a
Director until his successor is elected by the shareholders and qualifies; such
election may be made at the next annual meeting of the shareholders or at any
special meeting duly called for the purpose and held prior thereto. When one or
more Directors resign from the Board effective at a future date, the Directors
then in office, including those who have so resigned, may by the applicable vote
fill the vacancies, effective when the resignations become effective.
Section 2.09. COMPENSATION. Directors, as such, shall not receive
any stated salary for their services, but by resolution of the Board of
Directors a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each annual, regular or special meeting of the Board; provided,
that nothing herein contained shall be construed to preclude any Director from
serving the corporation in any proper capacity and receiving compensation
therefore.
Section 2.10. CONSENT OF DIRECTORS IN LIEU OF MEETING. Any action
required or permitted to be taken at a meeting of the Directors may be taken
without a meeting, if, prior or subsequent to the action, a consent or consents
in writing setting forth the
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action so taken is signed by all of the Directors and filed with the Secretary
of the corporation.
ARTICLE III
OFFICERS AND EMPLOYEES
Section 3.01. EXECUTIVE OFFICERS. The executive officers of the
corporation shall be the Chairman of the Board, the President, one or more Vice
Presidents (as may be determined by the Board of Directors), the Secretary and
the Treasurer, all of whom shall be elected by the Board of Directors. Any two
(2) or more offices may be held by the same person. Each executive officer
shall hold office until the next succeeding annual meeting of the Board of
Directors and thereafter until his successor is duly elected and qualifies, or
until his death, resignation or removal. At the discretion of the Board of
Directors, the office of Chairman of the Board and the office of Vice President
may be left vacant.
Section 3.02. ADDITIONAL AND ASSISTANT OFFICERS, AGENTS AND
EMPLOYEES. The Board of Directors from time to time may appoint one or more
other officers, assistant officers, agents, employees and independent
contractors as the Board deems advisable; and the Board of Directors or the
President shall prescribe their duties, conditions of employment and
compensation. Subject to the power of the Board of Directors, the President or
any other executive officer may employ from time to time such other agents,
employees and independent contractors as he may deem advisable, and prescribe
their duties, conditions of employment and compensation. The President may
dismiss any agent, employee or independent contractor not employed by authority
of the Board, without prejudice to the contract rights, if any, of the person so
dismissed.
Section 3.03. THE CHAIRMAN. The Chairman of the Board, if any, shall
be elected from among the Directors, shall preside at the meetings of the
shareholders and of the Board of Directors at which he shall be present, and
shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors.
Section 3.04. THE PRESIDENT. The President shall be the chief
executive officer of the corporation and, subject to the control of the Board,
shall have management and supervision over and exercise general executive powers
concerning all the property, business and affairs of the corporation. The
President
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shall be charged with carrying out the policies, programs, orders and
resolutions adopted or approved by the Board, and shall have all powers and
perform all duties incident to the office of general manager, and any further
powers and duties as from time to time may be prescribed by the Board of
Directors. He shall have the power to execute deeds, bonds, mortgages, other
contracts, agreements and instruments of the corporation. The President shall
be, ex officio, a member of all standing committees. Except as otherwise
directed by the Board of Directors, all other officers shall render reports to
the President.
Section 3.05. THE VICE PRESIDENTS. Except as otherwise ordered by
the Board of Directors, the Vice Presidents, if any, shall have and exercise
such powers and duties as from time to time may be conferred upon them by the
Board of Directors or by the President. The seniority of Vice Presidents, if
seniority is to be assigned, may be designated at the time of their election.
At the request of the President or in his absence or disability, the senior Vice
President shall have and exercise the powers and duties of the President.
Section 3.06. THE SECRETARY. The Secretary shall: (a) keep or cause
to be kept at the principal office of the corporation an original or duplicate
record of the proceedings of the shareholders and the Board of Directors, and a
copy of the Articles of Incorporation and of these By-Laws; (b) attend to the
giving of notices as may be required by law or these By-Laws; (c) be custodian
of the corporation's records, and if the corporation has a seal, of the seal,
which the Secretary shall cause to be affixed to such documents as may be
necessary or advisable; (d) have charge of and keep at the registered office of
the corporation an original or duplicate share register, giving the names of the
shareholders in alphabetical order, and showing their respective addresses, and
number and classes of shares held by each, the number and date of certificates
issued for the shares, and the date of cancellation of every certificate
surrendered for cancellation; and (e) have all powers and perform all duties
incident to the office of Secretary, and such other powers and duties as may
from time to time be prescribed by the Board of Directors or the President.
Section 3.07. THE TREASURER. The Treasurer shall: (a) be custodian
of the corporation's contracts, policies, leases, deeds and other indicia of
title, and all other business records, tax matters, financial documents and
accounting records; (b) see that the lists, books, reports, statements, tax
returns,
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certificates and other documents and records required by law are properly
prepared, kept and filed; (c) be the principal officer in charge of tax and
financial matters and of the accounting of the corporation; (d) have charge and
custody of and be responsible for the corporation's funds, securities, and
investments; (e) receive, endorse for collection and give receipts for checks,
notes, obligations, funds and securities of the corporation, and deposit moneys
and other valuable effects in the name and to the credit of the corporation, in
such depositories as shall be designated by the Board of Directors; (f) cause to
be kept appropriate, complete and accurate books or records of account of all
the corporation's business and transactions; (g) render to the President and the
Board of Directors when and as required, an account of all his transactions as
Treasurer, and a report as to the financial position and operations of the
corporation; and (h) have all powers and perform all duties incident to the
office of Treasurer, and such other powers and duties as may from time to time
be prescribed by the Board of Directors or the President.
Section 3.08 VACANCIES. Vacancy in any office or position by reason
of death, resignation, removal, disqualification or any other cause, shall be
filled in the manner provided in this Article III for regular election or
appointment to such office.
Section 3.09 DELEGATION OF DUTIES. In case of the absence of any
officer, or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors may delegate for the time being the powers
and duties, or any of them, of such officer to any other officer or Director or
other person whom it may select.
ARTICLE IV
SHARES OF CAPITAL STOCK
Section 4.01. SHARE CERTIFICATES. Every holder of stock in the
corporation shall be entitled to a certificate or certificates, consecutively
numbered, to be in such form as the Board of Directors may from time to time
prescribe, and signed (in facsimile or otherwise, as permitted by law) by the
Chairman of the Board or the President or a Vice President and the Secretary or
the Treasurer or an Assistant Secretary or an Assistant Treasurer, which shall
represent and certify the number of shares of stock owned by such holder. The
Board may authorize the issuance of certificates for fractional shares or, in
lieu
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thereof, scrip or other evidence of ownership, which may in the discretion of
the Board entitle the holder thereof to voting, dividend or other rights of
shareholders.
Section 4.02. TRANSFERS OF SHARES. Transfers of shares of stock of
this corporation shall be made on the books of the corporation only upon
surrender to the corporation for cancellation of the certificate or certificates
for such shares properly endorsed by the registered shareholder or by his
assignee or legal representative, who shall furnish proper evidence of
succession, assignment or authority to transfer, or by the agent of one of the
foregoing thereunto duly authorized by an instrument duly executed and filed
with the corporation.
Section 4.03. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. New
certificates for shares of stock may be issued to replace certificates lost,
stolen, destroyed or mutilated upon such terms and conditions, including proof
of loss or destruction and the giving of a satisfactory bond of indemnity, as
the Board of Directors from time to time may determine.
Section 4.04. REGULATIONS RELATING TO SHARES. The Board of Directors
shall have power and authority to make all such rules and regulations not
inconsistent with these By-Laws as it may deem expedient concerning the issue,
transfer and registration of certificates representing hsreas of the
corporation.
Section 4.05. HOLDERS OF RECORD. The corporation shall be entitled
to treat the holder of record of any share or shares of stock of the corporation
as the holder and owner in fact thereof for all purposes and shall not be bound
to recognize any equitable or other claim to or right, title or interest in such
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise expressly provided by law.
ARTICLE V
MISCELLANEOUS CORPORATION TRANSACTIONS AND DOCUMENTS
Section 5.01. SIGNATURES ON NOTES, CHECKS, ETC. All properly
authorized notes, bonds, drafts, acceptances, checks, endorsements (other than
for deposit), guarantees, and all evidences of indebtedness of the corporation
whatsoever, shall require such number of signatures, and shall be signed by such
officers or agents of the corporation, subject to such
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requirements as to countersignature or other conditions, as the Board of
Directors from time to time may determine. Facsimile signatures on checks may
be used if authorized by the Board of Directors.
Section 5.02. EXECUTION OF INSTRUMENTS GENERALLY. Except as provided
in Section 5.01, all properly authorized deeds, mortgages, contracts and other
instruments requiring execution by the corporation may be executed and delivered
by any executive officer of the corporation; and authority to sign any such
contracts or instruments, which may be general or confined to specific
instances, may be conferred by the Board of Directors upon any other person or
persons. Any person having authority to sign on behalf of the corporation may
delegate, from time to time, by instrument in writing, all or any part of such
authority to any person or persons if authorized so to do by the Board of
Directors.
Section 5.03. VOTING SECURITIES OWNED BY CORPORATION. Voting
securities in any other corporation held by this corporation shall be voted by
the President, unless the Board of Directors confers authority to vote with
respect thereto, which may be general or confined to specified investments, upon
some other person. Any person authorized to vote securities shall have the
power to appoint proxies, with general power of substitution.
ARTICLE VI
LIABILITY AND INDEMNIFICATION
Section 6.01. DIRECTORS' PERSONAL LIABILITY. A Director of the
corporation shall not be personally liable, as such, for monetary damages as a
result of any action taken or any failure to take any action; provided, however,
that this Section shall not apply (a) if the Director has breached or failed to
perform the duties of his office relating to standard of care and justifiable
reliance, as set forth in Section 1721 of the Business Corporation Law, any
amendment thereto or any successor statutes in effect at the time of the alleged
breach or failure to perform, and the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness, or (b) to the responsibility
of liability of a Director pursuant to any criminal statute, or (c) to the
liability of a Director for the payment of taxes pursuant to local, State or
Federal law. The rights conferred by this section shall continue as to any
person who has ceased to be a Director and shall inure to the benefit of
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the heirs, executors and administrators of such person. Any repeal or amendment
of this Section 6.01 shall be by vote of the shareholders but shall not
adversely affect any right existing at the time of such repeal or amendment to
which any Director or former Director may be entitled under this Section.
Section 6.02. MANDATORY INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The corporation shall indemnify, except as prohibited by law (including but not
limited to the indemnification provided by Section 1746 of the Business
Corporation Law), each Director or officer (including each former Director or
officer) of the corporation who was or is made a party to or a witness in or is
threatened to be made a party to or a witness in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that the person is or was an authorized
representative of the corporation, against all expenses (including attorneys'
fees and disbursements), judgments, fines (including excise taxes and
penalties), and amounts paid in settlement actually and reasonably incurred by
the person in connection with such action, suit or proceeding.
Section 6.03. MANDATORY ADVANCEMENT OF EXPENSES TO OFFICERS AND
DIRECTORS. The corporation shall pay expenses (including attorneys' fees and
disbursements) incurred by a Director or officer of the corporation referred to
in Section 6.02 hereof in defending or appearing as a witness in any civil or
criminal action, suit or proceeding described in such Section. The expenses
incurred by such Director or officer shall be paid by the corporation in advance
of the final disposition of such action, suit or proceeding only upon receipt of
an undertaking by or on behalf of such Director or officer to repay all amounts
advanced if it shall ultimately be determined that the person is not entitled to
be indemnified by the corporation as provided in Section 6.05 hereof.
Section 6.04. DISCRETIONARY INDEMNIFICATION AND ADVANCEMENT BY BOARD.
The corporation may, as determined by the Board of Directors from time to time,
indemnify, except as prohibited by law, any employee or agent of the corporation
who was or is a party to or a witness in or is threatened to be made a party to
or a witness in, or is otherwise involved in, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that the person is or was an authorized
representative of the corporation, both as to action in his official capacity
and as to action in any other capacity while
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holding such office or position, against all expenses (including attorneys' fees
and disbursements), judgments, fines (including excise taxes and penalties), and
amounts paid in settlement actually and reasonably incurred by the person or in
connection with such action, suit or proceeding. The corporation may, as
determined by the Board of Directors from time to time, pay expenses incurred by
any such person by reason of the person's participation in an action, suit or
proceeding referred to in this Section 6.04 in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such person to repay such amount if it shall ultimately be determined
that the person is not entitled to be indemnified by the corporation as provided
in Section 6.05 hereof.
Section 6.05. NO INDEMNIFICATION. Indemnification under this Article
shall not be made by the corporation in any case where a court determines that
the alleged act or failure to act giving rise to the claim for indemnification
constitutes one with respect to which indemnification is expressly prohibited by
the Business Corporation Law, or any successor statute as in effect at the time
of such alleged action or failure to take action.
Section 6.06 INDEMNIFICATION RIGHTS, SUPPLEMENTAL AND CONTINUING.
Each Director and officer of the corporation shall be deemed to act in such
capacity in reliance upon such rights of indemnification and advancement of
expenses as are provided in this Article. The rights of indemnification and
advancement of expenses provided by this Article shall not be deemed exclusive
of any other rights to which any person seeking indemnification or advancement
of expenses may be entitled under any agreement, vote of members or
disinterested Directors, statute or otherwise (including any right of
indemnification arising pursuant to Section 1741, 1742 or 1743 of the Business
Corporation Law), both as to action in such person's official capacity and as to
action in another capacity while holding such office or position, and shall
continue as to a person who has ceased to be an authorized representative of the
corporation and shall inure to the benefit of the heirs, executors and
administrators of such person. Indemnification and advancement of expenses
under this Article shall be provided whether or not the indemnified liability
arises or arose from any threatened, pending or completed action by or in the
right of the corporation. Any repeal or modification of this Article by the
shareholders or the Board of Directors of the corporation shall not adversely
affect any right or protection existing at the time of such repeal or
modification to which any person may be entitled under this Article.
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Section 6.07. INSURANCE. The corporation may purchase and maintain
insurance on behalf of any person referred to in Sections 6.02 and 6.04 hereof
against any liability asserted against or incurred by such person in any
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under the provisions of this Article. The
corporation may, in lieu of or in addition to the purchase and maintenance of
insurance, establish and maintain a fund of any nature or otherwise secure or
insure in any manner its indemnification obligations, whether arising under or
pursuant to this Article or otherwise. The Board of Directors, without approval
of the shareholders, shall have the power to borrow money on behalf of the
corporation, including the power to pledge the assets of the corporation, from
time to time to discharge the obligations with respect to indemnification, the
advancement and reimbursement of expenses, and the purchase and maintenance of
insurance referred to in this Article.
Section 6.08. AUTHORIZED REPRESENTATIVE. For purposes of this
Article, the term "authorized representative" shall mean a Director, officer,
employee or agent of the corporation or of any subsidiary of the corporation, or
a trustee, custodian, administrator, committeeman or fiduciary of any employee
benefit plan established and maintained by the corporation or by any subsidiary
of the corporation, or a person serving another corporation, partnership, joint
venture, trust or other enterprise in any of the foregoing capacities at the
request of the corporation.
ARTICLE VII
AMENDMENT OF BY-LAWS
Section 7.01. AMENDMENT. These By-Laws may be altered, amended and
repealed, and new By-Laws may be adopted, by the vote of shareholders entitled
to cast at least a majority of the votes which all shareholders are entitled to
cast, or, unless provided otherwise by these By-Laws or by law, by the vote of a
majority of the full Board of Directors of the corporation, at any regular or
special meeting. In the case of a meeting of shareholders, notice of the
specific Section proposed to be changed must be given to the shareholders. No
provision of these By-Laws shall vest any property right in any shareholder.
ARTICLE VIII
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GENERAL PROVISIONS
Section 8.01. OFFICES. The principal office of the corporation shall
be its registered office in the Commonwealth of Pennsylvania unless and until
the Board of Directors shall by resolution determine otherwise. The corporation
may also have offices at such other places within or without the Commonwealth of
Pennsylvania as the business of the corporation may require.
Section 8.02. CORPORATE SEAL. The Board of Directors may but need
not adopt a corporate seal.
Section 8.03. FISCAL YEAR. The fiscal year of the corporation shall
end on such day as shall be fixed by resolution of the Board of Directors.
Section 8.04. INTERESTED DIRECTORS; QUORUM. Except as may otherwise
be provided by law, no contract or transaction between the corporation and one
or more of its Directors or officers, or between the corporation and any other
corporation, partnership, joint venture, trust or other enterprise in which one
or more of its Directors or officers are Directors or officers, or have a
financial or other interest, shall be void or voidable solely for such reason,
or solely because the Director or officer is present at or participates in the
meeting of the Board which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors and
the Board authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested Directors even though the disinterested Directors
are less than a quorum; or
(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the shareholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the Board of Directors or the
shareholders.
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Interested Directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors which authorizes a contract or transaction
specified in this Section.
Section 8.05. DISALLOWED EXPENSES; REIMBURSEMENT. Any payments made
to an officer or employee of the corporation, such as salary, commission, bonus,
interest or rent or entertainment or travel expense, which shall be disallowed
to the corporation in whole or in part as a deductible expense by the Internal
Revenue Service, shall be reimbursed by such officer or employee to the
corporation to the full extent of such disallowance. It shall be the duty of
the Board of Directors, as a Board, to enforce payment of each such amount
disallowed. In lieu of payment by the officer or employee, subject to the
determination of the Board of Directors, proportionate amounts may be withheld
from such officer's or employee's future compensation, until the amount owed to
the corporation has been received.
Section 8.06. NOTICES; WAIVER OF NOTICE. (a) NOTICE: Whenever under
these By-Laws or by law notice is required to be given to any person, including
written notice, (and unless otherwise provided by these By-Laws or by law), it
may be given to such person, either personally or by sending a copy thereof by
first class or express mail, postage prepaid, or by telegram (with messenger
service specified) or courier service, charges prepaid, or by telecopier, to his
address (or to telecopier or telephone number) appearing on the books of the
corporation or, in the case of Directors, supplied by him to the corporation for
the purpose of notice. If the notice is sent by mail, telegraph or courier
service, it shall be deemed to have been given to the person entitled thereto
when deposited in the United States mail or with a telegraph office or courier
service for delivery to that person or, in the case of telecopy, when
dispatched. (b) ADJOURNED SHAREHOLDER MEETINGS: When a meeting of shareholder
is adjourned, it shall not be necessary to give any notice of the adjourned
meeting or of the business to be transacted at an adjourned meeting, other than
by announcement at the meeting at which the adjournment is taken, unless the
board fixes a new record date for the adjourned meeting. Such notice shall
specify the place, day and hour of the meeting; except in the case of a special
meeting of shareholders or as otherwise expressly required herein or by law,
neither the busienss to be transacted at, nor the purpose of, the meeting need
be specified in the notice. (c) WAIVER: Whenever under these By-Laws or by law
written notice is required to be given to any person, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein,
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shall be deemed equivalent to the giving of such notice. Except in the case of
a special meeting of shareholders or as otherwise expressly required herein or
by law, neither the business to be transacted at, nor the purpose of, the
meeting need be specified in the waiver of notice of such meeting. (d)
ATTENDANCE CONSTITUTES WAIVER: Attendance of a person in person, or by proxy in
the case of a shareholder, at any meeting shall constitute a waiver of notice of
such meeting, except where a person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting was not lawfully called or convened.
Section 8.07. DEFINITIONS. For the purpose of these By-Laws, the
following terms and definitions shall have the meanings respectively assigned to
them:
(1) "Business Corporation Law" shall mean the Business Corporation Law of
1988.
(2) The term "fundamental changes" shall mean those corporate transactions
that are governed by Chapter 19 of the Business Corporation Law.
Section 8.08. FINANCIAL REPORTS TO SHAREHOLDERS. The Board of
Directors shall have discretion to determine whether financial reports shall be
sent to shareholders, what such reports shall contain, and whether they shall be
audited or accompanied by the report of an independent or certified public
accountant.
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ORGANIZED UNDER THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA
IDT, INC.
This Certifies that SPECIMEN is the registered holder of the common
stock of IDT, Inc., fully paid and nonassessable shares
transferable only on the books of the Corporation by the holder hereof in person
or by Attorneys upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this
Certificate to be signed by its duly authorized officers and its Corporate Seal
to be hereunto affixed
this ____________ day of ____________ A.D. 19__
T.J. Feola, Secretary Glenn Keeling, President
<PAGE>
FOR VALUE RECEIVED, ____ HEREBY SELF ASSIGN AND TRANSFER UNTO
________________________________________________________SHARES REPRESENTED BY
THE WITHIN CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT
________________________________________________ATTORNEY TO TRANSFER THE SAID
SHARES ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH FULL POWER OF
SUBSTITUTION IN THE PREMISES.
DATED:________________ 19__
IN PRESENCE OF ________________________________
<PAGE>
WARRANT TO PURCHASE
COMMON STOCK
OF
IDT, INC,
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER TIHE SECURITIES ACT OF 1933 AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL FOR THE WARRANT-HOLDER SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED.
This is to certify that is entitled, subject to the terms and
conditions hereinafter set forth to purchase shares of Common Stock, par value $
.10 per share (the "Common Shares") of IDT, Inc., a Pennsylvania Corporation
(the "Company"), from the Company at the price per share and on the terms set
forth herein and to receive a certificate for the Common Shares so purchased on
presentation and surrender to the Company with the subscription form attached,
duly executed and accompanied by payment of the purchase price of each share
purchased either in cash or by certified or bank cashier's check payable to the
order of the Company.
The purchase rights represented by this Warrant are exercisable from
1999 through and including 2004 at a price per Common Share of $0.10.
The purchase rights represented by this Warrant are exercisable at the
option of the registered owner hereof in whole at any time, or in part from time
to time within the period specified; provided, however, that such purchase
rights shall not be exercisable with respect to a fraction of a Common Share. In
case of the purchase of less than all the Common Shares purchasable under this
Warrant, the Company shall cancel this Warrant on surrender hereof and shall
execute and deliver a new Warrant of like tenor and date for the balance of the
shares purchasable hereunder.
The Company agrees at all times to reserve or hold available a
sufficient number of Common Shares to cover the number of shares issuable on
exercise of this and all other Warrants of like tenor then outstanding.
<PAGE>
This Warrant shall not entitle the holder hereof to any voting rights
or others rights as a shareholder of the Company, or to any other rights
whatever except the rights herein expressed and such as are set forth, and no
dividends shall be payable or accrue in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until or unless, and
except to the extent that, this Warrant shall be exercised.
In the event that the outstanding Common Shares hereafter are changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of merger, consolidation,
other reorganization, recapitalization, reclassification, combination of shares,
stock split-up, or stock dividend:
(a) The aggregate number and kind of Common Shares subject to this
Warrant, shall be adjusted appropriately;
(b) Rights under this Warrant, both as to the number of subject Common
Shares and the Warrant price, shall be adjusted appropriately; and
(c) Where dissolution or liquidation of the Company or any merger or
combination in which the Company is not a surviving corporation is involved,
this Warrant shall terminate, but the registered owner of this Warrant shall
have the right, immediately prior to such dissolution, liquidation, merger, or
combination, to exercise his Warrant in whole or in part, to the extent that it
shall not have been exercised.
The foregoing adjustments and the manner of application of the
foregoing provisions may provide for the elimination of fractional share
interests.
The Warrant and all rights hereunder are transferable subject to the
terms and conditions set forth herein.
In the event of the Warrant holder's death, this Warrant may be
exercised by the Warrant holder's legal representatives, heirs or legatees in
accordance with the terms and conditions herein.
The Company shall not be required to issue or deliver any certificate
for Common Shares purchased on exercise of this Warrant or any portion thereof
prior to fulfillment of all the following conditions:
(a) The completion of any registration or other qualifications of such
shares under any federal or state law or under the rulings or regulations of the
Securities and Exchange Commission or any other government regulatory body which
is necessary;
(b) The obtaining of any approval or other clearance from any federal
or state government agency which is necessary,
(c) The obtaining from the registered owner of the Warrant a
representation in writing that he, is acquiring such shares for his own account
for investment and not with a view to, or for sale in connection with, the
distribution of any part thereof, if the Warrants and the related shares have
not been registered under the Securities Act of 1933, as amended (the "Act");
and
(d) The placing on the certificate of an appropriate legend and the
issuance of stop transfer instructions in connection therewith if this Warrant
and the related shares have not been registered under the Act to the following
effect:
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR THE LAWS OF ANY STATE AND HAVE BEEN ISSUED
PURSUANT TO AN EXEMPTION FROM REGISTRATION PERTAINING TO SUCH SECURITIES AND
PURSUANT TO A REPRESENTATION BY THE SECURITY HOLDER NAMED HEREON THAT SAID
SECURITIES HAVE BEEN ACQUIRED FOR PURPOSES OF INVESTMENT AND NOT FOR PURPOSES OF
DISTRIBUTION. THESE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF REGISTRATION. FURTHERMORE, NO OFFER, SALE,
TRANSFER, PLEDGE OR HYPOTHECATION IS TO TAKE PLACE WITHOUT THE PRIOR WRITTEN
APPROVAL OF COUNSEL OF THE ISSUER BEING AFFIXED TO THIS CERTIFICATE. THE
TRANSFER AGENT HAS BEEN ORDERED TO EXECUTE TRANSFERS OF THIS CERTIFICATE ONLY IN
ACCORDANCE WITH THE ABOVE INSTRUCTIONS."
Notwithstanding anything in this Warrant to the contrary, this
Warrant shall be null and void as of 5:00 p.m., Eastern Standard
Time, on 2004.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by the signatures of its duly authorized officers and the corporate
seal hereunto affixed.
IDT, INC.
BY:
__________________________________
Glenn Keeling, President
ATTEST:
_____________________________
Dated: , 1999
<PAGE>
SUBSCRIPTION FORM
(To be executed by the registered holder to exercise the rights to
purchase Common Shares evidenced by the within Warrant.)
IDT, Inc.
Building 2500, Second Floor
2275 Swallow I-Ell Road
Pittsburgh, PA 15220
The undersigned hereby irrevocably subscribes for ___________________
Common Shares pursuant to and in accordance with the terms and conditions of
this Warrant, and herewith makes payment of $_____________ therefor, and
requests that a certificate for such Common Shares be issued in the name of the
undersigned at the address stated below and, if such number of shares shall not
be all of the shares purchasable hereunder, that a new Warrant of like tenor for
the balance of the remaining Common Shares purchasable hereunder shall be
delivered to the undersigned at the address stated below:
Dated: ______________________
Signed: ________________________________________
Address: _______________________________________
________________________________________________
________________________________________________
Social Security No: ____________________________
<PAGE>
INVESTOR SUBSCRIPTION AGREEMENT
IDT, INC.
Persons interested in purchasing shares of the Common Stock of IDT, Inc. (the
"Shares") must complete and return this Subscription Agreement along with their
check or money order to:
IDT, Inc., 2275 Swallow Hill Road, Building 2500, Pittsburgh, PA 15220
If and when accepted by IDT, Inc., a Pennsylvania corporation (the
"Company"), this Subscription Agreement shall constitute an irrevocable
subscription for shares of Common Stock, no par value, of the Company. If
accepted, a copy of this Agreement will be returned as a receipt and a stock
certificate will be issued shortly thereafter.
The undersigned (referred to herein as the "Subscriber") desires to become a
SHAREHOLDER and hereby irrevocably tenders this subscription agreement and
subscribes for that number of shares (the "Shares") of the Company's common
stock as stated below, at the price of _________dollars ($_______) per share,
upon the terms, conditions and representations set forth herein.
1. The Subscriber acknowledges and represents as follows:
(a) That the Subscriber has received and carefully reviewed the
Company's prospectus, dated July , 1999, (the "Prospectus") and that the
Subscriber does not rely upon the verbal representation made by any officer,
employee or agent of the Company. Notwithstanding the availability of other
sources of information on the Company, Subscriber represents that this
subscription is based solely upon the information contained within said
Prospectus.
(b) That the Subscriber has the net worth and/or income to be able to
bear the economic risk of an investment in the Shares; and
(c) That the Subscriber has such knowledge and experience in financial
and business matters so as to be capable of evaluating the merits and risks
of an investment in the Shares; and
(d) That the Subscriber has determined that the Shares are a suitable
investment for him, her or it and meets his, her or its investment objectives
and financial needs, and that the Subscriber has adequate means for providing
for current financial needs and personal contingencies and has no need for
liquidity if a market for the Shares does not develop; and
<PAGE>
(e) The Subscriber recognizes that the Company is a development stage
business venture, that an investment in the Shares is highly speculative and
involves no escrow of funds and a high degree of risk, including those in the
Prospectus discussed under the heading "Risk Factors;" and
(f) The Subscriber is purchasing the shares herein for investment
purposes only and not for purposes of resale and/or distribution to others.
The Subscriber represents and warrants that he, she or it is a bona fide
resident of, and is domiciled in the State, or jurisdiction, stated below and
that the Shares are being purchased solely for the beneficial interest of the
Subscriber.
METHOD OF PAYMENT: CHECK, MONEY ORDER OR WIRE TRANSFER PAYABLE TO "IDT, INC".
I hereby irrevocably tender this Subscription Agreement for the purchase of
________Shares at $________ per Share. With this Subscription Agreement I tender
payment in the amount of $__________ ($_________ per Share) for the Shares
subscribed. In connection with this investment in the Company, I represent and
warrant as follows:
(a) Prior to tendering payment for the Shares, I received the
Company's Prospectus.
(b) I am a bona fide resident of the state of ____________________.
-2-
<PAGE>
PLEASE REGISTER THE SHARES WHICH I AM PURCHASING AS FOLLOWS:
1. INDIVIDUAL(s)--if more than one owner, please issue as follows:
___ Tenants-in-Common (all parties must sign--each investor has as
undivided interest)
___ Joint Tenants with Rights of Survivorship ( all parties must
sign--joint ownership)
___ Minor with adult custodian under the Uniform Gift to Minors Act (the
minor will have sole beneficial ownership)
--------------------------------- -----------------------------------
INVESTOR NO. 1 (print name above) INVESTOR NO. 2 (print name above)
--------------------------------- -----------------------------------
Street (residence address) Street (residence address)
--------------------------------- -----------------------------------
City State Zip City State Zip
--------------------------------- -----------------------------------
Home Phone Home Phone
--------------------------------- -----------------------------------
Social Security Number - Social Security Number -
Birth Date Birth Date
--------------------------------- -----------------------------------
Signature Signature
--------------------------------- -----------------------------------
Date Date
2. ENTITY
___ Corporation (authorized agent of corporation must sign)
___ Existing Partnership (at least one partner must sign)
----------------------------------- -------------------------------
-3-
<PAGE>
Name of Corporation or Partnership Federal Identification Number
----------------------------------- -------------------------------
Authorized Agent (print name above) Business Phone
----------------------------
Title
----------------------------
Business Address
----------------------------
City State Zip
The undersigned acknowledges under the penalties of perjury that the
foregoing information is true, accurate, and complete.
----------------------------
Signature
----------------------------
Date
3. TRUST
Trust (all trustees must sign)
-------------------------------------- --------------------------------
Trustee (print name above) Street Address
-------------------------------------- --------------------------------
Trust (print name above) City State Zip
-4-
<PAGE>
Date of Trust Agreement Social Security # or Federal ID #
The undersigned acknowledges under the penalties of perjury that the
foregoing information is true, accurate and complete.
-------------------------------------- --------------------------------
Signature Signature
-------------------------------------- --------------------------------
Date Date
Accepted by IDT, INC.
By
------------------------------------ --------------------------------
Date
-5-
<PAGE>
August 11, 1999
Board of Directors
IDT, Inc.
2275 Swallow Hill Road
Building 2500, 2nd Floor
Pittsburgh, PA 15220
Gentlemen:
We have examined the corporate records and proceedings of IDT, Inc., a
Pennsylvania corporation (the "Company"), with respect to:
1. The organization of the Company;
2. The legal sufficiency of all corporate proceedings of the Company
taken in connection with the creation, issuance, the form and
validity, and full payment and non-assessability, of all the currently
outstanding and issued common stock of the Company; and
3. The legal sufficiency of all corporate proceedings of the Company,
taken in connection with the creation, issuance, the form and
validity, and full payment and non-assessability, when issued, of
shares of the Company's common stock (the "Shares"), to be issued by
the Company covered by the registration statement (hereinafter
referred to as the "Registration Statement") filed with the Securities
and Exchange Commission on August 16, 1999, file number 33-
EXHIBIT 5.1
<PAGE>
Board of Directors
Page 2
August 11, 1999
_______ (in connection with which Registration Statement this opinion
is rendered).
We have also examined such other documents and such questions of law as we have
deemed to be necessary and appropriate, and on the basis of such examinations,
we are of the opinion:
(a) That the Company is duly organized and validly existing under the laws
of the Commonwealth of Pennsylvania;
(b) That the Company is authorized to issue 80,000,000 shares of common
stock of which 10,087,500 shares of common stock were outstanding as of 1999.
(c) That the Company has taken all necessary and required corporate
proceedings in connection with the creation and issuance of the presently issued
and outstanding shares of common stock and that all such stock so issued and
outstanding has been validly issued, is fully paid and non-assessable, and is in
proper form and valid;
(d) That when the Registration Statement shall have been declared
effective by order of the Securities and Exchange Commission, after a request
for acceleration by the Company, and the Shares shall have been issued and sold
upon the terms and conditions set forth in the Registration Statement, then the
Shares will be validly authorized and legally issued, fully paid and
non-assessable.
<PAGE>
Board of Directors
Page 3
August 11, 1999
We hereby consent (1) to be named in the Registration Statement, and in the
Prospectus which constitutes a part thereof, as the attorneys who will pass upon
legal matters in connection with the sale of the Shares, and (2) to the filing
of this opinion as an exhibit to the Registration Statement.
Sincerely,
Meyer, Unkovic & Scott, LLP
<PAGE>
PROMISSORY NOTE
$10,232,991.00 Pittsburgh, Pennsylvania
April 30, 1999
For value received and intending to be legally bound hereby,
IDT, INC., a Pennsylvania corporation (hereinafter called "Maker"), whose
address is 2275 Swallow Hill Road, Building 2500, Pittsburgh, PA 15220, promises
to pay to the order of BIOCONTROL TECHNOLOGY, INC., a Pennsylvania corporation
(hereinafter called "Holder"), with an address at 2275 Swallow Hill Road,
Building 2500, Pittsburgh, PA 15220, the principal sum of $10,232,991.00,
together with interest thereon at the rate of 10% per annum (the "Interest
Rate") on the unpaid principal amount, payable as follows:
This Note shall be payable by Holder either in its entirety or from
time to time as to part, together with any accrued and unpaid interest to the
date fixed for such payment; provided, however, that any balance of principal
and interest remaining unpaid on June 1, 2002 shall be in any event due and
payable on that date without demand. This Note may be paid at any time,
without penalty.
All payments made hereunder shall be made to Holder at Holder's address
set forth above, or at such other address or place as Holder may designate by
written notice to Maker.
In the event any principal and/or interest shall not be paid by Maker
within ten (10) days after maturity on June 1, 2002, Maker shall be in default
hereunder and the
<PAGE>
entire principal amount of this Note and accrued and unpaid interest thereon
shall immediately become due and payable, at the election of Holder, without
presentment, demand or notice to Maker, all of which are hereby expressly
waived by Maker. No failure on the part of Holder to exercise any of the
rights hereto shall be deemed a waiver of any such rights upon any default
hereunder.
Holder shall not be deemed, by any act of omission or commission, to
have waived any of its rights or remedies hereunder unless such waiver is in
writing and signed by Holder, and then only to the extent specifically set forth
in the writing. A waiver on one event shall not be construed as a continuing
waiver or as a bar to or waiver of any right or remedy to a subsequent event.
If any term or provision of this Note or the application
thereof to any person, property or circumstance shall to any extent be invalid
or unenforceable as to the remainder of this Note, then the application of such
term or provision to person, properties and circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Note shall be valid and enforceable to the fullest
extent permitted by law.
Holder shall be entitled to collect from Maker all reasonable costs and
expenses, including without limitation, all reasonable attorney's fees, whether
or not suit is instituted, incurred (i) in collecting any of the indebtedness
under this Note; (ii) in enforcing performance of the agreements, conditions,
covenants and provisions of this Note, or (iii) in connection with any
bankruptcy or receivership proceeding involving Maker.
-2-
<PAGE>
This Note shall be binding upon Maker and its successors and assigns,
and shall inure to the benefit of Holder and its successors and assigns. All
rights, powers and privileges granted to Holder under this Note shall be
available to the successors and assigns of Holder as fully and with the same
effect as though Holder were exercising said rights, powers and privileges.
This Note shall be construed in accordance with the internal laws of
the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, and pursuant to authority granted by its
Board of Directors, Maker has executed this instrument under its corporate seal,
the day and year first above written.
ATTEST: IDT, INC.
By: Glenn Keeling /s/
- --------------------------------- ------------------
Glenn Keeling, President
-3-
<PAGE>
AGREEMENT
THIS AGREEMIENT is made and entered into as of the 1st day of June,
1998, by and between Biocontrol Technology, Inc., a Pennsylvania corporation
("Biocontrol") and IDT, Inc., a Pennsylvania corporation ("IDT"). Biocontrol
and IDT are sometimes hereinafter referred to as the "Parties."
WITNESSETH:
WHEREAS, IDT is desirous of completing the development of, obtaining
regulatory approval for, and having manufactured a device intended to be used
for the regional treatment of cancers, known as the "'ThermoChem-HT"; and
WHEREAS, IDT desires to retain Biocontrol to assist in the completion of
these tasks for the ThermoChem-HT; and
WHEREAS, Biocontrol desires to perform such services for IDT by completing
the development and applying for regulatory approval in a timely manner, and to
undertake to manufacture the ThermoChem-HT for IDT based on the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, and intending to be legally bound
hereby, the Parties hereto agree that this Agreement shall be governed as
follows:
1.1 DUTIES OF BIOCONTROL.
a. Biocontrol agrees to use its best efforts to complete the development
of the ThermoChem-HT in a period not to exceed six (6) months from the date of
this Agreement (the "Development") Development will be considered complete when
one successful manufacturing prototype has been fabricated and operates in
accordance with IDT-provided specifications. The costs of Development will be
reimbursed by IDT in accordance with the following formula:
Actual labor costs (less benefits) plus 100% overhead
Actual material or service purchase costs (less freight) plus 15%
override
General and Administrative fee of 15% on the above costs
b. Biocontrol shall complete the Development in accordance with ISO and
FDA standards and will assume the responsibility for the ThermoChem-HT design
(the "Design Authority") and, providing Development has been successful, will
use its best efforts to obtain the CE Mark, FDA approval, and any other
regulatory approval deemed desirable by IDT (the "Regulatory Approval") for the
ThermoChem-HT. In addition, Biocontrol will endeavor to obtain patents as
directed by IDT. Biocontrol shall charge IDT for these services in accordance
with the above formula.
c. Biocontrol will take whatever steps are necessary to assure ongoing
regulatory compliance for the ThermoChem-HT, including, but not limited to,
adherence to ISO and FDA standards.
d. Biocontrol agrees to manufacture the ThermoChem-HT (the
"Manufacturing") and sell it to IDT at a price to be determined in accordance
with the following formula:
Costs of Goods Sold (defined as Biocontrol's aggregate cost of
materials, labor and associated manufacturing overhead) plus a sixty
percent (60%) markup.
<PAGE>
This formula may be amended from time to time by mutual consent of
both Parties, set forth in writing and attached hereto as an amendment
to this Agreement, and shall be reviewed at least annually from the
date of the initial schedule.
2. DUTIES OF IDT.
a. IDT assigns Design Authority to Biocontrol.
b. IDT will provide Biocontrol with specifications, drawings, notes,
prototype, components, patents, and any other items which will assist Biocontrol
in completing the Development and agrees that Biocontrol shall be the design
authority for the ThermoChem-HT.
c. IDT agrees to assume responsibility and costs for conducting clinical
and other testing AS required to collect data to be used by Biocontrol in the
submittal of reports, applications, notifications, and other documents for
approval by and compliance with any regulatory body.
d. IDT agrees and covenants to use Biocontrol as the exclusive
manufacturer of the ThermoChem-HT and other related products in the future and
will not engage or contract with any other entity to perform any manufacturing
services related to the ThermoChem-HT without the express prior written consent
of Biocontrol.
e. IDT agrees to use due diligence in providing timely notice to
Biocontrol of quantities of ThermoChem-HT and will submit a projection of
anticipated quantities to be manufactured by Biocontrol at least once per
quarter.
f. IDT will pay invoices submitted upon shipment of ThermoChem-HT within
thirty (30) days of date of shipment.
g. Except for disposables used up in the operation of a system, BDT
agrees that Biocontrol shall have first rights of refusal for development and/or
manufacture of any future devices IDT may intend
to market.
3. DISPUTE RESOLUTION WITH REGARD TO PRICE DETERMINATION. Prior to
invoking arbitration as outlined in Paragraph 9, in the event of a dispute
between the Parties with regard to payment for the Development Regulatory
Approval, and Manufacturing, the following remedy is provided:
Direct or indirect overhead items shall be initially defined by
Biocontrol. In the event that IDT disagrees with the characterization of
any such item, IDT shall so notify Biocontrol in writing, and, for a period
of thirty (30) days following such notification, Biocontrol's independent
certified public accountants and IDT's independent accountants will
negotiate with one another in an attempt to resolve the matter. During the
pendency of such negotiations, any disputed items shall continue to be
treated in accordance with the characterization given to them by
Biocontrol. Following the expiration of said thirty (30) day period, if
negotiations between the accountants have not been successfully concluded,
either Party shall have the right to request that the matter be submitted
to and determined by arbitration board as provided for in Paragraph 9.
4. APPLICABLE LAWS, ORDERS AND REGULATIONS. It is agreed that all
obligations herein undertaken are with a view to compliance by both Parties with
all pertinent provisions of applicable laws, orders and regulations relating to
the development manufacture, use and sale of medical devices.
5. ABILITY TO SUBCONTRACT. In the event Biocontrol desires to
subcontract or assign all or part of its rights to manufacture the
ThermoChem-HT, then Biocontrol shall provide ninety (90) days written notice to
EDT of the identity of such subcontractor or assignee and shall not enter into
any such
2
<PAGE>
agreement without the express prior written consent of IDT. IDT agrees that the
subcontracting of subassemblies or components shall not require such consent
when the assembly is completed by Biocontrol, unless such subassembly requires
regulatory notification.
IDT shall have the right to contract another manufacturer for the
ThermoChem-HT only as set forth in Paragraph 2 herein, or upon the occurrence of
an Event of Default by Biocontrol under the terms of this Agreement which is not
cured and results in the termination of this Agreement as set forth in Paragraph
5 herein.
6. TERMINATION AND DEFAULT. Either Party shall have the right during the
term of this Agreement to terminate the Agreement effective after thirty (30)
days written notice to the other in the event of the occurrence of an Event of
Default, as defined below:
a. Either Party's failure to use its best efforts to perform its
obligations under this Agreement; or
b. IDT fails to make payments to Biocontrol as described herein; or
c. If a petition under the federal bankruptcy laws or any state
insolvency law is filed by or against either Party, or a receiver, fiscal agent
or similar officer if appointed for either Party; or
d. If either Party is unable to fulfill its obligations as set forth
herein for any reason, including regulatory, patent, or enforcement activities
of any agency or unit or similar body of any state, local or federal government;
or
e. A material breach of representation set forth in this Agreement.
Each Party shall have a thirty (30) day period following the receipt of a
Notice of Default from the other Party in which to cure or remedy the stated
default. If the default is not cured during such period it shall be deemed as
Event of Default for which the Agreement may be terminated.
No failure of omission to carry out or to observe any of the terms of this
Agreement shall give rise to any claim by one Party hereto against the other, or
be deemed an event of default if the same shall be caused by FORCE MAJEURE or
other circumstances beyond the control of the Party affected and in the absence
of gross negligence.
In the event of termination pursuant to this Paragraph 6, IDT will pay for
any prior commitments made or expenses incurred by Biocontrol pursuant to this
Agreement which cannot be reasonably negated by Biocontrol, and Biocontrol shall
use its best efforts to mitigate any such commitments.
7. TERM. This Agreement shall remain effective for a period of 1 year
from the date of the initial production delivery of the ThermoChem-HT, and may
be renewed for additional terms by the Parties in writing.
8. WARRANTY. Biocontrol warrants the ThermoChem-HT to be free from
defects in materials and workmanship for a period of one year from the date of
delivery to IDT's customer. Biocontrol shall maintain an inventory control
system in order to keep adequate records in accordance with ISO9001 and FDA
Quality System requirements. Biocontrol's obligation under this warranty as
limited to making good as its factory on product returned intact to it, with
transportation charges prepaid and which upon examination shall be determined to
be a defective product. This warranty is expressly in lieu of all other
warranties expressed or implied and of all other obligations or liabilities on
its part, and Biocontrol neither assumes nor authorizes any other person to
assume for it any other liability in connection with the sale of ThermoChem-HT.
This warranty shall not apply to items purchased complete
3
<PAGE>
and installed in ThermoChem-HT (such as disposable components) without
Biocontrol's alteration. In those cases the warranty of the original
manufacturer shall be applicable.
9. ARBITRATION. The Parties agree that any and all disputes, claims or
controversies arising out of or relating to this Agreement shall be submitted to
J.A.M.S./ENDISPUTE, or its successor, for mediation, and if the matter is not
resolved through mediation, then it shall be submitted to J.A.M. S./ENDISPLTIE,
or and the other party a written request for mediation, setting forth the
subject of the dispute and the relief requested. The Parties will cooperate
with J.A.M.S./ENDISPUTE and with one another in selecting a mediator from
J.A.M.S./ENDISPUTE's panel of neutrals, and in scheduling the mediation
proceedings. The Parties covenant that they will participate in the mediation
in good faith, and that they will share equally in its costs. All offers,
promises, conduct and statements, whether oral or written, made in the course of
the mediation by any of the Parties, their agents, employees, experts and
attorneys, and by the mediator of any J.A.M. S/ENDISPUTE employees, are
confidential, privileged and inadmissible for any purpose, including impeachment
in any arbitration or other proceeding involving the Parties, provided that
evidence that is otherwise admissible or discoverable shall not be rendered
inadmissible or non-discoverable as a result of its use in the mediation.
Either Party may initiate arbitration with respect to the matters submitted to
mediation by filing a written demand for arbitration at any time following the
initial mediation session or 45 days after the date of filing the written
request for mediation, whichever occurs first. The mediation may continue after
the commencement of arbitration if the Parties so desire. Unless otherwise
agreed by the Parties, the mediator shall be disqualified from serving as
arbitrator in the case. The provisions of this Paragraph may be enforced by any
Court of competent jurisdiction, and the Party seeking enforcement shall be
entitled to an award of all costs, fees and expenses, including attorneys' fees,
to be paid by the Party against whom enforcement is ordered.
10. NOTICES. Any notice given pursuant to this Agreement shall be deemed
given (I) when received, if personally delivered to the Party to receive such
notice, or (ii) when received, if sent by overnight courier service or by
registered or certified mail, to the Party to receive such notice at the address
set forth below, or (iii) on the first business day following confirmed receipt
when transmitted by facsimile, with hard copy forwarded by United States mail or
overnight courier service, addressed as follows:
If to Biocontrol: Biocontrol Technology, Inc.
300 Indian Springs Road
Indiana, PA 15701
Attention: President
Fax No.: 724-349-8610
If to IDT: IIDT, Inc.
2275 Swallow I-Ell Road Bldg. 2500
Pittsburgh, PA 15220
Attention: President
Fax No.: 412-279-1367
11. MISCELLANEOUS.
a. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
b. Either Biocontrol or IDT may assign this Agreement to any party which
acquires substantially all of its assets and business. Otherwise, this
Agreement shall be non-assignable by either Party. This Agreement shall be
binding upon and inure to the benefit of the successors and permitted assigns of
the Parties.
4
<PAGE>
c. If any portion of this Agreement is adjudged illegal or unenforceable,
the remainder of this Agreement shall continue to be enforceable, if such
enforceability is commercially reasonable.
IN WITNESS WBEREOF, the Parties have caused this Agreement to be executed
by their fully authorized representatives as of the date first above written.
ATTEST: BIOCONTROL TECHNOLOGY, INC.
By
- ------------------------------ --------------------------------------
Title:
----------------------------------
ATTEST: IDT, INC.
By
- ------------------------------ --------------------------------------
Title:
----------------------------------
5
<PAGE>
AGREEMENT
THIS AGREEMENT is made as of the 21st day of June, 1999 by and between
IDT, INC., a Pennsylvania corporation whose address is 2275 Swallow Hill Road,
Building 2500, Pittsburgh, PA 15220 (hereinafter referred to as "IDT"), and
BIOCONTROL TECHNOLOGY, INC., a Pennsylvania corporation with an address at 2275
Swallow Hill Road, Building 2500, Pittsburgh, PA 15220 (hereinafter referred to
as "Biocontrol").
WHEREAS, Biocontrol is presently the owner of _________ shares of the
common capital stock of the IDT (the "Shares"), fully paid and non-assessable;
and
WHEREAS, Biocontrol has loaned to IDT the sum of $10,232,991.00 to be
repaid in accordance with the terms and conditions of a promissory note in the
form attached hereto;
WHEREAS, the Directors of IDT and Biocontrol believe that it is in the
best interests of and will be a benefit to both parties to enter into an
Agreement, by which Biocontrol will agree not to sell or otherwise transfer the
shares of IDT owned by Biocontrol during the lifetime of the loan;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto, with the intent to be legally bound,
hereby agree as follows:
1. Biocontrol hereby agrees that, without the prior written consent
of IDT, Biocontrol will not, during the three year period commencing on the date
hereof: (a) offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, more than ten (10) percent of the Shares
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in any one twelve month period, or (b) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of more than ten (10) percent of the Shares in any one twelve month
period, whether or not any such transaction described in clause (a) or (b) above
is to be settled by delivery of such Shares, in cash or otherwise. The
undersigned agrees and consents to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of the Shares except in
compliance with the terms and conditions of this Agreement.
2. This Agreement shall terminate upon (i) the repayment of all
outstanding principal and interest due to Biocontrol under the promissory note,
or (ii) the expiration of the three year period referenced in Paragraph 1.
3. This Agreement (i) contains the entire understanding and
agreement of the parties with respect to the subject matter hereof, and may not
be modified or amended except by a subsequent written agreement executed by the
parties hereto, (ii) along with all its terms and conditions shall inure to the
benefit of and be binding upon the parties hereto, their respective heirs,
successors and assigns, and (iii) shall be governed by Pennsylvania law and
enforceable in the state and federal courts of Pennsylvania in Pittsburgh,
Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
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ATTEST: IDT, INC.
By: GLENN KEELING-PRESIDENT/s/
- ----------------------------------- --------------------------
Glenn Keeling, President
ATTEST: BIOCONTROL TECHNOLOGY, INC.
By: Fred Cooper /s/
- ----------------------------------- ---------------
Fred Cooper, President
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LICENSE AGREEMENT
This License Agreement (the "Agreement") between WAKE FOREST UNIVERSITY, an
educational institution organized under the laws of the State of North Carolina,
having its principal offices at Winston-Salem, North Carolina 27109 ("Wake
Forest"), and IDT, INC., a Commonwealth of Pennsylvania Corporation with
principal offices at 2275 Swallow Hill Road #2500, Pittsburgh, Pennsylvania
15220 (the "Company").
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally bound, do hereby
agree as follows:
1. DEFINITIONS
For all purposes of this Agreement the following terms as used herein, will
have the meanings specified below:
1.1 "The Method" means all proprietary developments, data and/or
information currently owned by Wake Forest relating to A METHOD OF HEATED
PERFUSION OF CHEMOTHERAPY DRUG IN HE TREATMENT OF INTRAPERITONEAL AND OTHER
CANCERS, including methods, processes, apparatus, devices, systems, products,
articles of manufacture, and appliances, made and/or developed by Brian W.
Loggie, M.D.C.M. and Ronald A. Fleming, Pharm.D., employees of Wake Forest. The
Method utilizes the Company's THERMOCHEM-HT SYSTEM-TM-, or a related or
equivalent system, (hereafter "System") and employs disposable items and/or
accessories such as ThermoChem-HT disposable packs for use with or as part of
the System in the practice or performance of the Method.
1.2 "Disposables" means all disposable accessories or items, such as the
ThermoChem-HT disposable packs, used during the practice or performance of the
Method or used with or as part of the System for or during the performance or
practice of the Method provided by IDT.
1.3 "Effective date" means the date of the first sale of the Disposables.
1.4 "Affiliate" of a specified entity means an entity that directly or
indirectly controls, is controlled by, or is under common control with, the
specified entity. For purposes of this Agreement, the direct or indirect
ownership of more than 50% of the outstanding voting shares of an entity, the
right to receive
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50% or more of the profits or earnings of an entity, or the right to control
policy decisions of an entity, will be deemed to constitute control.
1.5 "Licensed Products" means the Disposables.
1.6 "Net Sales" means the gross sales amount of all sales or leases of
Licensed Products by or on behalf of the Company or Affiliates to any customer
minus any customary quantity, trade or cash discounts actually given, allowed
returns or allowances given In lieu of allowed returns, freight and insurance,
if separately itemized on the invoice and paid by the customer, and any value
added, sales, use or excise taxes actually included in the invoice amount,
provided, however, that no deductions will be taken for any other costs incurred
in the manufacture, offering for sale, sale, distribution, shipment, promotion,
advertisement, exploitation or commercialization of the Method or the Licensed
Products, for any costs of collections or any uncollectible accounts, or for any
other cots, expenditures, fees or expenses. Licensed Products will be considered
"sold" when delivered, billed out, or invoices, whichever comes first. For all
Licensed Products used by the Company as premiums to promote, market, sell
and/or lease products not employed in the Method, such premiums will be deemed
to have been sold at the Company's customary sales price.
2. GRANT OF LICENSE
2.1 Wake Forest hereby grants to the Company for the term of the License
set forth below, an exclusive, worldwide right and license to use and practice
the Method, subject, however, to a reservation of rights by Wake Forest to
practice and use the Method for Wake Forest's own purposes as well as any and
all other reservation of rights by Wake Forest provided in this Agreement.
2.2 Wake Forest hereby agrees that it will not grant any other license to
practice or use the Method for the term of the License set forth below subject,
however, to any reservation of rights by Wake Forest provided in this Agreement
to practice and use the Method for Wake Forest's own purposes as well as any and
all other reservation of rights by Wake Forest provided in this Agreement.
3. LICENSE FEES AND ROYALTIES
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3.1 The Company agrees to pay to Wake Forest the following amounts:
(a) a fee of 50,000 shares of the Company's common stock issued to
Wake Forest for each PMA or 510(d), or equivalent thereof, receiving FDA
approval for the Method or use of the System in the Method;
(b) an earned royalty of six percent (6%) of Net Sales either for
seven (7) years from the Effective date or for as long as Wake Forest utilizes
the System for the Method, whichever is longer;
(c) milestone payments of $10,000 following the submission of Phase I
data on each IDE related to use of the System for the Method and $25,000
following approval by the FDA of a PMA or 510(k) submission as a result of each
IDE involving the sue of the System for the Method; and
(d) any sublicense fees pursuant to Section 4.2.
3.2 If the Company is required to pay royalties or the like to a third
party in connection with the practice or use of the Method as a result of (I)
governmental laws, (ii) settlement procedures approved by Wake Forest or (iii) a
final, nonappealable judgment in an infringement action, the parties will
negotiate in good faith a royalty reduction in the earned royalty rate set forth
in Section 3.1(b) of this Agreement.
4. SUBLICENSES
4.1 The Company will have the exclusive right to grant sublicenses to
others for the Method provided, however, that any such sublicenses must be
limited by the terms and conditions of this Agreement.
4.2 For any sublicenses granted by the Company hereunder, the Company must
pay to Wake Forest as a sublicense fee that proportion of royalties received
from the Company's sublicensees necessary to yield Wake Forest returns on
Licensed Products sold or leased by such sublicensees equal to the amounts which
Wake Forest would have received from the Company for the Licensed Products sold
or leased by the Company.
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<PAGE>
4.3 Termination of the License granted to the Company by Wake Forest under
this Agreement will terminate all sublicenses which may have been granted by the
Company, provided, however, that any sublicensee who desires to continue its
sublicense must so advise Wake Forest in writing of sublicensee's desire to
continue the sublicense within thirty (30) days of the sublicensee's receipt of
written notice of the termination of the Company's License and, subject to the
sublicensee's agreement to assume relative to Wake Forest all the obligations,
including obligations for payment, contained in the sublicense Agreement with
the Company, Wake Forest, in its sole discretion, may elect to continue the
sublicense.
4.4 Any sublicense granted by the Company must first be approved by Wake
Forest, and such approval will not be withheld unreasonably. Any sublicense
granted by the Company must contain provisions corresponding to those of Section
4.3, 6.2, 7.1, 7.2.2, 8.2, 8.3, 8.5, 9, 11, 12, and 14 of this Agreement and
must not extend beyond the time provided in Section 8.1.
5. BEST EFFORTS AND DUE DILIGENCE
5.1 The Company will use its best efforts to bring the Method to market
through a thorough, vigorous and diligent program for exploitation, marketing
and commercialization of the Method.
6. WARRANTY
6.1 Wake Forest warrants that, to its actual knowledge and belief, it is
entitled to license its information regarding the Method.
6.2 All property, whether tangible or intangible, which may be delivered
hereunder, will b e delivered on an "as is, where is" basis without any express
or implied warranty. OTHER THAN THE OBLIGATIONS OF WAKE FOREST SET FORTH IN THIS
AGREEMENT, WAKE FOREST MAKES NO OTHER WARRANTIES WHATSOEVER. WAKE FOREST HEREBY
DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, ANY IMPLIED WARRANTIES OF NON-INFRINGEMENT OR ANY IMPLIED
WARRANTIES ARISING FROM ANY COURSE OF DEALING, USAGE, OR TRADE PRACTICE. WAKE
FOREST ASSUMES NO RESPONSIBILITY WITH RESPECT TO THE MANUFACTURE, USE, SALE,
LEASE OR DISTRIBUTION OF ANY METHODS, PROCESSES, APPARATUS, DEVICES, SYSTEMS,
PRODUCTS, ARTICLES, AND/OR APPLIANCES DERIVED FROM OR USING THE SYSTEM, METHOD,
OR LICENSED PRODUCTS. WAKE FOREST WILL
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<PAGE>
NOT BE LIABLE FOR ANY ACTIVITIES OR COMPANY, ITS AFFILIATES, OR ANY
SUBLICENSEES ARISING OUT OF THIS AGREEMENT OR FOR LOSS OF PROFITS, LOSS OF USE,
OR ANY OTHER DIRECT, INCIDENTAL, CONSEQUENTIAL, OR EXEMPLARY DAMAGES.
7. RECORDS, REPORTS, AND PAYMENTS
7.1 RECORDS
7.1.1 The Company will keep and maintain and will require any of its
sublicensees to keep and maintain complete, accurate, and correct records and
books relating to the sale or lease of the Licensed Products for the Method for
five (5) years following the end of the applicable calendar or fiscal year to
which such records and books pertain.
7.2 REPORTS
7.2.1 The Company will render to Wake Forest quarterly reports for
each calendar year during the term o the License under this Agreement. Within
thirty days following each such calendar quarter the Company will provide to
Wake Forest a written report setting forth the following information:
(a) accounting for all Licensed Products sold, distributed, or leased;
(b) gross sales of Licensed Products;
(c) any applicable deductions, allowances, and charges as provided in
Section 1.6 of this Agreement;
(d) total Net Sales;
(e) total royalties due;
(f) fees or milestone payments due under Section 3.1(b) and (d);
(g) reports of Sublicenses sales;
(h) income from sublicenses sales; and
(i) sublicense fees due to Wake Forest under Section 3.1(e).
The Company will remit to Wake Forest with each such report the amount
of payments or fees shown thereby to be due. If no sales or leases of the
Licensed Products were made during any calendar quarter, the Company will
provide to Wake Forest a statement to that effect.
7.2.2 The books and records of account kept by the Company and any
sublicensee must be made available upon reasonable notice, during normal
business hours for examination
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<PAGE>
by one or more auditors of Wake Forest's choosing, who will be permitted to
enter upon the premises of the Company and any sublicensee and make and retain
copies of any and all parts of said books and records of account, including
invoices that are relevant to any report required to be rendered by the Company.
Said copies will be provided at no cost to Wake Forest. Any amount found to have
been owed but not paid will be paid promptly to Wake Forest with interest at the
rate of fifteen percent (15%) per year. In the event any such audit shows that
the Company or any sublicensee has underpaid any obligation by five percent (5%)
or more during any calendar quarter, then such Company or applicable sublicensee
will reimburse Wake Forest for the out-of-pocket expense for such audit.
7.2.3 Royalty or other payments will be paid in United States dollars
to Wake Forest in Winston-Salem, North Carolina, or at such other place as Wake
Forest may reasonably designate consistent with the laws and regulations
controlling in any foreign country. Any withholding taxes which the Company is
required by law to withhold on remittance of the royalty payments will be
deducted from the royalty paid. The Company will furnish Wake Forest with
original copies of all official receipts for such taxes. If any royalties, fees,
or payments hereunder are based on Net Sales converted from foreign currency,
such conversion will be made by using the exchange rate prevailing at a
first-class foreign exchange bank on the last business day of the calendar
quarter reporting period to which such royalty payments relate.
8. TERMINATION
8.1 Unless sooner canceled or terminated as herein provided, this
License will continue for seven (7) years from the Effective Date or until Wake
Forest discontinues the use of the Method with the System, whichever is longer.
8.2 If the Company becomes bankrupt or insolvent, or files a petition
in bankruptcy, or if the business of the Company is placed in the hands of a
receiver, assignee or trustee for the benefit of creditors, whether by the
voluntary act of the Company or otherwise, this Agreement will automatically
terminate without any notice whatsoever to the Company.
8.3 If the Company at any time defaults in the payment of any fee,
royalty or other payment, or in providing any report due under this Agreement
makes any false report, or commits a material breach of any covenant or
undertaking set forth herein,
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<PAGE>
Wake Forest will have the right, in addition to all other remedies available, to
terminate the License under this Agreement and revoke any and all licenses
herein grated, by giving the Company thirty (30) days prior written notice of
such termination, provided, however, that if the Company will have rectified
such default or breach within such thirty (30) day period, then this Agreement
will remain in effect and the rights and licenses herein granted will be in
force as if no default or breach had occurred on the part of the Company. In the
event of termination under this Section, the Company will continue to be
obligated to pay to Wake Forest all fees, royalties, or other payment payable at
the time of termination pursuant to this Section.
8.4 The Company will have the right to terminate the License under this
Agreement with or without cause at any time on six (6) months notice by
certified mail to Wake Forest.
8.5 Upon termination of this License for any reason, nothing herein will be
construed to release either party from any obligation accrued prior to the
effective date of such termination. Any termination of this License will not
relieve the Company of any libations to make payments for any fees, royalties or
other payments that may have accrued prior to the date of such termination. The
Company is prohibited from selling, using, or exploiting the Method if the
License is terminated.
8.6 Upon termination of this License for any reason the rights granted
herein will immediately revert to Wake Forest.
9. INDEMNIFICATION AND INSURANCE
The Company will indemnify, defend, and hold harmless Wake Forest from any
suit, action, liability, claim, demand, judgment, and expense arising out of the
fault of the Company or from the use of the System. The Company agrees that if
any such claim is asserted or such suit is brought against Wake Forest, or its
officers, trustees, employees, agents, or subcontractors or their employees, the
Company will defend such claim or suit at the expense of the Company. The
Company will cooperate with Wake Forest in the management of such claim or suit.
The counsel chosen by the Company must be reasonably acceptable to Wake Forest
and agree to represent Wake Forest. The Company will not settle or compromise
any claim or action in a manner that imposes any restrictions or obligations on
Wake Forest without Wake
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<PAGE>
Forest's written consent, which consent will not be unreasonably withheld.
10. ASSIGNMENT
The Company may assign or otherwise transfer this Agreement and the License
granted hereby to and only to the assignee or transferee of the Company's entire
business or of that part of the Company's business to which the License granted
hereby relates, provided, however, that such assignee or transferee agrees in
writing to be bound by the terms and conditions of this Agreement. The Company
will give Wake Forest thirty (30) days prior notice of such assignment and
transfer and if Wake Forest raises no reasonable objection in writing to such
assignment or transfer within fifteen (I 5) days after Wake Forest receives such
notice, then Wake Forest will be deemed to have approved such assignment or
transfer so long as the assignee or -transferee agrees in writing to be bound by
the terms and conditions of this Agreement. If the Company fails to give Wake
Forest such notice of transfer or assignment, then Wake Forest will have the
right to terminate this Agreement or the License under this Agreement by
providing written notice of termination to the transferee or assignee. Further,
if the Company sells or otherwise transfers its entire business or that part of
its business to which the License granted hereby relates and the assignee or
transferee does not agree in writing to be bound by the terms and conditions of
this Agreement within fifteen (I 5) days of any request by Wake Forest, then
Wake Forest will have the sole right to terminate this Agreement or the License
under this Agreement by providing written notice of termination to such
transferee or assignee.
11. NON-USE OF NAMES
The Company will not use the names of Wake Forest or its employees, nor any
adaptation thereof in any advertising, promotional or sales activities without
prior written consent obtained from Wake Forest in each separate case, which
consent will not be unreasonably withheld.
12. EXPORT CONTROLS
It is understood that Wake Forest is subject to United States laws and
regulations controlling the export of technical data, computer software,
laboratory prototypes, and other commodities that may require a license from the
applicable agency of the United States Government and/or may require written
-8-
<PAGE>
assurances by the Company that the Company will not export data or commodities
to certain foreign countries without prior approval of such agency. Wake Forest
neither represents that a license will not be required nor that, if required, it
will be issued.
13. PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
Any payment, notice, or other communication pursuant to this Agreement will
be sufficiently made or given on the date of mailing if sent to such party by
certified first class mail, postage prepaid, addressed to it at its address
below, or as it otherwise designates, by written notice given to the other
party:
Wake Forest: Beth Fordham-Meier, Director
Technology Transfer and Industry Relations
Wake Forest University School of Medicine
Medical Center Boulevard
Winston-Salem, NC 27157-1023
Company: Glenn Keeling, President
IDT, Inc.
2275 Swallow Hill Road #2500
Pittsburgh PA 15220
14. MISCELLANEOUS PROVISIONS
14.1 This Agreement will be construed, governed, interpreted, and applied
in accordance with the laws of the State of North Carolina, U.S.A. Jurisdiction
over any dispute arising under, from, or because of this Agreement shall exist
only in North Carolina.
14.2 The parties hereto acknowledge that this Agreement sets forth the
entire agreement and understanding of the parties hereto as to the subject
matter hereof, and will not be subject to any change or modification except by
the execution of a written instrument subscribed to by the parties hereto. The
parties acknowledge that they have entered into or may enter into a separate
Research Agreement that is not intended to replace this Agreement or any part of
this Agreement. Instead, any such Research Agreement is intended to be separate
from and in addition to this Agreement.
14.3 The provisions of this Agreement are severable, and in the event that
any provision of this Agreement will be determined
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to be invalid or unenforceable under any controlling body of law, such
invalidity or unenforceability will not in any way affect the validity or
enforceability of the remaining provisions hereof
14.4 The failure of either party to assert a right hereunder or to insist
upon compliance with any ten-n or condition of this Agreement will not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.
14.5 In any litigation arising under or relating to this Agreement between
the parties hereto, the prevailing party or parties will be entitled to recover
its reasonable attorneys fees and litigation costs.
14.7 This Agreement will be binding and inure to the benefit of the parties
hereto and their respective affiliates, and permitted successors and assigns.
14.8 The representations, warranties, covenants, and undertakings contained
in this Agreement are for the sole benefit of the parties hereto and their
permitted successors and assigns and such representations, warranties,
covenants, and undertakings will not be construed as conferring any rights on
any other party.
14.9 Nothing contained in this Agreement will be deemed to place the
parties hereto in a partnership, joint venture or agency relationship and
neither party will have the right or authority to obligate or bind the other
party in any manner.
14.10 This Agreement may be executed in two or more counterparts, each of
which will be deemed an original, but all of which taken together will
constitute one and the same in instrument.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals and duly executed this License Agreement as of the day and year first set
forth above.
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WAKE FOREST UNIVERSITY IDT, INC.
BY: BY:
------------------------------ ---------------------------------
NAME: Lawrence D. Smith NAME: Glenn Keeling
TITLE: Associate Dean for Research TITLE: President
DATE: DATE:
----------------------------- ----------------------------------
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Reference on checks
GTS 8530
RESEARCH AGREEMENT
THIS AGREEMENT is by and between IDT, INC., a corporation organized under
the laws of the Commonwealth of Pennsylvania whose offices are located at 2275
Swallow Hill Road #2500, Pittsburgh, Pennsylvania 15220 (hereinafter "SPONSOR")
and WAKE FOREST UNIVERSITY SCHOOL OF MEDICINE, an educational institution
organized under the laws of the State of North Carolina, whose offices are
located on Medical Center Boulevard, Winston-Salem, North Carolina 27157 ("WAKE
FOREST").
1. Scope of Work. WAKE FOREST will use reasonable efforts to perform the
experiments and studies as required by the U.S. Food and Drug Administration
(FDA) to determine the safety and efficacy of implementing a method of heated
perfusion of chemotherapy drug in the treatment of intraperitoneal and other
cancers conceived and designed by WAKE FOREST ("the Method"). The Method
utilizes SPONSOR's The ThermoChem-HT SystemTM and incorporates necessary items
("disposables") to practice the Method (the "System"). The protocol is attached
as Appendix I and incorporated into this Agreement by reference (the "Research
Project"). The Research Project may be modified by mutual agreement in a duly
executed amendment to this Agreement. If there is a conflict between Appendix I
and the other terms of this Agreement, the other terms of this Agreement are
controlling. SPONSOR acknowledges that the primary mission of WAKE FOREST is
health care, education, and the advancement of knowledge, and consequently, all
services provided by WAKE FOREST under this Agreement will be performed in a
manner best suited to carry out that mission. WAKE FOREST does not guarantee
specific results of the Research Project.
This Agreement anticipates collaborative research between SPONSOR and
WAKE FOREST to evaluate and further improve the Method, including developing
applications for the use of the System, and to develop and/or improve
disposables and related accessories. As a condition of this Agreement, WAKE
FOREST agrees to conduct a pilot study and share its results with SPONSOR.
SPONSOR and WAKE FOREST will evaluate the data. Should the results be
favorable, the parties intend to pursue further avenues of collaboration. In
no event will SPONSOR offer for sale, sell or lease the System and the Method
except as pursuant
<PAGE>
to a license agreement between the parties to be executed contemporaneously with
this Agreement.
2. Key Personnel. The Research Project will be performed under the
direction of Brian W. Loggie, M.D.C.M and Ronald A. Fleming, Pharm.D. In the
event they become unavailable to continue with the Research Project, the parties
will attempt to find a mutually acceptable substitute. In the event a mutually
acceptable substitute is not found, the Agreement may be terminated in
accordance with Section 9.1.
3. Term. The term of this Agreement is one year from the date on which IRB
approval and FDA approval of the IDE is obtained (the "Commencement Date").
4. Costs and Billings. SPONSOR agrees to pay WAKE FOREST as outlined in the
Budget and Payment Schedule attached (Appendix 2) in consideration for the
Research Project. Checks will be made payable to Wake Forest University School
of Medicine (Federal Identification Number 56-0532138), will reference this
Research Project, and will be mailed to the following address:
Wake Forest University School of Medicine
The Controller's Office
Medical Center Boulevard
Winston-Salem, NC 27157
5. Equipment.
5.1. SPONSOR will provide WAKE FOREST with the System including
Thermo-Chem HT disposable packs, in sufficient quantity to perform the work
hereunder, without charge, throughout the term of the Research Project. Title
to the System shall remain with Sponsor.
6. Publications.
6.1. Notwithstanding any other provisions in this Agreement, WAKE
FOREST is free to publish, present, or use any results arising out of the
performance of this Agreement for its own instructional, research, or
publication objectives provided that the publication, presentation or use
does not disclose any Information defined under Section 9. WAKE FOREST
agrees that any proposed publication or presentation relating to the Research
Project conducted under this Agreement will be submitted to SPONSOR at least
thirty (30) days prior to submission for publication or presentation. No
right of approval is granted to the SPONSOR. In the event that the proposed
publication or
<PAGE>
presentation contains subject matter which needs patent protection, WAKE
FOREST will, upon written request that identifies potentially patentable
subject matter within the 3O-day review period, delay the publication or
presentation for a maximum of an additional ninety (90) days to allow for the
filing of patent application(s).
Should the SPONSOR also desire to publish any results arising out of the
performance of this Agreement, WAKE FOREST will be provided with a copy of any
proposed publication or presentation at least thirty (30) days prior to
submission for review. In the event that the proposed publication or
presentation contains subject matter which needs patent protection, SPONSOR
will, upon written request that identifies potentially patentable subject matter
within the 30-day review period, delay the publication or presentation for a
maximum of an additional ninety (90) days to allow for the filing of patent
application(s).
6.2. SPONSOR may issue press releases or other public communications at
any time concerning the Research Project, but shall furnish a copy thereof to
WAKE FOREST at least five (5) working days prior to public release. SPONSOR may
not use or refer to the name of WAKE FOREST, its likenesses, logos, or marks of
WAKE FOREST in any form without WAKE FOREST's prior written approval, which
approval will not be unreasonably withheld.
7. Intellectual Property
Either party will retain title to any patent or other intellectual
property rights in inventions made solely by its employees in the course of the
work under this Agreement. In the case of a question of inventorship, federal
law will rule. Any inventions made jointly by employees of SPONSOR and
employees of WAKE FOREST will be owned jointly.
8. Confidentiality
8.1. In recognition of WAKE FOREST as a non-commercial, academic
institution, SPONSOR agrees to limit to the extent possible the delivery of
confidential information to WAKE FOREST. WAKE FOREST agrees to use our best
efforts to hold in confidence, in accordance with this Section 8, any
information disclosed to WAKE FOREST by SPONSOR under this Agreement and
identified in writing as confidential (hereinafter "Information"). For the
purpose of this Agreement, "hold in confidence" means that WAKE FOREST will
protect the Information in the same manner in which
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it protects its own confidential information of similar nature. The Information
will remain the property of the SPONSOR.
8.2. The obligations of WAKE FOREST to maintain confidential under this
Agreement will survive its expiration or termination and will endure for three
(3) years from the date of disclosure.
8.3. Information does not include:
(a) information that is already known to WAKE FOREST prior to
the effective date;
(b) information that is or becomes publicly known through no
fault of WAKE FOREST;
(c) information that has been or is disclosed to WAKE FOREST by
a third party who, to WAKE FOREST's knowledge, was not or
is not under any obligation of confidence or secrecy to
SPONSOR at the time said third party discloses to WAKE
FOREST;
(d) information that is developed by employees of WAKE FOREST
who had no knowledge of the Information disclosed by
SPONSOR to WAKE FOREST under this Agreement and that is
identified in writing as confidential;
(e) Information that is approved for release by written
authorization of the SPONSOR; and
(f) Information that is required to be disclosed by law,
provided WAKE FOREST promptly notifies the SPONSOR in
writing of such lawful disclosure.
9. Termination
9.1. If WAKE FOREST fails to continuously staff the project with
personnel in accordance with Section 2, WAKE FOREST is not in default under this
Agreement but the SPONSOR may terminate this Agreement upon 30 days written
notice.
9.2. In the event that either party defaults or breaches any material
provision of this Agreement, the other party may terminate this Agreement upon
ninety (90) days written notice to the party in default or breach. The
Agreement will continue in force and effect, however, if the party in default or
breach (within 90 days of the receipt of such notice) cures such default or
breach.
9.3. If either party should become insolvent or should make any
assignment for the benefit of creditors, or should be
<PAGE>
adjudged bankrupt, or should file a petition in bankruptcy, or is named as
debtor in an involuntary bankruptcy proceeding, or if a receiver or trustee of
the property of either party is appointed, then this Agreement, at the option of
the other party, will terminate, effective on the date notice of such
termination is given.
9.4. SPONSOR may terminate this Agreement at any time for any reason
upon thirty (30) days written notice; provided, however, that early termination
by SPONSOR for any reason other than the fault of WAKE FOREST DOES NOT RELIEVE
SPONSOR OF THE OBLIGATION OF FULL SALARY SUPPORT AND FRINGE BENEFITS FOR THE
RESEARCH NURSE AS OUTLINED IN THE BUDGET AND PAYMENT SCHEDULE (APPENDIX 2). All
other payments, including financial obligations made prior to the termination
date, shall be paid by SPONSOR within thirty (30) days of receiving a final
invoice from WAKE FOREST.
9.5. Termination of this Agreement for any reason will not relieve the
parties of their duties and obligations which by their nature will survive
termination. Obligations under Section 12 of this Agreement will survive as
long as the Method utilizes the System.
9.6. WAKE FOREST DISCLAIMS ALL WARRANTIES WITH REGARD TO ITS METHOD,
INCLUDING ALL IMPLIED WARRANTIES OR MERCHANTABILITY AND FITNESS, IN NO EVENT
SHALL WAKE FOREST BE LIABLE FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES
OR ANY DAMAGES WHATSOEVER RESULTING FROM LOSS OF USE, DATA OR PROFITS, WHETHER
IN AN ACTION OR CONTRACT, NEGLIGENCE OR OTHER TORTIOUS ACTION, ARISING OUT OF OR
IN CONNECTION WITH THE USE OR PERFORMANCE OF THE METHOD.
10. Assignment. Neither party may assign this Agreement or any part of it
without the written consent of the other party.
11. Miscellaneous
11.1. The headings in this Agreement are intended solely for convenience
or reference and will be given no effect in the construction or interpretation
of this Agreement.
11.2. This Agreement, including any attached appendices, supersedes all
prior oral and written proposals and communications, if any, and sets forth the
entire Agreement of the parties with respect to its subject matter hereof and
may not be altered or amended except in writing, signed by an authorized
representative of each Party.
<PAGE>
11.3. The construction and enforcement of this Agreement will be
governed by the laws of the State of North Carolina, United States of America,
without regard to principles of choice of law. The parties acknowledge that
this contract is entered into and will be performed in North Carolina.
11.4. No waiver of any default, condition, provision or breach of this
Agreement will be deemed to imply or constitute a waiver of any other like
default, condition, provision or breach of this Agreement.
11.5. If any section, term, condition or provision of this Agreement can
be proven by a court of competent jurisdiction, to be-invalid or unenforceable,
or if any section, term, condition or provision is found to violate or
contravene the laws of the State of North Carolina, then the section, term,
condition or provision so found will be deemed severed from this Agreement, but
all other sections, terms, conditions and provisions will remain in full force
and effect.
11.6. Nothing contained herein will be construed as establishing an
employer-employee, joint venture, or principal-agent relationship between the
parties. In addition, neither party will have the right to incur any debt or
expense for the account of the other party except as may expressly be agreed
upon by separate written agreement.
12. Indemnity and Insurance
SPONSOR will indemnify, defend, and hold harmless WAKE FOREST from any
suit, action, liability, claim, demand, judgment, and expense arising out of the
fault of SPONSOR or the System. SPONSOR agrees that if any such claim is
asserted or such suit brought against WAKE FOREST, or its officers, trustees,
employees, agents, or subcontractors or their employees, SPONSOR will defend
such claim or suit at the expense of SPONSOR. SPONSOR will cooperate with WAKE
FOREST in the management of such claim or suit. The counsel chosen by SPONSOR
must be reasonably acceptable to WAKE FOREST and agree to represent WAKE FOREST.
SPONSOR will not settle or compromise any claim or action in a manner that
imposes any restrictions or obligations on WAKE FOREST without WAKE FOREST's
written consent, which consent will not be unreasonably withheld.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement signed
by their respective officers duly authorized as of the date and year written.
WAKE FOREST UNIVERSITY SCHOOL OF MEDICINE IDT, INC.
BY BY
-------------------------- ----------------------
NAME: Lawrence D. Smith NAME: Glenn Keeling
TITLE: Associate Dean, Research TITLE: President
DATE DATE March 16, 1999
------------------------
<PAGE>
APPENDIX 1
The Protocol
<PAGE>
APPENDIX 2
Drs. Brian W. Loggie and Ronald A. Fleming agree to conduct a Phase I
trial of The ThermoChemHT SystemTM (the "System") of IDT, Inc. (IDT, Inc.,
hereafter referred to as "SPONSOR") in patients with disseminated
intraperitoneal cancer. To assist in the SPONSOR's the System IDE submission to
the Food and Drug Administration ("FDA"), Drs. Loggie and Fleming will provide
to the SPONSOR a clinical protocol for inclusion in an IDE application prepared
by the SPONSOR for submission to the FDA. A copy of the IDE will be provided to
Drs. Loggie and Fleming at the time of the IDE submission. After the FDA has
reviewed the IDE, the SPONSOR will contact Drs. Loggie and Fleming and provide
them with specific details concerning the conduct of the Phase I trial, the
number of study patients required, study endpoints, and other items requested by
the FDA for the clinical evaluation of the System. Although the precise number
of subjects to be evaluated is not known, a payment schedule and personnel
budget breakdown to cover the cost of the Phase I study is provided below.
The following items will be provided by the SPONSOR to Drs. Loggie and Fleming:
- - The ThermoChem-HTSystemTM(received January, 1998) and consumable supplies
pertinent to IRB-approved use of the device for the number of patients
covered under this Agreement.
- - Funding for one year from the effective date of the Research Agreement as
described below:
1) Funding for partial support of one of the principal investigators
[$3,593 (5% effort)], a clinical data manager [$6,672 (20%
effort)] and a biostatistician [$2,884 (5% effort)] to collect and
record data in a manner acceptable to FDA requirements and
facilitate reporting of data to SPONSOR and the FDA.
2) Minimum payment of $10,000 for non-assigned research funds, which
use is to be directed by Drs. Loggie or Fleming for the purposes
of the before-mentioned Phase I trial (analysis of drug
concentrations in plasma and perfusate and related supplies) and
other areas of mutual interest including, but not limited to,
Phase 1, II, III trials of hyperthermia, regional perfusion, and
new perfusion applications.
<PAGE>
The parties will meet quarterly in person or by telephone to review the study
progress. Where appropriate in scientific articles and in published articles,
the collaborators will acknowledge the support of the SPONSOR.
PAYMENT SCHEDULE
- - $23.000 at the initiation of the Project with the remainder due after the
accrual of the fifth and last patient on the Phase I trial.
- - Funds for travel to two national or international meetings for both Drs.
Loggie and Fleming (including travel expense reimbursement and per diem
payment not to exceed $1,000 per day, in accordance with WAKE Forest's
customary policies) for presentation of data regarding the System to be
agreed upon by WAKE FOREST and the SPONSOR.
- - Funds for travel for the study nurse to attend one scientific meeting
(including travel expense reimbursement and per diem payment not to exceed
$1,000 per day, in accordance with WAKE FOREST's customary policies) to be
agreed upon by WAKE FOREST and the SPONSOR.
<PAGE>
BUDGET
<TABLE>
<CAPTION>
Base Fringe
Name Role %Effort Salary Salary Benefits TOTAL
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ronald Fleming Co-P.I. 10% $56,580 $5,658 $1,528 $7,186
Greg Russell Biostatistician 5% $44,770 $2,239 $645 $2,884
(28.8% rate)
Diane Garske Data Manager 20% $27,872 $5,574 $1,226 $6,800
-------
(22% rate)
TOTAL PERSONNEL
EXPENSES $16,870
</TABLE>
<TABLE>
<S> <C>
Phase I Trial Expenses (analysis of drug concentrations in plasma and
perfusate and related supplies); and
expenses covering other areas of mutual interest $10,000
TOTAL $26,870
Indirect Costs @25% $ 6,718
-------
GRAND TOTAL $33,588
Plus travel and Milestone Payments
</TABLE>
<PAGE>
CaroTech, LLC
- -----------------------------------------------------------------
3622 Lyckan Parkway, Suite 5008, Durham, NC 27707 USA
May 1, 1999
Mr. Glenn Keeling, President
IDT, Inc.
2275 Swallow Hill Rd., Bldg. 2500
Pittsburgh, PA 15220
Dear Glenn:
This will confirm our telephone conversation of today that the expiration date
of the Intellectual Property Brokering Agreement between IDT, Inc. and CaroTech,
L.L.C. dated August 1, 1998 is hereby extended for a 12-month period commencing
May 1, 1999. If this is in accord with your understanding, would you so
indicate by signing and returning the duplicate copies of this letter.
IDT, Inc. CaroTech, L.L.C.
By: Glenn Keeling /s/ By: Frederick A. Burke /s/
------------- ------------------
Printed Name: Glenn Keeling Printed Name: Frederick A. Burke
Title: President Title: Secretary-Treasurer
Date: 7/2/99 Date: 7/6/99
<PAGE>
INTELLECTUAL PROPERTY BROKERING AGREEMENT
This Agreement is made and entered into as the lst day of August, 1998 by
and between IDT, Inc., a Pennsylvania company whose address is 2275 Swallow Hill
Road, Suite 2500, Pittsburgh, Pennsylvania 15220 ("IDT"), and CaroTech LLC, a
North Carolina Limited Liability company whose address is 3622 Lyckan Parkway,
Suite 5008, Durham, North Carolina 17707 ("CaroTech")
IDT owns and controls technology relating to whole body hyperthermia and
dialysis treatment ("IDT Technology").
CaroTech is engaged in development and commercialization of
biopharmaceuticals, medical and health care technologies. and desires to assist
IDT in brokering of the IDT Technology to third parties having potential
interest in commercializing the IDT Technology or in licensing of same or
entering into other development relationship with IDT relating to such IDT
Technology.
Accordingly, it is agreed by and between IDT and CaroTech, as follows:
1. IDT shall disclose to CaroTech the IDT Technology and related business
and competitive information, under and subject to the terms and conditions of
the mutual Non-Disclosure Agreement entered into on June 19, 1998 by and between
IDT and CaroTech.
2. CaroTech for a period of nine (9) months from the date of this
Agreement shall have the right to present the IDT Technology to third parties
who may have an interest in acquiring rights thereto, and/or to establish
contacts between such third parties and IDT which may lead to evaluation,
license or other business arrangements between IDT and such third party,
relating to or involving the IDT Technology. Nothing herein shall be construed
to prevent IDT from entering into agreements with other brokers with respect to
the IDT Technology or from marketing the IDT Technology itself.
3. Prior to initiating any contacts with third parties, CaroTech will
identify the specific third parties to IDT in writing, so that any duplicative
or extraneous effort by CaroTech may be avoided in relation to corresponding IDT
efforts, and so that contacts may be established by CaroTech free of those
previously initiated by IDT. IDT will immediately advise CaroTech in writing if
it has had prior contact with the third parties identified by CaroTech to IDT.
Subsequent to identification by CaroTech of specific third parties as
<PAGE>
potential investors/licensees/collaborators, IDT agrees that it will not without
the prior written consent of CaroTech publicize or identify such
CaroTech-identified third parties or CaroTech to others.
4. A. If as a result of third party contacts initiated by CaroTech, the
IDT Technology is developed, evaluated, utilized and/or commercialized by such
third party producing revenue or value to IDT or assumption of debt of IDT, then
CaroTech shall be compensated by payment to CaroTech of fifteen percent (15%) of
all such revenues paid to IDT, value conferred on IDT or debt assumed by such
third parties (the "Royalty"). In addition, if CaroTech shall produce value or
revenue to IDT in excess of One Million Dollars in amount, then CaroTech shall
receive a one-half percent equity in IDT in the form of unrestricted registered
shares of the corporation. If CaroTech shall produce value or revenue to IDT in
excess of Five Milllon Dollars in amount, then CaroTech shall receive a one
percent equity in IDT in the form of unrestricted registered shares of the
corporation. If CaroTech shall produce value or revenue to IDT in excess of Ten
Million Dollars in amount, then CaroTech shall receive a one and one-half
percent equity in IDT in the form of unrestricted registered shares of the
corporation. If no registered shares are in existence to satisfy such
obligation, then CaroTech shall have vested piggyback rights in registered
shares subsequently issued by the corporation.
B. In order to minimize the possibility of disputes between the
parties concerning any Royalty to be paid to CaroTech, the parties agree that,
prior to entering into any business relationship with a third party identified
by CaroTech, IDT will describe such business relationship to CaroTech. The
parties shall then agree on the value of the benefit to be conferred on IDT, as
well as the amount and payment schedule of all Royalties, prior to IDT"s
commitment to any such business relationship.
5. IDT understands and agrees that no warranty or guarantee of results is
made or extended by CaroTech in consequence of this Agreement and that CaroTech
is functioning solely as a broker and independent contractor, and not as an
employee or general agent of IDT in CaroTech's performance of this Agreement.
6. In the event that CaroTech's efforts are productive of a
revenue-generating or value producing relationship between IDT and a third party
involving IDT and/or the IDT Technology, IDT agrees to render periodic reports,
on January 15 and July 15 of each year during the term of production of such
value or revenue, setting forth the value or revenue generated to IDT from such
CaroTech - located third party, identifying the amount of the Royalty payable to
CaroTech, and
<PAGE>
including such payment in current U.S. funds. CaroTech shall have the right to
audit the books and records of IDT to determine the correctness of such royalty
reports.
7. IDT shall have no obligation of withholding of taxes or any other
withheld amounts, and such amounts and obligations shall be the sole
responsibility of CaroTech, as to all revenues generated and payable by IDT to
CaroTech hereunder.
8. No modifications of this Agreement or waiver of any of its terms will
be effective unless set forth in writing signed by the party against whom it is
sought to be enforced. Failure by either party to require the other party's
performance of any of the terms of this Agreement or waiver by either party of
any breach of this Agreement by the other party shall not prevent subsequent
enforcement of such term or be deemed a waiver of any subsequent breach thereof.
9. No agency or partnership relationship shall be created between the
parties by this Agreement.
10. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns; provided,
however, that neither party shall have the right to transfer or assign its
interest in this Agreement, in whole or in part, without the prior written
consent of the other party.
11. Each provision of this Agreement shall be valid and enforced to the
fullest extent permitted by law. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision.
12. Each party agrees to perform its obligations hereunder without charge
to the other party, except as otherwise provided for herein.
13. This Agreement shall be governed by and construed in accordance with
the substantive laws of the State of North Carolina, USA without regard to its
conflict of laws provisions.
14. If a party breaches or threatens to breach this Agreement, the parties
acknowledge that there exists no adequate remedy at law, and agree that a
non-defaulting party shall have the right to seek and obtain temporary and
injunctive relief to restrain a violation of this Agreement without the
necessity of proving irreparable injury or damage and without the posting of any
bond or other surety thereon. The injunctive relief shall be cumulative and in
addition to the
<PAGE>
right to seek and obtain other remedies, including monetary damages.
Additionally, the non-defaulting party shall be entitled to recover its costs
and expenses of litigation, including attorney's fees.
In witness of which, the parties have executed this Agreement in duplicate
originals to be effective as of the date first set out above.
IDT Incorporated CaroTech, L.L.C.
By:__________________/s/ By:_____________________/s/
Name:Glenn Keeling Name: Steven J. Hultquist
Title: CEO Title:President
Date: 9/11/98 Date: August 18, 1998
Date: 01-11-96 Date:
el
3
<PAGE>
LICENSE AGREEMENT
THIS AGREEMENT (the "Agreement"), is made this 21st day of July 1993, by
and between HemoCleanse, Inc., an Indiana corporation ("HCI"), having an address
of 2701B Kent Avenue, West Lafayette, Indiana 47906, and IDT, Inc., a
Pennsylvania corporation ("IDT"), having an address as The Bourse, Building
2500, Second Floor, 2275 Swallow Hill Road, Pittsburgh, Pennsylvania 15220.
WITNESSETH:
WHEREAS, HCI exclusively owns certain technology, patents, processes,
methods, designs, technical know-how, and associated rights and tangible
property required to manufacture, market and sell an extracorporeal medical
device, known as the BioLogic-DT ("DT"), that utilizes sorbent chemicals, cation
and anion exchangers, and other physiological substances in a closed-loop
dialysate suspension to selectively remove from the blood and transfer to the
blood across a membrane toxins and chemicals, thus performing both
detoxification and physiological chemical balancing of the blood simultaneously
(the "Technology"); and
WHEREAS, HCI possesses the expertise and know-how to convert the DT into
an extracorporeal hyperthermia device, known as the
<PAGE>
BioLogic-HT ("HT"), by modifying the dialysate suspension heating system
to permit greater heat transfer to the blood, changing the method and rate of
blood pumping and altering the chemical composition of the dialysate suspension
to maintain physiological chemical balancing during hyperthermia while removing
toxins caused by hypertherrnia (the "Modified Technology"); and
WHEREAS, IDT is engaged in research regarding the treatment of disease or
other medical condition through the use of hyperthermia, whether or not in
conjunction with radiation, chemotherapy, or other methods, including, without
limitation, the treatment of Kaposi's sarcoma and Acquired Immune Deficiency
Syndrome ("Relevant Field of Use") and such procedure requires the Modified
Technology; and
WHEREAS, the parties believe that the Modified Technology can be utilized
and optimized as a unique treatment system for an effective extracorporeal
hyperthermia treatment procedure; and
WHEREAS, IDT desires to secure from HCI, and HCI is willing to provide
IDT with, an exclusive license to commercialize the Modified Technology subject
to certain terms and conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the recitals and covenants
and undertakings of the parties contained herein, the parties agree as follows:
<PAGE>
ARTICLE I
TERM
1.1 This Agreement shall begin on the date first written above and
shall continue until terminated by agreement of the parties or as otherwise
provided herein.
ARTICLE H
GRANT OF LICENSE
2.1 LICENSE. HCI hereby grants to IDT, subject to the conditions
outlined in Article III an exclusive, except as Paragraphs 2.2 and 10.2
otherwise provided, non-transferable worldwide license to commercialize, use,
market, sell and exploit the Modified Technology for use within the Relevant
Field of Use, such Modified Technology to include all inventions, improvements,
enhancements and modifications thereto made, conceived or acquired by HCI after
the date of this Agreement and any patent based on and covering the same which
HCI now or thereafter owns, controls or has the right to commercially exploit.
2.2 SUB-LICENSES. The exclusive rights and license herein granted
shall include the right of IDT to sub-license the Modified Technology to others
for use or resale within the Relevant Field of use subject to all terms and
conditions of this Agreement.
ARTICLE III
CONSIDERATION FOR GRANT
<PAGE>
3.1 PRODUCT DEVELOPMENT EXPENSES. IDT agrees to reimburse all
reasonable out-of-pocket expenses incurred by HCI for activities related to
developing the Modified Technology including, but not limited to, device
materials and components, treatment related disposable items ("HT Treatment
Kits") used in clinical trials, travel and lodging, shipping, manufacturing
supplies and other non-personnel operating costs. Expenditures in excess of One
Hundred Dollars ($100.00) must be pre-approved by IDT in writing.
3.2 PATENT Costs. If IDT deems it necessary for HCI to patent any
portion of the Modified Technology to assure protection of their exclusive
license, HCI, at IDT's expense, will prepare and file the requested patent
applications. All future costs related to such patent applications, including
maintenance fees once a patent is issued, will be borne by IDT as long as this
Agreement is in force.
3.3 NON-REFUNDABLE LICENSE FEE. On or before March 31, 1994, IDT
agrees to pay HCI the sum of Five Hundred Thousand Dollars ($500,000.00)
("License Fee") to secure the exclusive worldwide rights to the Modified
Technology for use within the Relevant Field of Use.
The parties acknowledge that as of June 30, 1993, IDT has paid, and HCI
has received, the sum of $178,000.00 as a partial payment of the License Fee.
IDT agrees to continue to make payments on the License Fee on a semi-monthly
basis depending
<PAGE>
upon the availability of funds and on the progress of clinical trials, on or
before the dates and at or above the amounts shown in the following schedule
until the License Fee in paid in full:
<TABLE>
<CAPTION>
Date Amount Due
---- ----------
<S> <C>
July 5, 1993 26,000.00
July 20, 1993 26,000.00
August 5, 1993 26,000.00
August 20, 1993 26,000.00
September 5. 1993 26,000.00
September 20, 1993 26,000.00
October 5, 1993 26,000.00
October 20, 1993 26,000.00
November 5, 1993 26,000.00
November 20, 1993 26,000.00
December 5, 1993 26,000.00
December 20, 1993 36,000.00
</TABLE>
Notwithstanding the foregoing payment schedule, in the event the License
Fee is not paid in full by March 31, 1994, or if, at any time prior to March 31,
1994, IDT notifies HCI in writing that IDT will no longer make payments toward
the License Fee under this Paragraph, this Agreement and the License granted
hereunder shall terminate, and IDT shall have the right to convert any partial
payments of the License Fee to common stock of HCI at $3.67/share. In the event
of such conversion, IDT will also be granted a one-year warrant entitling IDT to
purchase that number of shares equal to fifty percent (50%) of the shares
received from conversion of the partial payments at an exercise price of
$3.67/share. Thereafter neither party shall have any further rights against the
other arising out of this Agreement.
3.4 MACHINE PRICE.
<PAGE>
3.4.1 DEFINITIONS. As used in this Paragraph 3.4, the following terms
shall have the meanings indicated below:
"Machine Price Premium" means that portion of the purchase price which
IDT is required to pay for the HT in excess of 2.00 times HCI's actual
manufacturing cost ("AMC") of the HT.
"Royalty Completion Date" means the earlier of the following dates:
(i) The date on which HCI's obligation to make royalty payments (the
"Royalty Payments") to the Indiana Business Modernization and Technology
Corporation ("IBMTC") terminates; or
(ii) The date on which HCI's obligation to make the Royalty Payments to
IBMTC would terminate if HCI paid the entire Machine Price Premium to IBMTC.
3.4.2 CALCULATION OF Price. HCI agrees to sell and IDT agrees to
purchase the HT at a calculated price equal to 2.22 times the AMC of the HT
("Machine Price") until the Royalty Completion Date, at which time the Machine
Price will be a calculated price equal to two (2) times the AMC. The AMC is
defined for purpose of this agreement as the expected manufacturing cost to
manufacture the HT (or the HT Treatment Kit under Paragraph 3.5 below) under
ideal manufacturing conditions considering standard direct material cost,
standard direct labor costs and standard direct and indirect manufacturing
overhead
<PAGE>
costs, adjusted for variances such as scrap, labor productivity, capacity
situation and quantity produced. The Machine Price will be established by HCI
in December of each year prior to the start of the next calendar year (the
"Contract Year"). Detailed accounting substantiating the Machine Price will be
provided to IDT prior to the start of each Contract Year at the request of IDT.
Should this Agreement become a nonexclusive license as provided in Paragraph
3.9, the Machine Price will not exceed the lowest price charged to any other HT
purchaser.
3.4.3 REDUCTION OF MACHINE PRICE PREMIUM. The Machine Price Premium
shall be subject to the following reduction:
In the event that the license granted to IDT hereunder becomes
nonexclusive, the Machine Price Premium shall be reduced, PRO RATA, during each
succeeding calendar quarter according to the number of HT's purchased by IDT
during the preceding calendar quarter as compared to the number of HT's
purchased during such quarter by all licensees.
3.5 DISPOSABLES PRICE.
3.5.1 DEFINITIONS. As used in this Paragraph 3.5, the following terms
shall have the meanings indicated below:
"Disposables Price Premium" means that portion of the purchase price
which IDT is required to pay for the HT Treatment Kits in excess of 3.00 times
the AMC.
<PAGE>
"Royalty Completion Date" shall have the meaning set forth in Paragraph
3.4. 1.
3.5.2 CALCULATION OF Price. HCI agrees to sell and IDT agrees to
purchase the HT Treatment Kits at a calculated price equal to 3.53 times the AMC
of the HT Treatment Kit (the "Disposables Price") until the Royalty Completion
Date, at which time the Disposables Price shall be a calculated price equal to
three (3) times HCI's AMC for the HT Treatment Kit. The Disposables Price will
be established by HCI in December of each year prior to the start of the next
Contract Year. Detailed accounting substantiating the Disposables Price will be
provided to IDT prior to the start of each Contract Year upon IDT's request.
Should this Agreement become non-exclusive as provided in Paragraph 3.9, the
Disposables Price will not exceed the lowest price charges to any other HT
Treatment Kit purchaser.
3.6 AUDITS. IDT shall have the right, exercisable not more than once
in any twelve (12) month period, upon fifteen (15) business days' prior written
notice, to have HCI's manufacturing costs audited, at IDT's sole cost and
expense, by an auditor of recognized standing and reasonably acceptable to HCI.
3.7 ANNUAL MINIMUMS.
3.7.1 ANNUAL PURCHASES. Beginning either with the calendar year
following FDA approval to market the HT or with the calendar year following any
consecutive three (3) month period
<PAGE>
during which IDT uses the HT in 375 hyperthermia procedures whichever is earlier
("Minimum Year"), IDT agrees to purchase the annual minimum number of HTs and HT
Treatment Kits each Minimum Year as set forth below that, when multiplied by the
Machine Price and Disposables Price for that Minimum Year, will produce an
annual minimum sum ("Annual Minimum"). Once determined, the Annual Minimum can
be attained by the purchase of a mixture of HTs and HT Treatment Kits during the
Minimum Year:
UNIT PROJECTIONS
<TABLE>
<CAPTION>
Minimum Year HTs HT Treatment Kits
-----------------------------------------------------------
<S> <C> <C>
1 25 1,500
2 50 5,500
3 100 13,500
4 125 25,000
5 + each year 150 39,000
thereafter
</TABLE>
3.7.2 ANNUAL MINIMUM PAYMENT. Failure of IDT to fulfill its requirement
to purchase the minimum number of HTs and HT Treatment Kits in any Minimum Year
shall not constitute an event of default under this Agreement so long as IDT
pays HCI a sum equal to the Annual Minimum for the Minimum Year not later than
forty-five (45) days following the close of said Minimum Year.
<PAGE>
3.8 TRAINING AND CLINICAL SUPPORT. HCI agrees to provide and IDT
agrees to pay HCI for training and clinical support according to the following
schedule:
<TABLE>
<CAPTION>
Personnel Daily Charge
---------------------------------
<S> <C>
Dr. Stephen Ash $l,000.00
Clinical (RNs) 500.00
</TABLE>
In addition to these charges, IDT will also pay all travel and lodging expenses
incurred for training and clinical support.
3.9 TERMINATION.
3.9.1 Cause. In addition to termination under Paragraph 3.3, this
Agreement may be terminated upon the occurrence of either of the following:
a) At the option of HCI, upon the failure of IDT to make required
Annual Minimum payments pursuant to Paragraph 3.7; or within 15 days of written
notice of such failure from HCI; or
b) At the option of either party and upon fifteen (15) days "written
notice," with cause, in the event of the other party's material failure to
perform any of its duties or obligations under this Agreement. The notice of
termination must specify the actions or inaction constituting "cause" for
purposes of this Paragraph. If the defaulting party wishes to respond to such
notice and can cure the violation or failure and notifies the aggrieved party
within the fifteen (15) day notice period, the defaulting party will have an
additional forty-five (45) days
<PAGE>
to effect such cure. The provisions of (a), rather than this section (b), shall
control the right of HCI to terminate this Agreement by reason of IDT's failure
to make the required Annual Minimum payment pursuant to Paragraph 3.7.
3.9.2 Effect. Termination of this Agreement pursuant to Paragraph 3.9.1
will cause the exclusive license of the Modified Technology granted to IDT
hereunder to become non-exclusive. All provisions of this Agreement shall
remain in full force and effect other than Paragraph 3.7. Provided, however, if
this Agreement is terminated pursuant to Paragraph 3.3, IDT shall have no rights
to the Modified Technology and all provisions of this Agreement shall be of no
further force and effect except for the obligations of Confidentiality under
Article VIII which shall survive.
3.9.3 IDT ROYALTY. Should this Agreement become a non-exclusive
license, HCT agrees to pay IDT a five percent (5%) royalty out of the proceeds
from gross sales of the HT and HT Treatment Kits to other parties for three (3)
years following the termination of the exclusive license.
ARTICLE IV
REPRESENTATIONS BY HCI AND IDT
4.1 HCI represents to IDT that HCI has the right to grant the
exclusive license granted hereunder; that it has executed no agreement or other
document in conflict herewith; that its officers have the full right, authority
and authorization to
<PAGE>
execute this Agreement and to grant the exclusive rights granted to IDT
hereunder; and that no consent or authorization of any third party is required
as a condition precedent to its execution or performance of this Agreement.
4.2 IDT hereby represents to HCI that it has executed no agreement or
other document in conflict herewith that its officers have the full right,
authority and authorization to execute this Agreement; and that no consent or
authorization of any third party is required as a condition precedent to its
execution or performance of this Agreement.
4.3 IDT warrants to HCI that no Modified Technology will be sold or
otherwise distributed except in full compliance with all legal and regulatory
requirements. IDT assumes all responsibilities of every kind and nature
associated with satisfying all legal and regulatory requirements that must be
met before the HT can be sold for Relevant Fields of Use.
ARTICLE V
INFORMATION AND OWNERSHIP REGARDING THE INVENTIONS
5.1 HCI shall furnish to IDT all information and documents regarding
the Modified Technology necessary to enable IDT to exercise all of its rights
hereunder.
5.2 The Technology, Modified Technology, and all inventions,
improvements, enhancements and modifications thereto made, conceived or acquired
by HCI after the date of this Agreement and any patent based on and covering the
same which HCI
<PAGE>
now or thereafter owns, controls or has the right to commercially exploit shall
remain the sole and exclusive property of HCI, subject to the license hereby
granted. HCI shall, upon demand, execute and deliver to IDT, or cause to be
executed and delivered to IDT, such documents as may be deemed necessary or
advisable by counsel for IDT for filing in the appropriate public offices to
evidence the grant of the exclusive license hereby granted to IDT.
ARTICLE VI
INFRINGEMENT, INDEMNIFICATION AND INSURANCE
6.1 INFRINGEMENT. HCI shall defend, at its own expense, all charges
and claims of infringement that may be brought against IDT related to the
exercise of the exclusive license granted to IDT pursuant to this Agreement. IDT
shall prosecute, at its own expense, any infringing on the rights granted to IDT
pursuant to this Agreement.
6.2 INDEMNIFICATION.
6.2.1 Each party (the "Indemnifying Party") agrees to indemnify, defend
and hold harmless the other (the "Indemnified Party") from and against any and
all claims, damages, liabilities, losses, costs and expenses (including, without
limitation, legal, accounting, and other fees and expenses for investigating and
defending any actual or threatened claims) arising out of any breach or default
hereunder by the
<PAGE>
Indemnifying Party, including, without limitation, any breach of any
representation or warranty hereunder.
6.2.2 Whenever any claim shall arise for indemnification hereunder, the
Indemnified Party shall notify the Indemnifying Party in writing of the claim,
and, when known, the facts constituting the basis for such claim. In the event
of any claim for indemnification hereunder resulting from or in connection with
any claim or legal proceedings by a third party, the notice to the Indemnifying
Party shall specify, if known, the amount or an estimate of the amount of the
liability arising therefrom. The Indemnifying Party, at its sole cost and
expense, may, upon written notice to the Indemnified Party in writing, assume
its obligations to indemnify the Indemnified Party with respect to all elements
of such claim. The Indemnified Party shall be entitled to participate in (but
not control) the defense of such action, with its counsel and at its own
expense. If the Indemnifying Party does not assume the defense of any such
claim or litigation resulting therefrom, the Indemnified Party may defend
against such claim or litigation in such manner as it may deem appropriate,
including, but not limited to, settling such claim or litigation, after giving
notice of the same to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate.
6.3 INSURANCE. IDT agrees to purchase, at its sole cost,
comprehensive general liability insurance (occurrence, and/or
<PAGE>
claims-made form) for bodily injury and property damage, including contractual
and product liability, in an amount of not less than $500,000 combined single
limits License Agreement and provide HCI with a certificate of insurance naming
HCI as an additional insured. When HCI receives FDA approval to market the
BioLogic-HT, DDT will cause the combined single limits of such insurance to be
increased to not less than $2,000,000 before marketing such device. At such
time as IDT has had $5,000,000 in gross sales of sucb device, DDT will cause the
combined single limits of such insurance to be increased to not less than
$500,000. Such contract of insurance shall be primary with respect to any other
insurance available to HCI and shall contain a waiver of subrogation by IDT's
insurance carrier against HCI and its insurance carrier with respect to all
obligations assumed by IDT pursuant to this Agreement. Such insurance shall
contain provisions to the effect that policy limits may not be reduced, terms
changed, or the policy cancelled with less than thirty (30) days written notice
to HCI.
ARTICLE VII
ENHANCEMENTS
7.1 If following the date of this Agreement, HCI becomes the owner of
or acquires the marketing rights to any further improvements or supplements to
the Modified Technology which can be utilized within the Relevant Field of Use,
then HCI shall communicate such improvements and supplements to IDT and IDT
<PAGE>
shall have the right to include the same in this Agreement. It is the intention
of the parties that all improvements and supplements necessary or desirable to
enhance the commercial marketability of the Modified Technology within the
Relevant Field of Use or to enable the same to obtain or maintain a competitive
advantage shall be included within the scope of the license granted hereunder.
ARTICLE VIII
CONFIDENTIALITY
8.1 DEFINITION OF CONFIDENTIAL INFORMATION. As used in this
Agreement, "Confidential Information" shall mean all information which is
transmitted in written, graphic or photographic form and marked as
"Confidential" in accordance with Paragraph 8.1 hereof except Information which
(a) can be shown by the receiving party to have been in its possession prior to
disclosure to it by the transmitting party; (b) at the time of disclosure
hereunder is, or thereafter becomes, through no fault of the receiving party,
part of the public domain by publication or otherwise; (c) is furnished to the
receiving party by a third party after the time of disclosure hereunder as a
matter of right, who owes no obligation of confidentiality to the transmitting
party with respect to the Confidential information; or (d) is independently
developed by employees, agents or vendors of the receiving party who have not
had access to the Confidential Information received from the transmitting party.
<PAGE>
8.2 EXCHANGE OF INFORMATION. The contents of this Agreement and all
Confidential Information exchanged between HCI and IDT pursuant to this
Agreement, or which has previously been exchanged between HCI and IDT relating
to the subject matter hereof, shall be kept confidential by each party with the
same degree of care normally accorded by such party to its own confidential
information except for purposes authorized by this Agreement. Each party's
Information shall be supplied to the other party in written, graphic,
photographic or other tangible form and any Confidential Information so supplied
shall be marked "Confidential" and shall be identified as being disclosed under
this Agreement. Any Information which is disclosed in oral form shall be
confirmed in written summary form within thirty (30) days after its disclosure
to the receiving party and, if Confidential, shall be so marked. Neither party
shall disclose such Confidential Information to any person or firm, for a period
of five (5) years after the termination of this Agreement, unless previously
authorized in writing by the other party to do so; provided, however, that each
party may disclose said Confidential Information to responsible officers and
employees of that party who require said information for the purposes
contemplated by this Agreement, provided that said officers and employees shall
have assumed like obligations of confidentiality.
8.3 PRESS RELEASES. The parties agree that neither IDT nor HCI will
issue a press release relating to this Agreement without
<PAGE>
the prior written consent of the other party. Such consent will not be
unreasonably withheld.
ARTICLE IX
MANUFACTURING RIGHTS
9.1 The parties acknowledge and agree that HCI has retained the
right to manufacture the BioLogic-HT and the HT Treatment Kit, and that HCI
will sell IDT such quantities of these products as IDT requires from time to
time. Notwithstanding the foregoing, in the event that HCI for any reason
ceases to manufacture the HT and HT Treatment Kits or ceases to sell the same
to IDT, then, without further consideration and after giving HCI notice and
reasonable opportunity to cure, the exclusive license granted hereunder to
IDT shall be expanded to include the right of IDT to manufacture or to have
manufactured the HT and HT Treatment Kits for use within the Relevant Field
of Use.
ARTICLE X
ASSIGNABILITY
10.1 This Agreement shall be binding upon, and shall inure to the
benefit of HCI and its assigns and successors in interest.
10.2 This Agreement shall be binding upon and shall inure to the
benefit of IDT and any successor to substantially all of its entire business.
Moreover, IDT shall have the right to assign its right, benefits, obligations
and duties under this Agreement to any third party which controls, is controlled
by, or is under
<PAGE>
common control of IDT. In that event, notice of such assignment shall be given
to HCI and thereafter all references herein to "IDT" shall mean such assignee.
ARTICLE XI
GOVERNING LAW
11.1 This Agreement shall be governed by and construed in accordance
with the laws of the State of Indiana; provided, however, that any patent
question or controversy shall be resolved in the courts having jurisdiction over
the patent in question in accordance with the laws applicable to such patent.
ARTICLE XII
NOTICES
12.1 For purposes of notices given pursuant to this Agreement, the
addresses as set forth in Section 12.2 shall be used unless changed by written
notice given by one party to the other.
12.2 For the purpose of notices under Section 12.1 above, the following
addresses shall be used:
For HCI: HemoCleanse, Inc.
2701B Kent Avenue
West Lafayette, IN 47906-1350
ATTN: Robert B. Truitt, President and CEO
Facsimile No. (317)463-4129
For IDT: IDT, Inc.
The Bourse, Building 2500, Second Floor
2275 Swallow Ell Road
Pittsburgh, PA 15220
ATTN: N. Glenn Keeling, President
Facsimile No. (412) 279-1367
<PAGE>
12.3 All notices hereunder shall be in writing and shall be deemed
given when (a) personally delivered; (b) when received, if mailed by certified
mail, return receipt requested, postage prepaid; (c) when received, when sent by
courier service, UPS, or equivalent carrier; or (d) on the first business day
after receipt of facsimile copy when transmitted by confirmed facsimile, with
hard copy mailed by United States mail.
ARTICLE XIII
COUNTERPARTS
13.1 This Agreement may be executed in more than one counterpart, each
of which shall be deemed an original document, and all of which taken together
shall be one and the same Agreement.
ARTICLE XIV
MISCELLANEOUS
14.1 HEADINGS. The headings used in this Agreement are for purposes of
convenience and ready referral and shall not be deemed to limit the construction
of any paragraph to which they appertain.
14.2 Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect or limit the validity or enforceability of
any other provision hereof
<PAGE>
14.3 No Waiver. No waiver by either party or any breach of the terms
of this Agreement shall be deemed a waiver of any subsequent breach thereof
14.4 Entire Understanding. This Agreement embodies the entire
understanding and agreement between the parties and supersedes all previous
negotiations, representations and writings, written or oral, with respect to the
subject matter hereof This Agreement may be amended or modified only by an
instrument in writing, duly signed by the parties hereto.
ATTEST: HEMOCLEANSE, INC,
______________________/s/ By: Robert B. Truitt/s/
President and CEO
ATTEST: IDT, INC.
_____________________/s/ By: N. Glenn Keeling/s/
N. Glenn Keeling
President
<PAGE>
AMENDMENT TO LICENSE AGREEMENT
THIS AMENDMENT TO LICENSE AGREEMENT (the "Amendment") is made as of the
13th day of May, 1998 by and between HEMOCLEANSE, INC., an Indiana
corporation ("HCI") and IDT, INC., a Pennsylvania corporation ("IDT").
WITNESSETH:
WHEREAS, the parties have previously entered into a certain License
Agreement dated July 21, 1993 (the "Original Agreement") relating to HCI's
licensing to IDT of certain technologies described therein; and
WHEREAS, the parties now wish to amend the Original Agreement in certain
respects, as described herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS. Except as set forth below, capitalized terms
used in this Amendment not otherwise defined herein shall have the meanings
assigned to such terms in the -Original Agreement. The following capitalized
terms shall have the meanings set forth below:
"SB" means HCI's product now known as the ThermoChem-SB",
which utilizes the Modified Technology and which is more fully described on
Exhibit A to this Amendment.
"HT" means HCI's product now known as the ThermoChem-HT",
which utilizes the Modified Technology and which is more fully described on
Exhibit A to this Amendment.
"HT Treatment Kit" means the HCI product now known as the
ThermoChem-HT Treatment Kit which contains the disposable components used
with the HT.
"SB Treatment Kit" means the HCI product now known as the
ThermoChem-SB Treatment Kit which contains the disposable components used
with the SB.
"System" means HCI's ThermoChem System-TM-, comprised of the
SB, the HT, the SB Treatment Kit and the HT Treatment Kit.
2. EXPANSION OF RELEVANT FIELD OF USE. The Relevant Field of Use
is hereby expanded to include the treatment of disease or other medical
condition through the use of hypothermia, in addition to hyperthermia.
3. FAILURE TO COMMERCIALIZE. A new paragraph 2.3 shall be added
to the Original Agreement, as follows:
"2.3 CONVERSION. In the event that IDT fails to commercialize
the Modified Technology within the Relevant Field of Use for a period of
thirty-six (36) months following the receipt of approval from 'the United
States Food and Drug Administration to market the HT and the HT Treatment Kit
or the System, the rights granted to IDT under Paragraphs 2.1 and 2.2 hereof
shall convert from exclusive to non-exclusive rights.
4. SALE OF SB AND TREATMENT KIT COMPONENTS. A new Subparagraph
3.4.4 shall be added to the Original Agreement, as follows:
<PAGE>
"3.4.4 PRICING OF SB AND SB TREATMENT KIT. HCI agrees to
sell to IDT such quantities of SBs as IDT wishes to purchase from time to
time the AMC of the SB during the preceding calendar year. HCI agrees to
sell to IDT such quantities of the SB Treatment Kits as IDT wishes to
purchase from time to time, at a price equal to 2.0 times the AMC of such
Treatment Kits during the preceding calendar year.
5. ELIMINATION OF ANNUAL MINIMUMS. Paragraph 3.7 of the Original
Agreement dealing with annual minimum purchases is hereby deleted, and all
references in the Original Agreement to Paragraph 3.7 or to the Annual
Minimum purchase requirement shall be of no further force and effect.
6. MANUFACTURING RIGHTS. Paragraph 9.1 of the Original Agreement
is hereby amended and restated in its entirety as follows:
"9.1 HCI hereby grants to IDT the exclusive right and license
to manufacture or have manufactured HTs and HT Treatment Kits for sale or use
within the Relevant Field of Use (the "Manufacturing Rights'). The
Manufacturing Rights shall include, without limitation, access to HCI's
technical file relating to the HT and the HT Treatment Kit. In consideration
therefor, and in further consideration of the other covenants set forth
herein, IDT shall pay HCI the following amounts:
(a) A license fee in the sum of $700,000 to be paid to
HCI by IDT causing its wholly-owned subsidiary, Infectious Disease Treatment,
Inc. (the "Subsidiary") to mark as "Paid In Full" and to deliver to HCI that
certain original Convertible Promissory Note dated April 1, 1998 from HCI to
the Subsidiary in the principal sum of $664,000 (the "Canceled Note"), and by
delivering to IICI that certain original Convertible Promissory Note dated
April 1, 1998 from HCI to the Subsidiary in the principal sum of $75,000, to
be reissued by HCI to the Subsidiary in the principal sum of $39,000 (the
"Reduced Note"); and
(b) Royalty payments of 6% of the net sale price (after
cost of goods sold, and exclusive of sales tax, freight and similar
out-of-pocket charges) on all sales by IDT of HTs and HT Treatment Kits
manufactured by, or on behalf, IDT pursuant to the Manufacturing Rights.
Such royalties shall commence at such time as regulatory approval is obtained
from either the United States Food and Drug Administration or the European
Union for commercial marketing of the HT in the United States or Europe.
Royalties shall be paid by IDT to HCI by the fifteenth (15th) day of the
month following the calendar month during which the net sale price is
received by IDT.
7. APPLICATION OF INTEREST. At IDT's option, IDT may apply, from
time to time, any or all interest accrued under the Canceled Note (prior to
the date of cancellation thereof) or the Reduced Note or any other promissory
note now or hereafter made and delivered by 14CI to IDT, toward the purchase
price of spare parts or components for the H'Ts.
8. MISCELLANEOUS.
(a) This Amendment may be executed in more than one
counterpart, each of which shall be an original document, and all of which
taken together shall be one and the same agreement.
(b) This Amendment shall be governed by and construed in
accordance with the laws of the State of Indiana.
2
<PAGE>
(c) The Original Agreement, as amended by this Amendment,
shall remain in full force and effect in accordance with its terms, and it is
hereby ratified and confirmed by the parties.
(d) HCI will give IDT limited clinical and engineering
support at no cost to IDT, other than reasonable out-of-pocket travel
expenses, until the ThermoChem-HT development is completed.
IN WITNESS WHEREOF, the parties have executed this Amendment by their duly
authorized representatives as of the date first above written.
ATTEST HEMOCLEANSE, INC.
By
- ------------------------------ -------------------------------------
Robert B. Truitt, President and CEO
IDT, INC.
By
- ------------------------------ -------------------------------------
N. Glenn Keeling, President
3
<PAGE>
CONSULTANT'S AGREEMENT
This agreement is between J. Michael Fausset, consultant, and IDT, Inc. of
Pittsburgh, PA.
WHEREAS, IDT, Inc. and J. Michael Fausset both believe that it is their best
interest to collaborate on hyperthermia projects by IDT.
THEREFORE, the parties agree to the following:
1. J. Michael Fausset shall be engaged as a consultant to IDT
and will do his best to perform the same duties as he had as an employee Of
IDT in the development of its hyperthermia project. For this purpose he
will be paid the sum of TEN THOUSAND DOLLARS ($10,000.00) per month. Said
payment shall be paid in the amount of FIVE THOUSAND DOLLARS ($5,000.00) on
the first day of each month and FIVE THOUSAND DOLLARS ($5,000.00) on the
fifteenth day of the month. Payment to be made in advance. Consultant
will submit to IDT a detailed activity report, via fax, on the fourteenth
and last day of each month. i.e. status of machine development, clinical
trials and protocols.
2. IDT, INC. agrees to keep consultants group insurance in force, and
consultant agrees to have the sum of THREE HUNDRED TWENTY TWO DOLLARS AND
EITHT TWO CENTS ($322.82) deducted from consultant monthly fee.
3. IDT shall reimburse consultant for reasonable expenses in the cost of doing
business such as phone, general office, etc., as paid in the past with
exception of cell phone.
4. All air fares, car rentals, and hotels will be approved by IDT and paid in
advance for any travel incurred.
5. It is agreed that the development and interaction with trial sites and
anyone working on the machines should deal directly with consultant,
however, Glenn Keeling or a clinical director will be included in the loop.
This agreement will remain in force as long as all articles of this agreement
are met.
Date 2/1/98 Date 2/2/99
---------------- -----------------
J. MICHAEL FAUSSET /S/ GLENN KEELING /S/
J. Michael Fausset Glenn Keeling
President, IDT, Inc.
<PAGE>
CONSULTING AGREEMENT
THIS AGREEMENT entered into by and between IDT, INC., a Pennsylvania
corporation (hereinafter referred to as "IDT") and Brian W. Loggie, M.D.
(hereinafter referred to as "Dr. Loggie").
WITNESSETH THAT:
WHEREAS, Dr. Loggie has assisted IDT- since January 7, 1997 in the
following:
1. The development of the ThermoChem-HT System as a device for the
administration of intraperitoneal hyperthermic chemotherapy (IPHC).
2. A research trial to include a Protocol entitled "PHASE I STUDY OF
INTRAPERITONEAL HYPERTHERMIC ADMINISTRATION OF MITOMYCIN C ADMINISTERED BY THE
THERMOCHEM-HT DEVICE FOR ADVANCED GASTROINTESTINAL AND OVARIAN CANCERS".
3. Obtaining an investigational device exemption from the FDA to conduct
the Phase I study as Wake Forest University School of Medicine.
WHEREAS, IDT wishes to retain Dr. Loggie in the following:
1. To participate in the development of a PMA (Pre Market Application)
for the ThermoChem-HT System and disposables to be submitted to the FDA for
market clearance.
2. Assist IDT in a market analysis of the use of the ThermoChem-HT and
disposables in the treatment of advanced gastrointestinal and advanced ovarian
cancer.
WHEREAS, Dr. Loggie agrees to the following:
1. To participate in the development of a PMA (Pre Market Application)
for the ThermoChem-HT System and disposables to be submitted to the FDA for
market clearance.
2. Assist IDT in a market analysis of the use of the ThermoChem-HT and
disposables in the treatment of advanced gastrointestinal and advanced ovarian
cancer.
NOW, THEREFORE in consideration of the mutual covenants herein contained,
and intending to be legally bound hereby, the parties agree as follows:
1. IDT agrees to pay Dr. Loggie for tasks completed as described above
the sum of THIRTY THOUSAND DOLLARS ($30,000).
<PAGE>
2. IDT agrees to pay Dr. Loggie for ongoing consulting as described above
the sum of FIFTEEN THOUSAND DOLLARS ($15,000) upon acceptance by the FDA of a
PMA (Pre Market Application) for the ThermoChem-HT and disposables.
3. IDT agrees to pay Dr. Loggie for all reasonable out-of-pocket costs he
incurs in the performance of the tasks described herein upon Dr. Loggie
delivering to IDT of receipts for such costs all out-of-pocket expenses shall be
preapproved by IDT.
4. Except as IDT may otherwise consent in writing or as required by law,
Dr. Loggie shall use his best efforts to not divulge or communicate to any
person, entity or corporation, in any manner whatsoever, at any time either
during or subsequent to his retention as a consultant by IDT, any information,
knowledge or data of IDT which Dr. Loggie may receive or acquire during the
course of consulting work related to designs, formulas, processes, methods,
inventions, discovery procedures, techniques, data, testing, results or other
matters which are of a secret or confidential nature and marked confidential in
writing of which might be harmful to IDT's competitive position in its field.
IDT agrees that the confidentiality and use provisions of this Agreement shall
not apply to the following:
(a) Any Confidential/Proprietary Information which appears in issued
patents or printed publications in integrated form or which otherwise
is or becomes generally known to the public other than through fault
of Dr. Loggie.
(b) Any Confidential/Proprietary Information which Dr. Loggie can show by
written records was in Dr. Loggie's possession prior to disclosure; or
(c) Any Confidential/Proprietary Information which comes into Dr. Loggie's
possession by independent third party not associated with IDT, and who
is under no obligation to IDT to maintain the confidentiality of the
information.
5. This Agreement shall be binding upon the administrators, successors,
and assigns of the parties hereto.
6. IDT shall indemnify Dr. Loggie and hold him harmless for all acts,
decisions, or omissions made by him in good faith while performing services for
II)T pursuant to this consulting agreement. IDT shall pay all expenses,
liabilities, costs, damages, including attorney's fees, actually incurred by Dr.
Loggie in connection with the defense of any action, suit or proceeding, and in
connection with any related appeal, including the cost of court settlements,
arising out of or in anv way related to Dr. Loggie's performance of services for
IDT pursuant to this consulting agreement.
7. IDT acknowledges that Dr. Loggie's primary obligation is to the Wake
Forest University School of Medicine. It is the intent of the parties that
efforts and specific responsibilities under this Agreement be separate and
distinct from those duties performed at Wake Forest University School of
Medicine. In the
<PAGE>
event of conflict between this Agreement and any terms of employment between Dr.
Loggie the Wake Forest University School of Medicine, including work
responsibilities or assignments and ownership of developments, the terms and
conditions of employment will take precedence unless specific arrangements have
been-made in advance between IIDT and the Wake Forest University School of
Medicine.
IDT, INC.
Date: 3/12/99 By Glenn Keeling Pres. /s/
-------------------- -------------------------
GLENN KEELING PRESIDENT
Date: 3/8/99 By Brian Loggie, M.D. /s/
-------------------- -------------------------
BRIAN LOGGIE, M.D.
<PAGE>
CONSULTING AGREEMENT
THIS AGREENENT entered into by and between IDT, INC., a Pennsylvania
corporation (hereinafter referred to as "IDT") and Ronald A. Fleming, Pharm. D.
(hereinafter referred to as "Dr. Fleming").
WITNESSETH THAT:
WHEREAS, Dr. Fleming has assisted IDT since January 7, 1997 in the
following:
1. The development of the ThermoChem-HT System as a device for the
administration of intraperitional hyperthermic chemotherapy (IPHC).
2. A research trial to include a Protocol entitled "PHASE I STUDY OF
LNTRAPERITONEAL HYPERTHERMIC ADMINISTRATION OF MITOMYCIN C ADMINISTERED BY THE
THERMOCHEM-HT DEVICE FOR ADVANCED GASTROINTESTINAL AND OVARIAN CANCERS ".
3 . Obtaining an investigational device exemption from the FDA to conduct
the Phase I study as Wake Forest University School of Medicine.
WHEREAS, IDT wishes to retain Dr. Fleming in the following:
1. To participate in the development of a PMA (Pre Market Application)
for the ThermoChem-HT System and disposables to be submitted to the FDA for
market clearance.
2. Assist IDT in a market analysis of the use of the ThermoChem-HT and
disposables in the treatment of advanced gastrointestinal and advanced ovarian
cancer.
WHEREAS, Dr. Fleming agrees to the following:
1. To participate in the development of a PMA (Pre Market Application)
for the ThermoChem-HT System and disposables to be submitted to the FDA for
market clearance.
2. Assist IDT in a market analysis of the use of the ThermoChem-HT and
disposables in the treatment of advanced gastrointestinal and advanced ovarian
cancer.
NOW, THEREFORE in consideration of the mutual covenants herein contained,
and intending to be legally bound hereby, the parties agree as follows:
<PAGE>
1. IDT agrees to pay Dr. Fleming for tasks completed as described above
the sum of TWENTY THOUSAND DOLLARS ($20,000).
2. IDT agrees to pay Dr. Fleming for ongoing consulting as described
above the sum of FIFTEEN THOUSAND DOLLARS ($15,000) upon acceptance by the FDA
of a PMA (Pre Market Application) for the ThermoChem-HT and disposables.
3. IDT agrees to pay Dr. Fleming for all resonable out-of-pocket
costs he incurs in the performance of the tasks described herein upon Dr.
Fleming delivering to IDT of receipts for such costs all out-of-pocket expenses
shall be preapproved by IDT.
4. Except as IDT may otherwise consent in writing or as required by law,
Dr. Fleming shall use his best efforts to not divulge or communicate to any
person, entity or corporation, in any manner whatsoever, at any time either
during or subsequent to his retention as a consultant by IDT, any information,
knowledge or data of IDT which Dr. Fleming may receive or acquire during the
course of consulting work related to designs, formulas, processes, methods,
inventions, discovery procedures, techniques, data, testing results or other
matters which are of a secret or confidential nature and marked confidential in
writing of which might be harmful to IDT's competitive position in its field.
IDT agrees that the confidentiality and use provisions of this Agreement shall
not apply to the following:
(a) Any Confidential/Proprietary Information which appears in issued
patents or printed publications in integrated form or which
other-wise is or becomes Generally known to the public other than
through fault of Dr. Fleming;
(b) Any Confidential/Proprietary Information which Dr. Fleming can
show by written records was in Dr. Fleming's possession prior to
disclosure; or
(c) Any Confidential/Proprietary Information which comes into Dr.
Fleming's possession by independent third party not associated
with IDT, and who is under no obligation to EDT to maintain the
confidentiality of the information.
5. This Agreement shall be binding upon the administrators, successors,
and assigns of the parties hereto.
6. IDT shall indemnify Dr. Fleming and hold him harmless for all acts,
decisions, or omissions made by him in good faith while performing services for
DDT pursuant to this consulting agreement. IDT shall pay all expenses,
liabilities, costs, damages, includin2 attorney's fees, actually incurred by Dr.
Fleming in connection with the defense of any action, suit or proceeding, and in
connection with any related appeal, including the cost of court settlements,
arising out of or in any way related to Dr. Fleming's performance of services
for IIDT pursuant to this consulting agreement.
<PAGE>
7. IDT acknowledges that Dr. Fleming's primary obligation is to the Wake
Forest University School of Medicine. It is the intent of the parties that
efforts and specific responsibilities under this Agreement be separate and
distinct from those duties performed at Wake Forest University School of
Medicine. In the event of conflict between this Agreement and any terms of
employment between Dr. Fleming the Wake Forest University School of Medicine,
including work responsibilities or assignments and ownership of developments,
the terms and conditions of employment will take precedence unless specific
arrangements have bee-n-made in advance between IDT and the Wake Forest
University School of Medicine.
IDT, INC.
Date: 3/12/99 By Glenn Keeling President/s/
--------------------- ----------------------------
GLENN KEELING, PRESIDENT
Date: 3/8/99 By Ronald A. Fleming /s/
--------------------- ----------------------------
RONALD FLEMING, PHARM. D.
<PAGE>
NON-GOVERNMENTAL CLINICAL STUDY AGREEMENT
("Clinical Trials")
THIS Agreement is made this 10 day of September 1997, between The University of
Texas Medical Branch, 301 University Blvd., Galveston, TX ("Institution"), a
component of The University of Texas System ("System"), and IDT, Inc., 2275
Swallow Hill Road, Bldg 25ll, Pittsburgh, PA ("Sponsor"), to conduct a clinical
study and evaluation ("Study"). Institution and Sponsor agree to follows:
1. PROTOCOL
1 Institution agrees to use its best efforts to conduct the Study as an
independent contractor, in accordance with Institutional policy, applicable
laws and regulations and the study entitled Phase I Trial of
Perfusion-Induced Systemic Hyperthermia for Metastatic Non-Small Cell Lung
Carcinoma a Concept Feasibility Study, as described in Exhibit A
("Protocol"). The Study will be supervised by Joseph Zwischenberger, M.D.
("Principal Investigator") at Institution with assistance from associates
and colleagues as required.
2 Sponsor agrees to engage the services of Institution to conduct the Study
and further agrees to provide at no cost to Institution the equipment and
supplies for the conduct of the Study.
2. AWARD
1 In consideration for performance of the Study by Institution, Sponsor shall
pay Institution Ninety-nine thousand seven hundred eighty dollars and
ninety cents ($99,780.90) for Study expenses for the clinical study of
approximately five (5) patients and other related costs. This amount,
shown by approximate category of expense in Exhibit B, is payable in two
(2) equal installments of Forty-nine thousand eight hundred ninety dollars
and forty-five cents (449,890.45) each by Sponsor to Institution prior to
the start of the study. Institution will invoice Sponsor for the first
payment upon execution of this agreement.
Checks should be made payable to The University of Texas Medical Brance,
and mailed to The University of Texas Medical Branch, Research
Administrative Services, P.O. Box 200790.
(OVERNIGHT MAIL: UNIVERSITY OF TEXAS MEDICAL BRANCH, RESEARCH
ADMINISTRATIVE SERVICES, 601 TRAVIS (BOX 200790), HOUSTON, TX 77002.)
<PAGE>
3. TERM
1 This agreement shall continue in force until the earlier of completion of
the Study or as mutually agreed upon by the parties, provided, however that
either party may terminate the Agreement by giving thirty (30) days advance
notice to the other.
2 Upon early termination of this Agreement, Sponsor shall be liable for all
reasonable costs incurred or obligated by Institution at the time of such
termination, subject to the maximum amount specified in Article 2. Sponsor
shall pay Institution for such costs within thirty (30) days of receipt of
an invoice for same.
3 Upon termination of this Agreement, Institution shall return Sponsor's
materials and equipment to Sponsor.
4. INDEMNIFICATION
1 Institution shall, to the extent authorized under the Constitution and laws
of the State of Texas, indemnify and hold Sponsor harmless from liability
resulting from the negligent acts or omissions of Institutions, its agents
or employees pertaining to the activities to be carried out pursuant to the
obligations of this Agreement: provided, however, that Institution shall
not hold Sponsor harmless from claims arising out of the negligence or
willful malfeasance or Sponsor, its officers, agents or employees, or any
person or entity not subject to Institution's supervision or control.
2 Sponsor shall indemnify and hold harmless System, Institution, their
Regents, officers, agents and employees from any liability or loss
resulting from judgements or claims against them arising out of the
activities to be carried out pursuant to the obligation of this Agreement,
including but not limited to the use by Sponsor of the results of the
Study; provided however, that the following is excluded from Sponsor's
obligation to indemnify and hold harmless:
a. the negligent failure of Institution to comply with any applicable
governmental requirements or to adhere to the terms of the Protocol; or
b. the negligence or willful malfeasance by a Regent, officer, agent, or
employee of Institution or System.
5. PUBLICATION AND CONFIDENTIALLY
<PAGE>
1 The parties reserve the right to publish or otherwise make public the data
resulting from the Study. The party wishing to publish or make public
shall submit any such manuscript or release to the other party for comment
prior to publication or release.
2 Except as otherwise required by law or regulation, neither party shall
release or distribute any materials or information containing the name of
the party or any of its employees without prior written approval by an
authorized representative of the non-releasing party, but such approval
shall not be unreasonably withheld. IDT anticipates press release when
appropriate and will submit them for review prior to release.
3 Each party shall hold in confidence for three (3) years after the
termination of this Agreement any confidential information identified as
confidential and obtained from the other party during the course of this
Study. Nothing herein, however, shall prevent Institution or any other
component of System from using any information generated hereunder for
ordinary research and educational purposes of a university.
6. INTELLECTUAL PROPERTY
1 "Invention" shall mean any discovery, concept, or idea, whether or not
available, made during the conduct of the study and arising directly from
the performance of the study, including but not limited to processes,
methods, software, tangible research products, formulas and techniques,
improvements thereto, and know-how related thereto.
2 Institution agrees that the Principal Investigator will promptly disclose
to its Intellectual Property Committee and to SPONSOR any Inventions made
by the Institution and/or the Principal Investigator. It is agreed that
all Inventions and any information with respect thereto shall be subject to
confidentially obligations commensurate with those set forth in Section 5
herein.
3 Any Inventions that originate solely with the Principal Investigator, or
any other Institution agent or employee associated with this study (jointly
or severally referred as "Inventor") shall be the property of the
Institution. If Inventor is a co-inventor with SPONSOR, its agents or
employees, Institution and SPONSOR shall jointly own the Invention. Any
Inventions that originate solely with any agent or employee of SPONSOR
shall be property of SPONSOR. To the extent that SPONSOR pays all patent
expenses for an Invention, Institution does hereby grant to SPONSOR an
exclusive option to acquire an exclusive, worldwide royalty-bearing license
to any invention in which Institution has an ownership interest. SPONSOR
shall indicate its intention to exercise its option to Invention's
disclosure to SPONSOR. If
<PAGE>
SPONSOR decides to exercise its option, the terms shall be negotiated in
good faith within one hundred twenty (120) days of the date the option is
exercised, or within such time as the parties may mutually agree in
writing.
4 If negotiations between SPONSOR and the Institution terminate and the
Institution thereafter negotiates a license agreement with a third party on
substantially better terms than those last offered to SPONSOR, SPONSOR
shall be given the first right to refuse such terms for a period of sixty
(60) days from the date of SPONSOR's receipt of a draft of such license
agreement from Institution.
7. GENERAL
1 This Agreement, including the attached Exhibits A and B, constitutes the
entire and only Agreement between the parties relating to the Study, and
all prior negotiations, representations, agreements, and understandings are
supersuded hereby. No agreements altering or supplementing the terms may
be made except by a written document signed by the duly authorized
representatives of the parties.
2 Any conflicts between the Protocol and this Agreement are controlled by
this Agreement.
3 This Agreement shall be construed and enforced in accordance with the laws
of the State of Texas
4 This Agreement anticipates educational training and may involve health
science postgraduates and other students of the Institution.
IDT, INC. THE UNIVERSITY OF TEXAS MEDICAL
BRANCH
By: Glenn Keeling /s/ By: Wayne Patterson /s/
--------------------------- ------------------------
Name: Glenn Keeling Name: Wayne Patterson/s/
-------------------------- ---------------------
Title: President Title: Director, Instutional
------------------------- Review Coordination
-------------------------
Date: September 10, 1997 Date: 9/5/97
-------------------------- --------------------
I have read this Agreement and understand my obligations hereunder.
By: Joseph B. Zwischenberger M.D. /s/
---------------------------------------
(Principal Investigator)
Name: Jospeh B. Zwischenberger M.D. /s/
----------------------------------
Date: 9/5/97
----------------------------------
<PAGE>
NON-GOVERNMENTAL PRE-CLINICAL STUDY AGREEMENT
("Pre-Clinical Trials")
THIS AGREEMENT is made this 24th day of June, 1996, between The University of
Texas Medical Branch ("INSTITUTION"), a component of The University of Texas
System ("SYSTEM"), and IDT, Inc., ("SPONSOR"), to conduct a clinical study and
evaluation ("STUDY"). INSTITUTION and SPONSOR agree as follows:
1. PROTOCOL
1.1 INSTITUTION agrees to use its best efforts to conduct the STUDY, as an
independent contractor, in accordance with INSTITUTIONAL policy, applicable
laws and regulations and the study entitled Veno-Venous Perfusion-Induced
Systemic Hyperthermia ("PROTOCOL"). The STUDY will be supervised by Joseph
B. Zwischenberber, MD ("PRINCIPAL INVESTIGATOR") at INSTITUTION with
assistance from associates and colleagues as required.
1.2 SPONSOR agrees to engage the services of INSTITUTION to conduct the STUDY
and further agrees to provide at no cost to INSTITUTION the equipment and
supplies for the conduct of the STUDY.
2. AWARD
2.1 In consideration for performance of the STUDY by INSTITUTION, SPONSOR shall
pay INSTITUTION Twenty-eight Thousand One Hundred and Ten Dollars
($28,100.00) for study expenses for the study of approximately eight (8)
animals and other related costs. This amount, shown by approximate category
of expense is Exhibit B and is payable in two equal installments prior to
the start of the study. INSTITUTION will invoice SPONSOR for the first
payment upon execution of this agreement.
Checks should be made payable to The University of Texas Medical Branch,
and mailed to The University of Texas Medical Branch, Research
Administrative Secretaries, P.O. Box 200790, Houston, TX 77216-0790.
(OVERNIGHT MAIL: UNIVERSITY OF TEXAS MEDICAL BRANCH, RESEARCH
ADMINISTRATIVE SERVICES, 601 TRAVIS (bOX #200790).)
<PAGE>
3. TERM
3.1 This agreement shall continue in force until completion of the STUDY as
manually agreed upon by the parties; provided however that either party may
terminate the Agreement by giving thirty (30) days advance notice to the
other.
3.2 Upon early termination of the Agreement, SPONSOR shall be liable for all
reasonable costs incurred or obligated by INSTITUTION at the time of such
termination, subject to the maximum amount specified in Article 2. SPONSOR
shall pay INSTITUTION for such costs within thirty (30) days of receipt of
an invoice for same.
3.3 Upon termination of this Agreement, INSTITUTION shall return SPONSOR'S
materials to SPONSOR.
4. INDEMNIFICATION
4.1 INSTITUTION shall, to the extent authorized under the Texas Constitution
and the laws of the State of Texas indemnify and hold SPONSOR harmless from
liability resulting from the negligent acts or omissions of INSTITUTION,
its agents or employees pertaining to the activities to be carried out
pursuant to the obligations or this Agreement; provided, however, that
INSTITUTION shall not hold sponsor harmless from claims arising out of the
negligence or willful malfeasance of SPONSOR, its officers, agents, or
employees or any person or entity not subject to INSTITUTION supervision or
control.
4.2 SPONSOR shall indemnify and hold harmless SYSTEM, INSTITUTION, their
Regents, officers, agents and employees from any liability or loss
resulting from judgments or claims against them arising out of the
activities to be carried out pursuant to the obligations of this Agreement,
including but not limited to the use by SPONSOR of the results of the
STUDY; provided, however, that the following is excluded from SPONSOR'S
obligation to indemnify and hold harmless.
a. the negligent failure of INSTITUTION to comply with any applicable
governmental requirements or to adhere to the terms of the PROTOCOL;
or
b. the negligence or willful malfeasance by a Regent, officer, agent,
or employee of INSTITUTION or SYSTEM.
<PAGE>
5. PUBLICATION AND CONFIDENTIALLY
5.1 The parties reserve the right to publish or otherwise make public the data
resulting from the STUDY. The party so wishing to publish or make public
shall submit any such manuscript or release to the other party for comment
prior to publication or release.
5.2 Except as otherwise required by law or regulation, neither party shall
release or distribute any materials or information containing the name of
the party or any of its employees without prior approval by an authorized
representative of the non-leasing party, but said approval shall not be
unreasonably withheld.
5.3 Each party shall hold in confidence for three (3) years after the
termination of this agreement any information identified as proprietary or
confidential obtained from the other party during the course of this STUDY.
Nothing herein, however, shall prevent INSTITUTION or any other component
of SYSTEM from using any information generated hereunder for ordinary
research and educational purposes of a university.
6. GENERAL
6.1 This agreement, including the attached Exhibits A and B, constitutes the
entire and only Agreement between the parties relating to the STUDY, and
all prior negotiation, representations, agreements, and understandings are
superseded hereby. No agreements altering or supplementing the terms
hereof, including the exhibits attached hereto, may be made except by a
written document signed by the duly authorized representatives of the
parties.
6.2 Any conflicts between the Protocol and this Agreement are controlled by
this Agreement.
6.3 This Agreement shall be construed and enforced with the laws of the State
of Texas.
6.4 This Agreement anticipates educational training and may involve health
science postgraduates and other students of the INSTITUTION.
<PAGE>
EXHIBIT B
NON-GOVERNMENTAL STUDY AGREEMENT BUDGET
Between
The University of Texas Medical Branch
and
IDT, Inc.
VENO-VENOUS PERFUSION-INDUCED SYSTEMIC HYPERTHERMIA
The approximate distribution of expenses related to the STUDY described in the
covering Agreement is as follows:
<TABLE>
<S> <C>
Salaries (including fringe benefits) $ 9,000
Animals and supplies $ 11,240
Laboratory Costs $ 2,248
----------------
Total Direct Costs $ 22,488
Indirect Costs (institutional overhead 25%) $ 5,622
TOTAL COST $ 28,100
</TABLE>
Such expenses are provided for information only. INSTITUTION reserves the right
to modify the distribution of such expenses as necessary in the circumstances,
provided that the stipulated total cost is not exceeded. Further, the above data
is predicated on the evaluation of eight animals; if the total number of
evaluated animals is greater or less than said number, the parties may increase
or decrease the grant amount accordingly.
<PAGE>
SPONSOR: IDT, INC. UNIVERSITY OF TEXAS MEDICAL BRANCH
By By
---------------------- ----------------------
Name: Name: Gary Esham
-------------------
Title: Title: Director, Research
------------------ Administrative Services
Date: Date:
-------------------- --------------------
I have read this agreement and understand my obligations hereunder.
By
----------------------------------
Principal Investigator
Date:
--------------------------------
<PAGE>
IDT, INC.
2275 Swallow Hill Road - Building 2500
Pittsburgh, PA 15220
(412) 279-8715 Fax (412) 279-1367
July 22, 1998
Mr. Marc Clupper
Javelin Technologies, Inc.
30 Cadillac Court, Apt. 4C
Lafayette, IN 47905
Dear Marc:
I would like to extend our Design and Engineering Agreement with Javelin
Technologies, Inc., until the completion of the ThermoChem-HT-TM- . The
financial terms will be negotiated upon the availability of funds in IDT, Inc.
IDT, Inc. will compensate all travel between Pennsylvania and Indiana.
In addition, 80,000 Warrant Shares of IDT, Inc. at $.10 per share will be issued
upon completion of the ThermoChem-HT-TM-. IDT, Inc. will provide continued
support for the project as needed.
This agreement supersedes the previous agreement dated April 16, 1998.
I look forward to our continued work together. If you have anything with which
to discuss with me, please contact me.
Sincerely,
IDT, INC.
Glenn Keeling
President
Accepted by:
- ------------------------- ----------------
Marc Clupper Date
<PAGE>
DESIGN AND ENGINEERING AGREEMENT
BETWEEN
IDT, INCORPORATED
AND JAVELIN TECHNOLOGIES, INCORPORATED
1. INTRODUCTION
This is an agreement for Javelin Technologies, Inc. to develop engineering
software and documentation for IDT, Inc. in accordance with an agreed-upon
Letter of Agreement (See Attached).
2. DEFINITIONS
As used in this Agreement, the following definitions shall apply:
1. "Agreement" shall mean this Contract Agreement between Customer and
Developer.
2. "Customer" shall mean IDT, Incorporated of Pittsburgh, Pennsylvania.
3. "Commonly Used Code" shall include computer code, techniques,
functions, routines, and subroutines that are common in the computer
industry and computer programming methods in common use, whether or
not created for use in the Software.
4. "Confidential Information" shall mean any information relating to or
disclosed in the course of the Agreement, which is or should be
reasonably understood to be confidential or proprietary to the
disclosing party. "Confidential Information" shall not include
information (a) already lawfully known to the receiving party, (b)
disclosed in published materials, (c) generally known to the public,
or (d) lawfully obtained from any third party.
5. "Deliverables" shall mean all services that are offered and supplied
to the Customer by the developer under terms of this Agreement.
6. "Developer" shall mean Javelin Technologies, Incorporated of Wabash,
Indiana, and G. Marc Clupper, jointly and separately.
7. "Effective Date" shall mean no later than 15 January, 1998. The date
upon which this Agreement is executed by Developer.
<PAGE>
8. "Software" shall mean all computer software developed by Developer for
Customer use throughout execution of this Agreement.
9. "Specifications" shall mean requirements for the Software's required
operation, functions, capabilities and performance and the
documentation to be retained therewith or as revised by the parties
under procedures set forth in this Agreement.
3. TERMS OF AGREEMENT
1. No later than the Effective Date, Developer shall provide one (1)
programmer to begin work for Customer to develop software at the site
of Customer.
2. Developer shall supply such resources, such as development equipment
and software, and efforts such as shall be reasonably necessary to
accomplish the tasks set forth by Customer.
3. Customer shall reimburse Developer expenses incurred during
customer-required trips for business pertaining to Customer.
4. RESOURCES TO BE PROVIDED TO DEVELOPER
Customer shall supply to Developer all information and resources that
Developer shall reasonably require in order to carry out the work required by
this Agreement.
5. CONFIDENTIALITY
1. Each party acknowledges that it will receive Confidential Information
of the other party relating to technical, marketing, product, and/or
business affairs. Each party agrees that all Confidential Information
of the other party shall be held in strict confidence and shall not be
disclosed or used without express written consent of the other party,
except as may be required by law.
-2-
<PAGE>
2. Developer is required to have all employees sign confidentiality
agreements, in a form reasonably satisfactory to Customer, which
include a promise to maintain confidentiality as required by this
Agreement. Developer shall provide to Customer, upon request, a list
of all employees who work on the Software and a copy of a current
confidentiality agreement between each employee and Developer.
6. PAYMENT
1. Customer shall pay Developer a fixed fee for services provided upon
the execution of this Agreement at the rate of Seven Thousand Five
Hundred Dollars ($7,500.00) per month. Payments of Three Thousand
Seven Hundred and Fifty Dollars ($3,750.00) shall be made bimonthly by
the customer to the developer on the 15th and last day of each month.
2. Customer shall provide Developer for services rendered a total of
thirty thousand (30,000) warrants for IDT, Inc. common stock at a
guaranteed conversion price of one dollar ($1.00) per share. Payment
shall be made in full within 30 days of the completion of the
ThermoChem-HT pre-production delivery/completion date.
3. If any payment is not made as required, Developer may give notice of
the failure to pay. The failure to pay, if not cured within fifteen
(15) days after notice, shall entitle Developer to terminate this
Agreement in accordance with the provisions on Termination.
7. INTELLECTUAL PROPERTY
1. Customer shall have and Developer shall be deemed to have irrevocably
assigned to Customer all rights, titles, and interest, throughout the
world, in all copyrights, trade secrets, patentable materials, and all
other proprietary rights in the Software.
2. The Developer shall execute such documents as Customer shall
reasonably require to evidence and confirm the transfer of rights made
under the Agreement.
3. Customer may register the copyright to the Software and any derivative
work in any and all countries and jurisdictions, place its copyright
notice on the Software, and take such further steps as it deems fit
-3-
<PAGE>
to provide legal protection to intellectual property relating to the
Software.
4. Notwithstanding any other provisions of this Agreement, Developer
shall retain the right to utilize all Commonly Used Code in Software
developed for others or for its own use.
8. DEVELOPMENT CREDIT
Customer shall acknowledge Developer as the programmer. Such development
credit shall not give Developer any trademark, copyright, or other proprietary
interest or rights in the Software.
9. DISCLAIMER OF WARRANTIES
Developer and Customer agree that due to the nature of complex computer
Software such as the Software, Developer cannot warrant that the Software will
be completely free of all defects and errors. Accordingly, the Software is
transferred and delivered to Customer "AS IS." EXCEPT AS PROVIDED BELOW IN THE
PROVISION ENTITLED INTELLECTUAL PROPERTY WARRANTY, ALL WARRANTIES EXPRESS OR
IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY. FITNESS FOR A
PARTICULAR PURPOSE AND NON-INFRINGEMENT, ARE DISCLAIMED.
10. INTELLECTUAL PROPERTY WARRANTY
Developer represents and warrants that it has no knowledge of any right,
title, and interest in the Software other than its own, and that it has granted
no license or ownership interest. Developer represents and warrants that it
knows of no fact or circumstance indicating that commercial use and sale of the
Software will infringe any rights existing under the laws United States or any
state thereof of any other person or entity.
11. TERM AND TERMINATION
1. The term of this Agreement shall commence on the Effective Date and
shall continue for a period of three (3) months, unless sooner
terminated in accordance with the provisions set forth in this
Agreement.
2. Either party may terminate this Agreement:
-4-
<PAGE>
A. In accordance with provisions stated in this Agreement that
provide for termination,
B. In the event that the other party ceases business operations or
is in any bankruptcy or state insolvency or receivership
proceeding not dismissed in thirty (30) days or assigns its
assets for the benefit of creditors, or
C. In the event of any material breach by the other party which is
not cured within thirty (30) days after notice.
3. Customer may terminate this Agreement at any time on thirty (30) days
notice for any cause or no cause. In the event of such a termination,
Customer shall pay the reasonable cost of Developer's services to the
date of receipt of notice of termination.
12. EFFECT OF TERMINATION
Upon any termination of this Agreement by any party:
1. All provisions of the section of this agreement entitled
Confidentiality shall remain in effect.
2. Customer shall promptly return all objects and materials owned by or
the responsibility of Developer.
13. REMEDIES
1. Except as is otherwise provided in this Agreement, the parties shall
have such remedies for breach or termination as are provided by
applicable law.
2. The parties agree that in the case of the breach of any provision of
the section of this agreement entitled Confidentiality, the aggrieved
party will suffer immediate and irreparable harm, and that immediate
injunctive relief will therefore be appropriate.
14. ARBITRATION
Any dispute relating to the terms, interpretation or performance of this
Agreement (other than claims for preliminary injunctive relief or other
pre-judgment remedies) shall be
-5-
<PAGE>
resolved at the request of either party through binding arbitration. Arbitration
shall be conducted in Lafayette, Indiana under the rules and procedures of the
American Arbitration Association ("AAA") . The parties shall request that the
AAA appoint a panel of three arbitrators and, if feasible, include one
arbitrator of the three who shall possess knowledge of computer software and its
distribution; however the arbitration shall proceed even if such a person is
unavailable.
15. ATTORNEYS' FEES
In the event of any litigation or arbitration between the parties arising
under this Agreement, the prevailing party shall be entitled to recover, in
addition to any other relief awarded, its reasonable costs and expenses,
including attorneys' fees, incurred in the proceeding.
16. RENEWAL
This Agreement is renewable and re-negotiable by Customer and Developer by
mutual agreement at any time during or after the Term of this Agreement.
17. GENERAL PROVISIONS
1. RELATIONSHIP OF PARTIES. Developer shall be deemed to have the status
of an independent contractor, and nothing in this Agreement shall be
deemed to place the parties in the relationship of employer-employee,
principal-agent, partners or joint ventures. Developer is responsible
for all payments to its subcontractors, and guarantees their
observance of their confidentiality requirements referred to herein.
2. PAYMENT OF TAXES, Developer shall be responsible for any withholding
taxes, payroll taxes, disability insurance payments unemployment taxes
and other taxes or charges incurred in the performance of the
Agreement.
3. FORCE MAJEURE. Neither party shall be deemed in default of this
Agreement to the extent that performance of their obligations or
attempts to cure any breach are delayed or prevented by reason of any
act of God, fire, nature disaster, accident, act of government,
shortages of materials or supplies, Or any other cause beyond the
control of such party ("Force Majeure") provided that such party gives
the other
-6-
<PAGE>
party written notice thereof promptly and, in any event, within
fifteen (15) days of discovery thereof and uses its best efforts to
cure the delay. in the event of such a Force Majeure, the time for
performance or cure shall be extended for a period equal to the
duration of the Force Majeure but not in excess of six (6) months.
4. ASSIGNMENTS. This Agreement may not be assigned by Customer in whole
or in part without consent of Developer which consent shall not be
unreasonably withheld. Customer may assign this Agreement, without
Developer's consent, to any third party which succeeds by operation of
law to, purchases, or otherwise acquires substantially all of the
assets of Customer and assumes Customer's obligations hereunder.
Notwithstanding the above, Customer shall retain the obligation to pay
if the assignee fails to pay as required by the payment obligations of
this Agreement. Developer may not assign its obligations under this
agreement without Customer's written consent, which Customer may
withhold in its complete discretion.
5. PARTIAL INVALIDITY. Should any provision of this Agreement be held to
be void, invalid, or inoperative, the remaining provisions of this
Agreement shall not be affected and shall continue in effect as though
such provisions were deleted.
6. NO WAIVER. The failure of either party to exercise any right or the
waiver by either party of any breach, shall not prevent a subsequent
exercise of such right or be deemed a waiver Of any subsequent breach
of the same or any other term of the Agreement.
7. NOTICE. Any notice required or permitted to be sent hereunder shall
be in writing and shall be sent in a manner requiring a signed
receipt, such as Federal Express, courier delivery, or if mailed,
registered or certified mail, return receipt requested. Notice is
effective upon receipt. Notice to Customer shall be addressed to
Glenn Keeling, President, 2275 Swallow Hill Road, Building 2500,
Pittsburgh, PA 15220 or such other person or address as Manufacturer
may designate. Notice to Developer shall be addressed to G. Marc
Clupper, President, 1373 Mill Street, Wabash, TN 46992 or such other
person or address as Dealer may designate.
-7-
<PAGE>
8. ENTIRE AGREEMENT. This Agreement, including the Schedules thereto,
states the entire agreement between the parties on this subject and
supersedes all prior negotiations, understandings, and agreements
between the parties concerning the subject matter. No amendment or
modification of this Agreement shall be made except by a written
document signed by both parties.
9. GOVERNING LAW. This Agreement shall be governed and interpreted in
accordance with the substantive law of the State of Indiana.
10. VENUE AND JURISDICTION OF LEGAL ACTIONS. Any legal action brought
concerning this Agreement or any dispute hereunder, including but not
limited to an action to enforce an. arbitration award, shall be
brought only in the courts of the state of Indiana in the county of
Marion or in the federal courts located in such state and county, and
both parties agree to submit to the jurisdiction of these courts.
IN WITNESS WHEREOF, IDT, incorporated and Javelin Technologies,
Incorporated and G. Marc Clupper have executed this Agreement.
IDT, Incorporated
By:
-----------------------------
Glenn Keeling, President
Javelin Technologies, Incorporated
By:
-----------------------------
G. Marc Clupper, President
WITNESS:
--------------------------------
-8-
<PAGE>
SPONSORED LABORATORY STUDY AGREEMENT
THIS Agreement is made this 7th day of July, 1997, between The University
of Texas M.D. Anderson Cancer Center, 1515 Holcombe Boulevard, Houston, Texas
77030 ("Institution"), a component of The University of Texas System ("System"),
and IDT, Inc., 2275 Swallow Hill Road, Building 2500, Pittsburgh, PA 15220
("Sponsor"), to conduct a laboratory study and evaluation ("Study").
Institutional and Sponsor agree as follows:
1. PROTOCOL
1.1 Institution agrees to use its best efforts to conduct the Study, as an
independent contractor in accordance with Institutional policy,
applicable laws and regulations and Project, "Pre-Clinical Studies for
Phase I/II Trial of a Thermochemotherapy Hemi-Perfusion of Patients with
Pelvic or Lower Extremity Recurrences" as described in Exhibit A attached
hereto and incorporated herein. The Study will be supervised by Stephen
P. Tomasovic, Ph.D., ("Principal Investigator"), at Institution, with
assistance from associates and colleagues as required.
1.2 Sponsor agrees to engage the services of Institution to conduct the Study
and further agrees to provide to Institution the long-term loan of a
Biologic-HT System and System ($250,000 retail) and the HT Disposable
Kits for the pig perfusions ($6,000 per kit retail) at no cost for the
conduct of the Study.
2. AWARD
2.1 In consideration for performance of the Study by Institution, Sponsor
shall pay Institution Nine Thousand Five Hundred Twelve and 50/100
Dollars (9,512.50) for Study expenses and other related costs. This
amount, shown by approximate category of expense in Exhibit B attached
hereto for information only, is payable within thirty (30) days of the
date herein above.
3. TERM
3.1 This Agreement shall continue in force until the earlier of completion of
the Study as mutually agreed upon by the parties or within two (2) months
of delivery of the System; provided, however, that either party may
terminate the Agreement by giving thirty (30) days advance notice to the
other.
3.2 Upon early termination of this Agreement, Sponsor shall be liable for all
reasonable costs incurred or obligated by Institution at the time of such
termination, subject to the
<PAGE>
maximum amount specified in Article 2. Sponsor shall pay Institution for
such costs within thirty (30) days of receipt of an invoice for same.
3.3 Upon termination of this Agreement, Institution shall return Sponsor's
materials and equipment to Sponsor.
4. INDEMNIFICATION
4.1 Institution shall, to the extent authorized under the Constitution and
laws of the State to Texas, indemnify and hold Sponsor harmless from
liability resulting from the negligent acts or omissions of Institution,
its agents or employees pertaining to the activities to be carried out
pursuant to the obligations of the Agreement; provided, however, that
Institution shall not hold Sponsor harmless from claims arising out of
the negligence or willful malfeasance of Sponsor, its officers, agents,
or employees, or any person or entity not subject to Institution's
supervision or control.
4.2 Sponsor shall indemnify and hold harmless System, Institution, their
Regents, officers, agents and employees from any liability or loss
resulting from judgments or claim against them arising out of the
activities to be carried out pursuant to the obligation of this
Agreement, including but not limited to the use by Sponsor of the results
of the Study; provided, however, that the follow is excluded from
Sponsor's obligation to indemnify and hold harmless:
a. the negligent failure of Institution to comply with any applicable
governmental requirements or to adhere to the terms of the
Protocol; or
b. the negligence or willful malfeasance by a Regent, officer, agent
or employee of Institution or System.
5. PUBLICATION AND CONFIDENTIALITY
5.1 The parties reserve the right to publish or otherwise make public the
data resulting from the Study. The party so wishing to publish or make
public shall submit any such manuscript or release to the other party for
comment thirty (30) days prior to publication or release.
5.2 Except as otherwise required by law or regulatior4 neither party shall
release or distribute any materials or information containing the name of
the other party or any of its employees without prior written approval by
an authorized representative of the non-releasing party, but such
approval shall not be unreasonably withheld.
IDT anticipates press releases when appropriate and will submit them for
review prior to release.
<PAGE>
5.3 Each party shall hold in confidence for three (3) years after the
termination of this Agreement any confidential information identified as
confidential and obtained from the other parry during the course of this
Study. Nothing herein, however, shall prevent Institution or any other
component of System from using any information generated hereunder for
ordinary research and educational purposes of a university.
6. GENERAL
6.1 This Agreement, including the attached Exhibit A and B, constitutes the
entire and only Agreement between the parties relating to the Study, and
all prior negotiations, representations, agreements, and understandings
are superseded hereby. No agreements altering or supplementing the terms
hereof including the exhibits attached hereto, may be made except by a
written document signed by the duly authorized representatives of the
parties.
6.2 Any conflicts between the Protocol and this Agreement are controlled by
this Agreement.
6.3 This Agreement shall be construed and enforced in accordance with the
laws of the State of Texas.
6.4 This Agreement anticipates educational training and may involve health
science postgraduates and other students of the Institution.
IN WITNESS WHEREOF, Institution and Sponsor hereby enter into this
Agreement, effective as of the date set forth above, and execute
two (2) original counterparts.
IDT, Inc. The University of Texas
M.D. Anderson Cancer Center
By: Glenn Keeling /s/ By: Donna S. Gilberg /s/
------------------- --------------------------
Glenn Keeling Donna S. Gilberg, CPA
President Manager, Sponsored Programs
Date: 7/8/97 Date: 7/2/97
---------------- -------------------------
I have read this agreement and
understand my obligation hereunder.
By: Stephen P. Tomasovic /s/
---------------------------
Stephen P. Tomasovic, Ph.D.
Principal Investigator
Make Payment to:
The University of Texas
<PAGE>
M.D. Anderson Cancer Center
Attn: Donna S. Gilberg, CPA
Manager, Sponsored Programs
P.O. Box 297402
Houston, TX 77297
Tax I.D. 74 6001118A1
<PAGE>
EXHIBIT B
SPONSORED LABORATORY STUDY AGREEMENT
BETWEEN
THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER
AND
IDT, INC.
"PRE-CLINICAL STUDIES FOR PHASE I/II TRIAL OF A THERMOCHEMOTHERAPY
HEMI-PERFUSION OF PATIENTS WITH PELVIC OR LOWER EXTREMITY
RECURRENCES'"
The approximate distribution of expenses related to the Study described in the
covering Agreement is as follows:
<TABLE>
<S> <C>
Charges Per Pig
Pig cost $ 250.00
Operating room time (4 h) 125.00
Gas anesthesia 125.00
Disposables 170.00
Euthanasia & disposal 30.00
Tc-99m 25.00
Ultra Tag kit 36.00
Total Estimated Cost Per Pig $ 761.00
Total Direct Costs (10 pigs) $7,610.00
Indirect Costs (@ 25%) $1,902.50
Total Costs $9,512.50
</TABLE>
These expenses are provided for information only. Institution reserves the
right to modify the distribution of such expenses as necessary in the
circumstances, provided that the stipulated total cost of $9,512.50 is not
exceeded.
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
We have issued our report dated June 4, 1999, accompanying the consolidated
balance sheets of IDT, Inc. as of December 31, 1998 and 1997, and the related
statements of operations, changes in stockholders' equity (deficiency) and cash
flows for each of the three years in the period ended December 31, 1998, and for
the period from October 23, 1992 (inception) through December 31, 1998. We
consent to the inclusion in the Registration Statement on Form S-1 of the
aforementioned report. Our reports on the financial statements referred to
above include explanatory paragraphs which discuss going concern considerations
as to IDT, Inc.
/s/Thompson Dugan, PC
Pittsburgh, Pennsylvania
August 16, 1999
EXHIBIT 23.1
